Video content on the Internet has been steadily growing over the last few years, but with major announcements this fall from companies such as Amazon.com, AOL and Apple regarding their commercial plans, Web-based video has gone from a cute hobby to a disruptive force seemingly overnight.

With announced plans by multiple players — including Intel and major TV equipment manufacturers — to enable PC-based video to be displayed on a TV set, the way seems paved for the Internet video industry to go after the audience currently buying cable TV and digital satellite service — the same audience targeted by new IPTV services.

That potential conflict has led to some dire predictions for IPTV and how it might suffer in the face of new competition from Internet TV. Industry analysts and the leading U.S. providers of IPTV believe, however, that this newest form of video entertainment not only won't crush IPTV but may be a boon to its prospects, or at least its ability to compete with cable and satellite, if service providers plan for it now.

“We see Internet video as an advantage for us in being able to bring the best-of-class of that to the TV because of our IP connectivity within the home,” said Joe Ambeault, a director in Verizon's FiOS TV product development marketing team. “This is an opportunity for us.”

It might even give telecom service providers an advantage over cable and satellite companies. AT&T's HomeZone product, which combines DISH Network's digital satellite service in a home media network with AT&T DSL and voice services, allows customers to download movies onto a PC and watch them on a TV set, where the viewing is better.

“In order to have a comprehensive offering, a service provider is going to have to be able to put [video content] on any device that the user wants to consume it on,” said Maribel Lopez, broadband analyst with Forrester Research. “That will include the TV, the cell phone, personal video players — whatever. They have to find a way to get it there.”

That is, according to AT&T, exactly the goal of its three-screen strategy, laid out this summer — to deliver available content onto whatever device the customer is watching at the time and to do that ahead of the competition.

There's a tendency to associate Web-based video with sites such as YouTube or MySpace.com, which specialize in user-created content, but as AOL made clear this summer in launching its video portal, there is much more to Internet video than funny clips of guys putting Mentos in bottles of Diet Coke. The AOL video portal, www.video.aol.com, looks very much like an electronic programming guide, with dozens of channels of free and paid content.

Already, the ad market for this new medium is taking off as well, said AOL Vice Chairman Ted Leonsis, speaking at Fall VON '06. AOL is getting 113 million customers a month on its video portal and has sold out its ad inventory, he said.

“Video is creating a new mega-industry,” Leonsis said. “Video makes everything better. You can time shift, content is at your disposal, on demand the way you wanted it. If you like TV, now you can watch shows when and how you want, all online and stored because storage costs have gone down dramatically.”

In many cases, he added, video on the Internet can do a better job of presenting content, the best example being one of the early mass-market Internet video events, the Live 8 benefit concerts from July 2005. While the 10 simultaneous concerts were on broadcast TV, the Web video presentation allowed viewers to pick and choose which performers they wanted to see from which venue and watch on-demand when they chose. AOL Music still has the videos available from viewing.

Voice-over-IP (VoIP) pioneer Jeff Pulver of pulver.com has now shifted his focus to include video and sees what is happening today on the Internet as analogous to the arrival of competition in the telephony realm.

“This is much like next-gen telcos were 10 years ago,” he said. “It's the same DNA — they just happen to be working in the world of video. Ten years ago, we discovered that you can operate a telephone company without owning many assets. Well, to be a major player in video now, you don't need broadcast spectrum, you don't need content, what you need to be able to do is bring it all together and present it and figure out who is going to buy the digital popcorn.”

After a broadband trial that involved streaming video episodes of “Desperate Housewives” and “Lost,” ABC announced it will be offering free next-day streaming videos of many of its network series. When AMC launches its annual “Monsterfest” for Halloween this year, it will include 16 different horror films for its cable affiliates to distribute on their broadband platforms to PCs, as well as their video-on-demand (VoD) services.

Much of what Web TV is focusing on is what has become known as long tail video content, meaning it is content that has a long shelf life for a relatively small population of viewers and can generate page views or sales that collectively outperform best-seller products with shorter shelf lives. The Internet is the perfect home to long-tail content as Amazon.com and Netflix have proven, with their massive catalogs of searchable books and movies, respectively.

