Which online video services made the biggest impact on consumers in 2012?
It's been more than 20 years since streaming media became popular, but only in the last 10 years has online video streaming gained traction, thanks to the more unified standard of Adobe's (Nasdaq: ADBE) Flash application, introduced in 2002. The increased interest can also be attributed to the rise in mobile devices that have platforms which can support online video streaming (like Apple's (Nasdaq: AAPL) iPhone, Android phones and tablet PCs), the innovation of apps specifically designed to stream online video to nontraditional devices, and the increasing number of cable companies willing to either partner with online video streaming services or create their own.
Some of the major contenders in 2012 for subscribers and viewers in this industry, according to ComScore, are Google (Nasdaq: GOOG) Sites, with a total of 188,016,000 unique viewers (including a huge boost from YouTube, which it owns), Yahoo! (Nasdaq: YHOO) Sites, with 150,198,000 unique viewers, and Microsoft (Nasdaq: MSFT) Sites, with 55,045,000 unique viewers. AOL (NYSE: AOL) just added its video library to YouTube's already massive collection, broadening its portfolio as well. Services from other providers, like Hulu Plus and HBO Go, may not be as universally recognized but are also making significant inroads into the online streaming world. As the industry expands, it's worth taking a look at some of the services that are having the biggest impact on this young market—and what their moves might mean for the future.
To consumers who don't subscribe to the service, HBO Go may seem like only one of several similar applications offered by content providers that let their subscribers log on to their websites and get unlimited access to all available content from any location, on any device, at no extra cost.
(Image source: HBO)
The difference? Time Warner-owned (NYSE: TWX) HBO was one of the first to offer the option in an industry reluctant to do so, whether because of the added effort of transferring content to the Internet, maintaining a high-quality streaming service or losing revenue from advertising. Besides being a trailblazer (it launched in February 2010), HBO Go has kept up with the times, offering its content on a variety of platforms like the iPad, Android and Amazon's (Nasdaq: AMZN) Kindle. Another big advantage is the service posts new episodes of shows online as they premiere on TV, so viewers can control when and where they watch content instead of having to adjust their schedules to keep up with series or trying to remember when to record their favorite programs. HBO Go also streams in HD, which requires a broadband connection but means users are less likely to encounter problems such as slow buffering or grainy video footage.
So what's next for the provider that forged the online streaming path for other, less intrepid pay TV services? Its newest significant update, in March 2012, was making itself available on Xbox360, although users require an Xbox Live Gold subscription in addition to an HBO Go subscription to take advantage of that option. A less exciting but more practical change is the availability of captions for mobile devices on Android and iOS platforms, in accordance with new FCC rules that went into effect Sept. 30. In addition, HBO announced in August that it would begin offering its HBO Nordic multiplatform video distribution service to Sweden, Finland, Denmark and Norway—moving in ahead of Netflix, which launched in Scandinavia on Oct. 15. The European service is also available as an over-the-top (OTT) VOD service, which allows consumers to subscribe only to HBO's online content without purchasing the entire HBO Go package. Will the United States be the next market where HBO expands its VOD option?
Like HBO Go, this streaming service might not seem like a big deal to nonsubscribers, including those who make use of the free version of Hulu. With small and medium-sized players like Amazon Prime, CinemaNow and iStore now available, Hulu Plus looks like just one of many choices. Lately, though, it has been garnering positive attention for building up its extensive catalog of titles, including past and present seasons of TV shows. This is making established industry giant Netflix (Nasdaq: NFLX), which does not often post recently-aired episodes online, nervous, which is something none of the other competitors has managed to do.
(Image source: Hulu)
That's one of Hulu Plus's advantages. Another one, which may not matter much to most people but which will send a small subset of consumers into paroxysms of joy, is that Hulu Plus supports Linux, an operating system modeled on free and open source software. Although more applications and programs are beginning to support this platform, Netflix does not. And while this may not necessarily help Hulu Plus grow its subscriber list by thousands, the underlying message is clear: This relatively new online video streaming service is not afraid to take risks in order to attract customers, and it is willing to put forth the effort to expand in unconventional directions.
One of the things Hulu Plus should focus on is beefing up its movie content. As Jeff Bertolucci of PCWorld noted when the service debuted in July 2010, "Netflix is better for movie buffs, while Hulu Plus is best for network TV fans who want to keep up with current shows." Since then, Hulu Plus has been building up its catalog of titles, but it's still nowhere near as extensive as Netflix's. The service also needs to work on differentiating its two services, Hulu and Hulu Plus; since some of Hulu Plus's content is available for free on Hulu, the service will need to convince consumers the extra content and the option to watch on many different platforms is worth paying for.
