• by Tara Walpert Levy , December 4, 2009

With all the hype about the growth of online video viewing, I decided to check it out for myself by watching all my TV shows online for an entire week. My plan was to watch Hulu or abc.com and to supplement with iTunes on the big screen via Apple TV. I also wanted to experiment with Boxee, a start-up company that aspires to provide a common user interface for enabling consumer viewing of online video on a TV screen.

I am embarrassed to admit that while I started this experiment three times, I never made it past Wednesday of week one. The first time, I broke right away because the whole experiment seemed a bit of a pain. In my second attempt, I did watch Sunday's Brothers and Sisters on abc.com and I admired Hulu's new user interface, which made it particularly easy to find the prior week's episode of 30 Rock. But I folded on Monday, when I just couldn't wait to find out what was happening on 24. I mean, c'mon, Jack Bauer was trying to save the president rightnow. The final effort ended when the news broke that Hulu was no longer available on Boxee.

So what does my failed experiment mean - besides the fact that I really need to work on my 24 addiction? Those who dismiss my experience as merely anecdotal might be interested in Nielsen's Three Screen report, which indicated that in 2008 the average American increased his or her TV watching to an all-time high of 151 hours per month, compared to fewer than 3 hours of online video. The Leichtman Research Group also found that the percentage of adults who would be willing to disconnect their TV service to watch their shows via the Internet dropped by a point from 4 percent in 2007 to 3 percent last year.

Online video adoption is constrained by the amount of premium content available in real-time, business-model challenges, and technology limitations that make the consumer experience inferior to kicking back to watch an HD movie on a 50-inch screen. All of these obstacles will eventually be overcome, but not soon. Consumers still struggle with video buffering, lower quality video, and the perceived - or real - need for an it help desk to hook up the computer to the TV. Content providers wrestle with the decision to place more material online because they know they are risking large portions of revenue they currently receive from distributor carriage fees. Exacerbating the problem for distributors, delivery costs are much higher in a unicast versus multicast environment, meaning the industry needs to get a higher CPM or ARPU just to break even. Finally, the bandwidth necessary to support volume anywhere close to what is seen on traditional tv simply doesn't exist.

So who is driving all the hype for the emergence of online video? There are several new stakeholders in this ecosystem who view this nascent market as representing only upside, and who are aggressively pushing the online video agenda. One group includes online media giants like Google and Yahoo - or upstarts like Boxee - who look forward to playing a role in video aggregation and distribution that, to date, has been dominated by traditional TV providers. Another set of players includes the consumer electronics manufacturers, who see the opportunity for a new business model by supplementing product revenue with a service model based on video consumption or advertising.

It will take many years before consumers turn to online video sites as their medium of choice for watching their favorite TV shows. And, as with other new media innovations, it is likely that this new medium will live alongside traditional television rather than replacing it. Traditional cable providers are hard at work determining their own role in offering Hulu-like sites and capturing value from the improved video quality available through their pipes. New entrants like Netflix are proposing mixed models where, for example, consumers can organize their video online but still watch on traditional TV.

Futurist Paul Saffo is often quoted on innovation as saying, "Don't mistake a clear view for a short distance." Frankly, I'm not sure we even have the clear view yet. That said, I am looking forward to the fog lifting and am certain that whatever changes are coming will likely be as profound as they will be slow to arrive.

And in my household, we'll be watching!