Pulver has assembled lists of Web video sites, including more than 110 sites with Web-only TV that cover everything from cooking, travel and cartoon shows to personal daily commentary. He also lists 88 sites where existing TV or cable shows are now available on the Web, including AOL's In2TV, which shows older programming.

All this personalization of content not only puts the user in charge, but also can enable advertisers to specifically target their ads based on viewing habits and other demographics, Pulver said. And Web-based TV has some of the same advantages that IPTV can offer, such as different means of doing e-commerce. Instead of inserting ads, for example, advertisers can place products and enable viewers to buy them or get more information with the click of a mouse.

Not surprisingly, the popularity of Internet video has prompted multiple efforts to put this content onto a TV set, where it can be viewed with greater comfort, at greater distance and by more people. According to a recent poll by Accenture, consumer taste is already being influenced by Internet video services, as they expressed a strong desire to download what they are seeing on the Internet to their TV sets.

Intel's Viiv technology initiative is built around bringing Internet functionality to the TV set so consumers can download movies with a remote control, and AOL is working with Intel to enable this, AOL's Leonsis said.

Apple is promising to connect its iTunes music and video-downloading service to the TV via the iTV, a box that will be available for $299 in the first quarter of 2007. The five major TV manufacturers — Hitachi, Matsushita/Panasonic, Sharp, Sony and Toshiba — have formed a joint venture to develop common standards for enabling TVs to access Web video.

The fact that Web TV is coming to a family room near you — and very soon — seems certain.

So with a flexible, user friendly, on-demand and often very cheap source of video available to its customers, why isn't Verizon shaking in its boots, especially given the multi-billion dollar investment the company is making to build fiber-to-the-premises, specifically to offer FiOS TV?

“The Home Media DVR that we launched two months ago provides an IP connection between the PCs and the home network to the set-top box,” Verizon's Ambeault said. “Today, we use that to allow music and photos that are stored on a PC to be displayed on the TV. We aren't supporting video yet, but we are already well down the path of getting the prototype up and working to support video from the PC.”

Verizon uses Multimedia over Coax (MOCA) technology to link PCs with set-tops within the home over existing coaxial cable where possible, although it can also support Cat-5 Ethernet wiring. The company could be supported video over those connections as early as next year.

With its IPTV service, U-verse, and with its HomeZone product, AT&T also is creating in-home networks that link PCs and set-top boxes using HomePNA 3 technology.

“AT&T is doing some interesting things with HomeZone, where they are hooked up to MovieLink and Akimbo and Yahoo for content,” said Vince Vittore, broadband analyst with Yankee Group.

The essence of the AT&T's three-screen strategy means customers can control where they view content, said Stephen Bye, executive director for wireless and converged services. The initial two applications are more focused on fixed/mobile convergence than PC-to-TV, but AT&T believes it is in “a unique position to take advantage of new forms of distribution to deliver video services in both new and familiar ways,” a spokesman said. “Our all-IP platform means we can provide integration across services and across platforms. The advanced features and functionality and the robust and niche content selection enabled by our IP platform also provides users with an enhanced personalized experience, bringing the user control and choice associated with online video to a television-based, managed service.”

However, that doesn't mean that there aren't challenges, both technical and regulatory, to bringing Web-TV content into the average living room.

“There are two issues — can you do it, and if so, how do you control the quality of that video experience, and secondly, is there any money in it for the telco,” Vittore said.

Already, the two companies allow consumers of U-verse and FiOS TV to use their TV sets to display digital photos and music that have been stored on a PC that is networked. The most desirable approach to handling Web TV would be for it to be downloaded and stored locally on a PC as well, Ambeault said. But it is also possible to source it directly from the Internet similar to a VoD experience.

Technically, once the telcos have IP network established in the home, there is the capability of letting users control how and where they view content.