YouTube, NBC and the Olympics
Two years ago, the idea that one website could stream more than two weeks' worth of live, complex content, all in real time, would have been unlikely at best. As avid sports fans will tell you, it's difficult enough to find a good online stream for one game of soccer or football, let alone many hours of often fast-moving footage. Yet that's exactly what Google's YouTube, in partnership with NBC, did for the 2012 Summer Olympics in London. In fact, online coverage of the games was so good that NBC's accompanying TV broadcasts, some of which only aired after several hours' delay, were criticized harshly in comparison.
(Image source: NBC Sports)
Viewers could find NBC's online Olympic Games coverage on NBCOlympics.com, a site that used YouTube's Flash player with some added features geared toward supporting a high-quality stream with immense amounts of content. Besides the live streaming advantage, two other factors made the content appealing: presentation and interactive elements. Unlike most generic YouTube-hosted sites, the NBC Olympics site has a distinctive design which allows consumers to easily view the most popular videos, highlighted events and interviews with athletes. According to an article in GigaOM, the site also featured a live count of how many people were watching any given competition to give a viewer the feel of being part of a crowd. The site remains active even though the games are over.
Since the Olympics only happen every two years, it will be interesting to see whether NBC, which has the rights to the Olympics through 2020, makes any significant changes to either its TV or online coverage. Jason Gaedtke, the director of software engineering for YouTube's Olympic coverage, noted in the GigaOM article that the difficulties of streaming the Olympics live included complex encoding and ensuring viewers would get high quality streaming regardless of the device or platform they were using. It's not yet clear how NBC will handle its next chance at online Olympics coverage, especially with the 11-hour time difference between the West Coast and Sochi, Russia, the site of the 2014 Olympics. What we can expect, however, is that the network will endeavor to improve its online coverage with lessons learned the first time around.
Of the five services reviewed here, Aereo may be the biggest unknown. This is probably due partly to geography (Aereo is currently only available in New York City), partly to the newness of the service (it went live in March 2012) and partly to the fact that it's not as easy to explain as some of the older, more established options.
Aereo's antenna is about the size of a dime. (Image source: Aereo)
In the simplest terms possible, Aereo provides subscribers with an antenna, similar to the one on a roof or a TV set but much smaller. This antenna can route any TV channel that a user subscribes to through a data center with "tons" of antennas, according to Aereo, thus allowing a consumer to access their over-the-air channels from a remote location.
This fledgling service, however, has already encountered a significant challenge to its expansion. When Aereo officially launched, several stations affiliated with broadcasters including Fox, the CW, Univision, PBS, ABC, CBS and NBC filed two separate suits against the company, alleging that it violated the Copyright Act. Aereo defended itself by claiming that since it distributed individual antennas to each customer, rules that governed community antenna use were not applicable. In July, Aereo triumphed, at least temporarily, when a federal court blocked the broadcasters' plea for a preliminary injunction to shut down the service. But if Aereo decides to broaden its geographical market, it may encounter similar challenges elsewhere.
Although this streaming service is even younger than Aereo (the companies announced the joint venture in February but have not yet gone live with it), it has the substantial advantage of benefiting from major name-brand recognition: Verizon (NYSE: VZ) is an industry giant and Redbox kiosks can be found in nearly every grocery store in the United States. If this venture is successful, it might mean a major shake-up in the status quo of the online video industry.
(Image source: CoinStar)
But that's a big "if." This scenario, where a cable company joins forces with a video service--whether one that streams videos online or ships DVDs to customers--has been tried before, and it didn't go so well.
When Dish Network (Nasdaq: DISH) bought the bankrupt Blockbuster in April 2011, it hoped to revamp the service as a Netflix competitor, but recently the company announced it would no longer pursue those plans. Instead, it has created "Blockbuster @Home," which, similar to Netflix, sends subscribers discs by mail and streams video online. And although Blockbuster's service has a comparable number of disc titles and rated higher than Netflix when it comes to disc rentals, Netflix's online streaming service still beat out the competition, with Blockbuster's version "seriously lacking," according to a NextAdvisor study. Other services may have been able to copy, or even improve on, aspects of Netflix's service, but no one has managed to provide the full package that Netflix does.
Will the Verizon/Redbox venture, set to premiere in time for the holidays, change all that? It just might. Like Blockbuster, CoinStar (Nasdaq: CSTR) subsidiary Redbox has a large catalog of titles, but it also has what Blockbuster lacks: Verizon's high-speed network, over which Redbox's content will be delivered. And Verizon gets plenty out of the deal, too, since in areas where FiOS is available, Redbox Instant subscribers can switch to Verizon from their former providers. Netflix has also struggled with rollercoaster stocks in the past few months--thanks to a poorly received price hike and a misguided attempt to separate its streaming and disc rental services into two companies--which might help convince dissatisfied customers to give the new option a try. Either way, the deal should reinvigorate an industry formerly dominated by one major service, creating room for competition.