Under-The-Hood Of Over-The-Top

Earlier this year, I went over-the-top. No, not in the way I write fill-in columns and blog posts (I topped out in that process long ago). I went over-the-top as a TV viewing household, meaning, I began streaming conventional TV programming via an intermediary device. Okay, so that's not so surprising, right? I mean, millions of Americans are doing that (more on that in a moment)? The reason I'm telling you about my transition is that it was purely unintentional. You see, despite covering the front lines of media innovation, I don't consider myself an early adopter of media technology, and my journey over-the-top began when I upgraded from my loyal, dependable, but apparently antiquated analogue Trinitron to a digital, state-of-the-art digital TV. I chose an LG, because it was the least expensive, and had the best average user ratings for any model in its price range.

So I went down to my local Costco, trucked the incredibly large, but surprisingly light 46-inch set home, plugged it in and turned it on. And here's where the story gets interesting. Before I even turned on a conventional TV channel, the set synced up with my home wi-fi network and booted up LG's "Netcast" home screen, with icons to directly access video programming from a variety of streaming services, including Yahoo, YouTube and Netflix. Since we already were a Netflix household, my family began streaming TV programs and movies, and we haven't looked back under-the-top.



I'm sharing my personal Netflix journey with you, because Nielsen just released some interesting data showing the migration of over-the-top viewing to Netflix and Hulu, and the different ways in which people are accessing it. The data isn't actually new. It was from last March and has already been previewed to clients during meetings earlier this year, but shows that divergent patterns are beginning to emerge in the ways in which people access streaming video online. Half of all Netflix customers currently utilize a gaming console - either a Nintendo Wii (25%), a Sony PS3 (13%), or a Microsoft Xbox (12%) - to stream video programming. By contrast, the vast majority (89%) of Hulu users utilize their Internet-connected computers to stream programming from the Web-based service.

That differential doesn't surprise me, given the different ways in which two streaming video platforms are marketed. What does surprise me, is that more people aren't accessing either of those services via an Internet-enabled TV. But I predict that as more and more consumer electronics manufacturers build wi-fi adapters and Internet tuners into their TV sets, more and more people will begin discovering, and accessing streaming video just the way I did - as an unintended byproduct of trading up to a new TV set.

And I wouldn't even be surprised to see deals in which TV manufacturers begin bundling Netflix-ready sets as a premium offer, much the way car manufacturers began adding satellite radio tuners to their higher-end trim lines a decade ago.

In the end, streaming video technology will become seamless and ubiquitous, and the real game-changer will be what it's always been: access to programming. Currently, Netflix has a spotty library, but I have to believe that will change in time. In terms of total streaming video viewers, Netflix already is about as big as a "mid-size" cable network, according to CBS research chief Dave Poltrak, who describes the video subscription service as a "phenomenon," and agrees that if and when it gains access to deeper and better programming libraries, could become a real challenger to the conventional TV distribution players - cable and satellite TV.

When that will happen, is anyone's guess and depends on the usual economic factors of Hollywood licensing models. In the meantime, I'm on my way home to boot up my TV and browse my cue.

1 comment about "Under-The-Hood Of Over-The-Top".
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  1. John Haake from Gotham Advisory, LLC, July 29, 2011 at 12:15 p.m.

    Netflix knows what they are doing by making its customers choose. Their disk business has plateaued while their streaming service is exploding, and the margins on the digital side are many times larger than the disk side. They are aggressively inviting their customers to join them in ushering in the future of media. Let’s face it, DVDs are yesterday’s Betamax.

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