Has online video become the light at the end of the tunnel for pay-TV, programmers?

editor's corner

Jim O'NeilOnline video is booming. YouTube, of course, continues to rack up ridiculous numbers that were nearly unimaginable just a couple of years ago. Google's (Nasdaq: GOOG) little engine that could just 18 months ago reported it was serving up 2 billion videos a day; it's now seeing 3.5 billion videos served up daily. (For the record, it crossed 1 billion views a day just more than two years ago in October 2009.) And, it claims more than 800 million unique viewers daily, reports Ryan Lawler at GigaOm.

Those numbers used to put a scare into pay-TV operators and broadcasters who kept looking over their collective shoulders as online video viewing continued to grow. But two studies released this week are casting the growing adoption of online video and OTT devices in a different light.

A survey from Frank N. Magid Associates shows that more than half of all consumers who watch online video are now watching TV episodes and movies on the Internet. And, Magid found, when users watch online video on alternate platforms like mobile devices, set-top boxes, via instant streaming and video-on-demand, they also tend to spend more money on traditional pay-TV services.

Online video, the study says, is a win-win for service providers and the online video industry.

"For several years, cable, satellite, and telco TV providers have been working under the assumption that as the use of alternative video viewing platforms grows, consumers will increasingly ‘cut the cord' and cancel their subscriptions," the survey's authors wrote. "On the contrary, Magid's new study, 2010: The New Age of Video Entertainment, uncovers several consumer behaviors that should persuade the industry to take a second look at earlier defection forecasts."

Magid posits that alternative video viewing platforms should be considered additive to traditional subscription television.

Magid's research does, however, take a contrarian view to the idea that tablets are a major driver of online video's growth. The company said just a fraction, some 10 percent, of respondents said they were interested in watching video on a computer or tablet screen. "Interest surges in viewing this content on a TV screen via a computer connected to the Internet," Magid said, adding that "it climbs even higher for devices designed specifically to stream content to the TV" like AppleTV and Roku.

"As new video viewing platforms such as instant streaming and mobile apps proliferate, consumers are simply adding them to their portfolio of video viewing options," said Maryann Baldwin, VP of Magid Media Futures and author of the survey. "Our research indicates that this is definitely not a zero-sum game -- at least at this point, it appears that traditional subscription services and alternative viewing platforms can coexist with services like 'TV Everywhere' locking in revenues for traditional providers."

The Magid survey comes on the heels of another study released this week from Bain & Company that says the increasing uptake by consumers of Internet-ready devices is fueling their appetite for over-the-top content.

The study, presented Tuesday at Forum d'Avignon in Paris, found that a majority of consumers expressed an interest in Internet video and forecast that Internet TV would reach 60 percent of households by 2014.

But, the study said, while consumers are inclined to increase their adoption of online content for video consumption, video games, live entertainment and cultural activities, media companies and cultural institutions face stiff competition for incremental consumer spending unless new business models and "ambitious content" are created.

"The permanent media revolution continues," said Patrick Behar, head of Bain's Media & Entertainment Practice in Europe and lead author of the study. "But media and entertainment companies must pursue aggressive content development and diversification strategies to unlock new consumer spending."

Way back in July 2008, Magid released a survey that showed short-form video dominated online video viewing. Snackable video, comedy, music videos and movie previews all saw more viewers than TV episodes and movies. Also, 28 percent of respondents told Magid they watched less TV as a result. Netflix (Nasdaq: NFLX), Hulu, the hard-charging Vudu service from Walmart, Amazon's (Nasdaq: AMZN) Instant Prime and so many others have all changed that, of course, so one more online video bogeyman appears to have finally bitten the dust. Online video, it turns out, can be good for programmers and service providers alike.

Have a safe and happy Thanksgiving.--Jim

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