2013 may be the tipping point for online video. Major brands and production companies are bringing bigger budgets, top talent and A-list celebrities to online video in hopes of woo'ing users and advertisers. This didn't happen over night, in fact some would say it's about time. Global viewing habits are changing, many are increasingly watching more video over the internet. (India watched twice as many online videos in 2012 than it did in 2011) Tablets, smartphones, and set top boxes, are a large part of the reason for the dramatic growth in the past couple of years. In the U.S. there's a relatively small but growing movement of people that are "cable cutters" or "cable-nevers", who have either unsubscribed or never subscribed to traditional cable. Relying on laptops, set-top boxes, even piracy to get only the shows or content they're interested in over the internet.
For years, it was difficult to find anything from the major networks online legally. They've slowly began to host a portion of their content on company websites to address the growing demand. This year companies are beginning to make larger investments in original programming online while trying to bring advertisers on board. Traditional TV and cable stations are reluctant to disrupt their gravy train by totally moving to streaming, as the ad dollars aren't there yet. Meanwhile, internet native companies like YouTube, Amazon and Yahoo are looking to pull the rug from under them by establishing a relationship with users early and become the major networks of the future. Approaching the internet conservatively, companies like ABC, NBC, and CBS could find themselves replaced with companies like YouTube, Netflix and TWIT.
In the past 2 years Google has invested $300 Million dollars into it's YouTube Original Channel Initiative that promised to bring 100 premium channels to the website. Attaching celebrities like NBA player, Shaquille O'neal, Madonna, Ashton Kutcher and others with the hopes of kick-starting a shift to more professionally produced content on YouTube. Since that time they've tweaked the interface of YouTube to encourage users to subscribe to channels and make it easier to find new, recurring content. The short-term results have been mixed but it was the first large scale attempt at getting serious ad money flowing into YouTube.
Outside of Google there have been a number of Hollywood directors, producers and actors that have experimented with their own content on YouTube with varying results. In 2012, Producer Bryan Singer released a sci-fi web series titled "H+" that had the production values of a traditional television show but didn't gain much traction. Experimenting with show length, he created over 40 episodes, each ranging between 3 - 6 mins. The first episode, the highest watched, currently has a little over a million views with the last few episodes under 100,000.
The biggest Youtube success story thus far has been the teen-targeted channel "AwesomenessTV", which was purchased by DreamWorks Animation last week for a reported $35 Million. It's a major milestone and shows that forward thinking executives in traditional media see the writing on the wall.
Netflix started out as a DVD rental service that offered online streaming of mostly catalog movies and TV shows on the side. In the past two years they've made an incredible pivot, focusing almost entirely on growing their streaming audience. In 2013 Netflix has been busy releasing a number of original shows, most notably the critically acclaimed political drama, "House of Cards" starring Kevin Spacey. Hemlock Grove, a horror series Executive Produced by Eli Roth recently premiered in April and the much anticipated return of cult-favorite "Arrested Development" arrives on May 26th. There are a number of other original shows scheduled to be released by Netflix in 2013 and into 2014.
House of Cards however was the show that showed everyone that a scrappy internet company can stand toe to toe with HBO. Paying a reported $100 million for the rights, it cemented the idea that Netflix was serious about original content. House of Cards was a hit from the beginning, instantly becoming one of the most watched shows ever on Netflix. CEO Reed Hastings has not been shy about his vision for online video and do for internet video what HBO did for cable TV in the 1980's. Currently Netflix has over 35 million subscribers world wide and is larger than HBO in the U.S. The shift to original programming instead of the increasingly expensive licensing for movie rights seems to be taken right of the HBO playbook. Original programming will be the differentiating factor that will separate it from the pack and keep it from being under the thumb of movie studios and distributors.
