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Television’s shift to the Internet:

How online video websites are gaining momentum between viewers and

advertisers alike.

Senior Seminar Group Project :: Page [2]

April 2009

DUE TO THE POPULARITY OF NEW AND INTERACTIVE MEDIA...More and more television content is becoming easily accessible to viewers through the web. With networks putting popular content on their web sites, as well as additional sites and programs such as Hulu, ABC, iTunes, and AppleTV, people are turning to their computer screens in addition to their television sets to enjoy their favorite shows.

      While this new business model is certainly a step in the right direction that adapts to the fast-paced lifestyle of the 21st century, there are a few glitches that still need adjustment. There is a huge concern over whether or not networks are making nearly enough money off of advertisements shown on shows accessible through the web. With the total number of videos watched online up 41% from a year ago, according to reports from the internet measurement firm ComScore, networks need to make sure they are not allowing viewers to completely alienate their television sets. Overall, however, this new

platform is taking technology to another level. While some of the networks are major contributors to this online shift, cable companies should be careful not to make all of their content available on the web, or they will have to start charging subscription fees to stay in business, as customers might start to cancel their monthly cable subscriptions. (Fritz)

Hulu Hulu is an online video service co-owned by NBC Universal, News Corp. and Providence Equity Partners.   The website offers TV

It’s not your parents

television set anymore!

How online video websites are gaining momentum between viewers and advertisers alike.

TV’S SHIFT TO THE INTERNET

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shows, movies, and video clips at Hulu.com.   The company is all for free for anyone in the United States.   Founded in 2007, Hulu made it their mission to assist people in finding and enjoying premium video content whenever and wherever they wanted it. (Hulu)

Beyond their own website, Hulu videos are accessible through AOL, Comca st, MSN, MySpace, Yahoo!, as well as personal blogs, and fan sites.   The content brings together a wide selection of videos from over 130 content providers. (Hulu)  FOX, NBC Universal, MGM, and Warner Bros, are just a few that provide the site with more than 1,000 current primetime TV hits.

Hulu’s user experience is focused on providing the browser with quality and convenience.   The system is easy to use and simple to

share.  The website does not require the viewer to download any software.  All that is needed to view the high quality videos is Flash 9.0 and an Internet connection. (Hulu) From here the user is able to share full-length episodes or short video clips via e-mail, posting to a Web site, or on their social networking page.

Due to these commitments Hulu has done well since their public access debut March 12, 2008.  Hulu has grown from a small video streaming company to now streaming around 308 million videos a month. (Fritz) Another reason why the site is successful is because it is free and videos on the site contain fewer ads than on cable TV.   With the acceleration of Hulu’s popularity it could cause the shift of advertising dollars to online formatting from broadcast and cable TV.   In 2007, Forrester Research estimated that marketers would spend $471 million

HULU HOW -TO

Hulu in 1, 2, 3 Step One: Type in a keyword of what you are looking for and a list of shows will appear.

Step Two: Click on the show you wish to view and a full viewing screen will appear.

Step Three: When your show is over you can send the video to friends through social networking sites.

Watch your favorites. Anytime.

For free.

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on online video advertising, with about that amount transferred directly from broadcast and TV ad budgets. (Learmonth)

While cable television might be dwindling in viewership, advertisers are shifting their medium to a more focused internet-based version rather than losing money on cable ads.  Advertisements on Hulu run for two minutes per every half-hour of content and are unskippable.   With broadcast TV there is no guarantee that advertisments are being watched, on the Internet there is no doubt that the viewer has to watch them. (Learmonth)

Maecenas Quis Dolor

ONLINE TELEVISION OPTIONS HULU ABC APPLE TV

Free

Advertisments

NBC TV, clips, some Movies...

Free

Advertisments

ABC television shows only

$1.99 per show

No advertisments

TV, Movies, Music, PodCasts, Photos

HULU BY THE NUMBERS

Todd Dagres, principal of Boston-based Spark Capital is invested in a competitor of Hulu and believes that television is dying out.  “Eyeballs are shifting away from TV not because people want to watch TV on their computers, but because they don’t want to watch TV.” (Learmonth)

      To confirm these statements, The Council for Research Excellence, has executed a $3.5 million dollar project titled “Video Consumer Mapping Study.” The project does just as it says, the initiative is described as, the largest and most significant observational study of media activity ever undertaken.  (Atkinson)

           The goal of this research funded in part by Nielsen Media Research, is to find out what really is going on in the consumption of video and television. 

The research includes what age groups do the most media multi-tasking and if younger

viewers are in fact shifting away from traditional TV. (Atkinson)

           Steve Sternberg, the executive Vice President of Magna, stated that, “multi-

tasking is not a young person’s phenomena.” The results from this information will help

marketers ask the right questions about their fears of the rise of DVR and online television. (Atkinson)

“Eyeballs are shifting away from

TV...”

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Network Video Sites Perhaps the most well known way to enjoy television content through the Internet is simply by visiting the Web sites of major television networks. While only a percentage of viewers may be informed of sites such as Hulu, a l m o s t everyone who watches TV is aware that the stations they tune in to have their own web sites with a surplus of video content, including full episodes of popular shows. 