“On the backside of an [optical network terminal used to connect the FiOS network at the home], there is coaxial cable, twisted pairs and Ethernet,” said analyst John Celantano of Skyline Marketing. “The content is hitting that box, and whether Verizon chooses to make that only available to the TV set, that's their choice. There is no reason why it should be limited to that. If a customer wants to watch a program on the PC picture-in-picture, they should be able to do that. If they want to browse the Web from the TV set, they should be able to do that.”

Just because something is doable, however, doesn't make it easy or without challenges.

“The thing that makes the Internet great also creates some challenges, like spyware, viruses and parental controls — those are all things we have to think about when we start linking Internet content to the TV,” Verizon's Ambeault said. “Also there are rules about what kind of content you can show at what time of the day. And some programmers also have rules — it's very important to ESPN to never associate with alcohol and tobacco.”

There are also fundamental issues such as customer expectations of what TV service is and looks like and concerns about federal decency laws.

“By the nature of [Web-TV content] being displayed on the TV, you are automatically under the umbrella of regulation and the FCC rules on decency and those kinds of things,” Ambeault said. “FiOS TV is a mass-market product — a large portion of our customer base is families, not single 18-year-olds.”

Service providers want to be the content distributors, not the gatekeepers that set ratings and determine what content can or can't be shared between a PC and TV, he said.

Pulver said he fully expects the FCC to try to regulate video on the Net, even though he is troubled by that prospect.

Another challenge is trying to avoid converting the TV into another large PC, making a consumer's 42-inch plasma screen into a display for error messages.

“It's a really bad day for our customers when the TV asks them computer questions,” said Ambeault, who today has a Linux media server connected to his TV and sometimes faces just that challenge. While a select group of early-adopter customers may put up with having to understand how everything is connected, the vast majority of customers just want it all to work simply, he added.

Digital rights management (DRM) also looms as an issue because video downloads come equipped with DRM, and some formats will prevent the video stream from being shared across a network with a set-top box, Ambeault said.

The DRM issue works in the other direction as well, Forrester's Lopez points out. “Even with MOCA and a multi-room DVR, if I want to watch a movie on my iMAC, I can't,” she said. “The reason it is locked in the DVR is because of copyright laws — if it can be ported to the PC, it can be sent anywhere.”

As technology increasingly knits together IP content, the industry is going to have to come to terms with some business case realities, she added.

“The consumer pays somewhere — it's where they pay and how many times they pay,” Lopez said. “Any business model that assumes the consumer is going to pay for the same content eight times — well, that's not going to happen. The quicker we get over that and figure out how to monetize the new model because the old model is broken, the better off we'll be.”

Ambeault sees all blue skies for distributors, even as he admits content creators, owners and aggregators may be facing turmoil.

Verizon would offer broadcast programming, VoD and “way down that long tail, the Internet-sourced video,” he said. There is little upfront expense for that kind of content, as opposed to VoD, which requires distributed storage for caching content near the customer and network operational capability, Ambeault said.

“We could have a limitless number of [Web TV] providers,” he said. “This reduces the barrier of entry. More than likely, we would want to have commercial agreements with the most popular sites, but that would be limited only by how quickly we could do those deals, and I think we've shown how quickly we can move on content deals over the last year.”

The no-limit aspect of the telecom service providers' IP networks would give them an advantage over their cable rivals in packaging Web-based TV over an IPTV network, Vittore said.

“That is one of the biggest differentiators between IPTV and cable — you can integrate all the media stored in the home, the stuff stored on Yahoo photos and network-based servers,” he said. “It's a fairly important and a real differentiator. Cable operators just can't do it.”

VIDEO ON THE NET

TV ON THE NET: TV shows created for broadcast or cable, now viewable on the Internet.

INTERNET-ONLY TV: New programming created only for the Internet.

USER-CREATED CONTENT: Sites such as YouTube and others with clips uploaded by viewers.

SITES TO VIEW TV: Commercial TV is viewable over sites such as ChannelKing and ChannelChooser.

Source: Pulver.com

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