From the beginning, Hulu has offered original programming but most of it has been small budgets, and of lower production quality than what Netflix is producing. In 2013 they're attempting to raise the bar a bit and have green lit shows from SNL's Seth Meyers, "The Awesomeness" (animated), and co-produced shows with the BBC entitled, "The Wrong Mans" & "Behind The Mask". Hulu currently has 4 million paid users (Hulu+) with millions more that watch online for free. The service has struggled to gain the following services like Netflix have mainly due commercials and its weird licensing agreements. For instance there are episodes that are available on the free version that paying subscribers can't watch. Another buzz-kill is that Hulu displays ads during the shows even if you pay the monthly subscription fee. In effect, customers are double paying to use Hulu+ having to watch ads on top of a subscription. These types of anti-consumer practices seem to plague Hulu, especially among the mostly likely demographic to use the service who are increasingly less likely to watch commercials.
What seems a bit like a conflict of interest, Hulu is co-owned by three major TV networks: ABC, News Corp (Fox), and NBC. There have been rumors going around for over a year that Hulu was going to be sold. First Apple was a potential buyer than Amazon and more recently Yahoo. It's hard to put a value on Hulu as it's only as valuable as the contract terms it has with the TV networks that currently own it. Who ever does decide to buy it will be at the mercy of the networks, further emphasizing the need to create successful original content.
Last month Amazon dipped its toe into the original content water and put up 15 pilots for new shows on it's Amazon Streaming Video service. They plan on letting their subscribers choose which of the 15 pilots become actual shows. The reaction to the pilots have been luke warm, the content being split between mostly comedies and children's programming. For years Amazon Streaming Video has primarily been an also-ran to Netflix offering similar movies and TV shows but less of them. Recently Amazon has made a push to shore up some exclusive offerings from popular shows like "Downton Abbey" and "Justified". The move to producing original content seems like the next natural step as they attempt to differentiate itself as an alternative to Netflix.
AOL, Yahoo, Conde Nast
The past couple of weeks online portals like AOL, Yahoo and magazine powerhouse, Conde Nast have all announced their plans to produce original programming for the internet. Both AOL and Yahoo are struggling to find an identity for their brand in this decade and creating original content could be an avenue to not only keep their current audiences but grow them as more people increasingly get their video from the internet.
Video over the internet or IPTV (Internet protocol TV) has been the dream for many living on the cutting edge of technology. The hopes of a successful IPTV system would be to democratize the distribution of video, provide more options and flexibility for end-users and make content available on every device. One of the pioneers of this vision is veteran radio and TV host, Leo Laporte. In 2008, he started streaming all of his audio podcast in video. The network was called TWIT.tv, which now has over 25 shows that cover topics in various niches involving technology. 7 days a week, 24hrs a day. The network is accessible via the web, mobile, iTunes, and set-top boxes like the Roku and Apple TV. TWIT.tv is the prototype of what is possible not only from large` multi-national corporations but from everyday people wanting to stream shows out of their homes or make shift studios. What the internet did for music can eventually be done for video content.
Of course just like music, when everyone is able to produce and distribute their content on a equal playing field, a gluttony of mediocrity surfaces. Having so much choice makes it hard to separate the wheat from the chaff. Music is having a filter problem at the moment and video producers will soon face the same predicament once a proper IPTV system is established. As professionals and amateurs alike figure out what the best strategies are to produce profitable content for the internet someone should be figuring out a way to properly host and filter all of this content. As more people get used to set-top boxes and smart TVs, asking users to go to individual websites to watch video content isn't going to cut it. There has to be an easy avenue for users to watch content where we watch most of our content, the TV.
Equally distributing online "channels" or apps from both large and small production houses to televisions around the world isn't exactly an easy task. Apple doesn't seem to have a solution yet, neither does Google or Microsoft. Preferably I'd like to see someone that doesn't produce content take the lead on this. Roku is the closest thing to a solution we have thus far. Almost anyone can put a channel in their store and every service is treated equally. Technology like voice search and AI that can learn your likes and dislikes are improving dramatically. It's easy to imagine an interface that combines all of this and provides a seamless experience for end users in the near future. Perhaps Apple's trepidation in seriously entering the IPTV business is due to them waiting to see where all the pieces will land. I'm not completely sure if the app for every brand route is the best solution but it is a solution. As more content becomes available, search and customization will become of greater importance. Whatever the case, online video is moving fast but won't become mature if users have to jump through hoops and learn multiple interfaces to watch their favorite shows.