M a j o r TV networks such as ABC and NBC began putting episodes of popular shows such as “Lost”, “Desperate Housewives”, and “The Office” online for free around April of 2006. What started off as a two-month trial has now turned into a major model for the television industry that has contributed greatly to the online shift.

“It’s really an opportunity for us to learn about a different model,” Disney-ABC television group president Anne Sweeney shares.  “We should not allow the industry to have only one business model, and the trend of declining television v i e w e r s m u s t b e remedied.” (Reuters)  Similar to the idea of Hulu, iTunes, and other technologies such as DVR and TiVo, online content

allows viewers to chose when they view their content. They no longer have to stop what they are doing and set aside a time to watch new episodes of their favorite programs. They too run short ads 2 to 3 times during a show, forcing the advertisements upon the viewer but for a much more tolerable period

than basic television. Like Hulu, advertisers should be much more c o n fi d e n t that their ads are b e i n g v i e w e d , since they are not able t o b e s k i p p e d , a n d t h e r e f o r e

will hopefully be more inclined to buy slots from the networks, allowing the business model to be successful despite little to no subscription fees.

While advertisers should be fighting to get sots on the internet-based airings of shows, some are questioning the networks ability to make nearly as much through advertising as they do through traditional television methods. Part of the problem comes from the fact that when ABC first launched the i r program, they allowed consumers to get used to the low-volume ad model. It is a model that goes hand in hand with the fast-paced

lifestyle of the 21st century, as people who are sitting in front of their computers are less likely to be patient when it comes to load time or in this case, advertisements. Although advertising rates per viewer are higher on the Internet than on broadcast TV, the lower volume of ads makes it nearly impossible for online ad revenues to catch up to that of standard television. Since viewership through traditional TV has not yet dwindled, this has not yet posed a serious issue. But with more and more people becoming familiarized with the internet revolution of television, the number of ads shows every thirty minutes may have to change in order to keep the networks from losing too much money and going out of business. While this could pose a serious threat to the loyalty of the viewers, it is something that people may just have to get used to if they went to enjoy premium television content on the web. (Fritz)

      iTunes Apple’s iTunes, one of the most popular digital media player applications, has brought a challenge to cable television and DVD sales. iTunes library provides hundreds of movies and television shows. Viewers are able to download these

programs directly on their laptops and iPods quickly

and at a reasonable cost. iTunes offers programs that aren’t easily found on cable or in video rental stores. With the click of a

button one can download anything from

vintage films to movies made by independent

filmmakers to TV shows and

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documentaries from all over the world.   Not only has iTunes increased variety in television and movie viewing, but it has made watching these programs more portable then ever.

      Many people believe that Apple will lead to the demise of cable television. They predict that people will no longer be inclined to pay a cable company when they can get what the company offers and more straight from their laptops. Blogger Bill St. Arnaud comments, “the speed of cable TV’s demise will depend on how fast Apple can get films and TV shows from all over the world on iTunes.” (Macenstein) The recent launch of the product’s second version has already led to a 17% slump in Blockbuster's share price. (Walmsley) iTunes users can rent movies for a similar price that they could at a video rental store.

Some may wonder why you would pay $1.99 to watch a television show on iTunes when they could watch it for free when it airs on broadcast TV.   Many people, especially college students and busy 20-somethings find that this “on-demand” style viewing fits their lifestyle perfectly. They don’t have the kind of regular schedules conducive to watching their favorite show at the same time every week.

           Recently, the introduction of AppleTV has revolutionized “on-demand” viewing and even further contributed to the downfall of cable.

AppleTV, which began shipping in March of 2007, is essentially a tiny white box that wirelessly transmits the shows and movies you've downloaded from your computer to your TV screen. You can also access your entire iTunes library including your music, movies, podcasts and photos. AppleTV also allows direct access to YouTube. "This is the biggest realignment of the distribution of entertainment in history," says Colin Dixon. "I don't think that traditional broadcast – cable and satellite – are going away tomorrow, but they must change to maintain market share." (Gerson) Many analysts believe that consumers eventually will shy away from DVD’s and turn to the Web and their computers for movies much like they have for music. Online music services have had a major impact on falling CD sales, which may be an indication of things to come in movie and television industry. (TECHWEB)

           The shift of focus from the television sets to computer screens is certainly one that could potentially change the industry. Despite the potentially advertising issues, which can easily be combated despite upsetting consumers, the convenience as well as low cost makes it the optimum choice for television viewing for the majority of viewers. While many are used to the

comfort that comes from sitting on the couch in front of

the television set, others are becoming more and more reliant on the many possibilities that are available for free on the internet. 

In addition to the many legal options discussed throughout this paper, many other underground and illegal sites provide full-length episodes available to those who missed out on the broadcast debut of their favorite shows. The legal websites we have discussed are aware of these other possibilities, and are doing everything they can to stay on top of their game and provide the best quality video for the best price. Networks and cable companies need to account for the obvious shift that stands before them. The shift to online video is one that is inevitable, and cable companies as well as the networks need to do everything they can to accommodate for these changes and provide content on the web that is high quality and easily accessible to viewers.

WHICH WILL YOU CHOOSE TO USE?

Alex Baker Taylor Hass Andrew Kay

iTunes “on-demand”

viewing fits 20-somethings

lifestyles perfectly