Behind the Numbers:The Digital Video Drift

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Nobody seems to have much use for plastic platters

Remember that great one-word piece of advice from The Graduate? Plastics. Well, forget it. Plastic is dead. Plastic is so over it's beyond over. dvds made from the stuff are the medium most vulnerable to being replaced by online video, says a new report from One Touch Intelligence. To be fair, the whole digital media ecosystem is roiling tons of traditional businesses, but the plastic-based DVD one is going to be hit the hardest by the gradual shift to the Web to watch programs, the report finds. The DVD business has the biggest bull's-eye on it because it was already fragile: DVD sales growth has been flat since 2005.

By contrast, both subscription television and ad-supported television are least vulnerable to being replaced by online video. On the surface, that seems like a counterintuitive finding, given the rapid growth of online video. In the late fall, Americans were watching 13.5 billion videos online each month, up 45 percent over a year ago, comScore says. But even though three-quarters of Americans are watching programs online, we're only using the Web to watch about 4.5 hours of video per month.

That's the metric to keep in mind, says Stewart Schley, author of the One Touch Intelligence study. Because 4.5 hours is about the same amount of time the television is on in the average home each day, he says.

"There is a dichotomy that exists between the perception and usage of Internet video and the reality in terms of the data points," Schley says. "While the growth is stratospheric, we need a reality check. When you look at the time devoted to it, there is a gigantic gulf in terms of time spent. It's a still a few minutes a day versus four to five hours a day."

Even Hulu, which attracts viewers of long-form content like TV shows and movies, is only keeping viewers for about 12 minutes per session, suggesting consumers are still merely dropping into the Internet for a quick video hit, not for a full meal.

Schley has other reasons for his somewhat old-media stance. Traditional TV is still priced well for the amount of programming available and is also convenient, he says. Another limiting factor for online video is that it's still challenging to connect computers to TV. From a pure business standpoint, the bulk of revenue generated by media companies will continue to come from traditional sources because that's where the mass audiences still are, Schley says.

"It's important to recognize the amount of time devoted to online video is really minuscule compared to that devoted to traditional TV and, six months from now, the world won't be turned upside by online video despite a lot of interest and impressive growth," Schley adds.

DVDs, however, are going to have a tougher time forging a successful survival strategy.

"The viewing experience on a DVD you can replicate in a convenient manner online," he says.

Additive elements like director's cuts and bonus features aren't alluring enough to sustain the business. The companies that will be the most hurt from the projected dip in DVD sales will be the manufacturers that press the actual DVDs and mainstream DVD retailers, Schley says. "When you look at Netflix, I do believe the lines will cross and over time more customers will choose online delivery."

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