Five Predictions For Online Video In 2012

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People Spend Twice As Much Time On Netflix Than On Hulu

Editor’s note: Guest author Peter Csathy is President and CEO of Sorenson Media, a leading provider of encoding solutions. Peter was interviewed by TechCrunch TV earlier this year about how Hollywood is moving to the cloud. He blogs at Digital Media Update.

In 2011, the long-promised ubiquity of video—on-demand anytime, anywhere—started to become a reality, driven by mobile (smart phones, tablets).  While this may seem obvious, remember, it was not so long ago (a couple years, really) that most doubted that consumers would ever watch anything other than short-form YouTube-like video clips on the small screen.  Consumers are now beginning to watch premium long-form video (TV, motion picture content) on their most important screen on a massive scale, despite the frequent paucity of compelling content offered by service providers.  Yet, we are still in the early innings of this video revolution—so, we truly haven’t seen anything yet.  With this in mind, here are my predicted “big stories” for video in the coming year:

(1) TV Re-imagined. I have always expected Apple to release an all-in-one flat screen TV—think of a large-screen beautiful iPad on your wall—that will be called “iTV” in order to distance itself from Apple’s current Apple TV “hobby.” Apple’s goal will be to re-think the living room experience to be, well, more of an “experience” (rather than simply a “dumb” TV).  That means that, yes, it will be a beautiful and aesthetically appealing piece of hardware. But, it will be much more than that. It will aim to seamlessly marry that beautiful hardware with underlying services (including linear TV—more on that below), much as Apple was uniquely able to effectively do originally with the iPod/iTunes to transform the music business and the overall consumer music experience. Apple’s ultimate goal is to sell more hardware of course—using software and services as the Trojan Horse. And, Apple will be able to command higher prices—and significantly higher margins. There is no doubt on this one. If Apple builds it, the Apple faithful most certainly will come.

(2) Tablets on Fire. Not surprisingly, Apple’s iPad will continue to be the No. 1 tablet, but Amazon’s Kindle Fire will be closing in … fast, fast, fast (remember, it was recently reported that it already outsells the iPad at Best Buy).  Sure, version 1.0 of the Kindle Fire has some performance issues, but Amazon will knock those down fast.  And, “Amazon Prime” will begin to significantly challenge Netflix, as more and more of us are introduced to Prime via Amazon’s brilliant Kindle Fire maneuver.  Amazon’s strategy is completely the reverse from Apple’s. Amazon will use its hardware (the Kindle Fire) as the Trojan Horse to sell more services (especially premium video)—and, of course (and most importantly) to enable mobile shopping. Anytime. Anywhere. That’s Amazon’s huge advantage over virtually every CE company—Amazon is willing to take a significant loss on its hardware sales, because it is gunning for long-term continuous purchases of goods and services (including digital media).  Brilliant Amazon.

(3) Battle for Your Living Room & Cutting of the Cord. Not to be outdone, Google will continue its massive push—and billions of dollars in investment — into the premium video and “TV” world. It doesn’t matter whether Google’s initial experiments have worked so far (they haven’t); Google is patient and recognizes that we are still early in the video game.  Google covets the living room experience—again for very different reasons than both Apple and Amazon. For Google, it’s all about advertising of course—and monetizing video via ads is Google’s next great frontier. That’s why Google will stop at nothing. Google will even begin to take on the cable and satellite providers head on by offering full live linear programming (like ESPN) over the Internet and on their pipes.  Apple and other behemoths (Amazon?) will follow suit—and consumers will finally respond in real meaningful numbers to cut the cord from cable/satellite programming packages, thereby beginning to relegate cable companies to “dumb pipe” status.  Of course, this isn’t all bad for the cable giants, because margins on broadband services are significantly higher than those for premium content services (due to the high licensing costs commanded by the content providers); and, more premium video means that more consumers will need faster broadband.  This also is good—very good—for premium content providers like ESPN, because there will be more mega-customers vying to distribute their content; after all, content is still king).  With these behemoths (Google, Apple, Amazon) battling for a seat on your living room couch, smaller players like Roku will be faced with tremendous pressure to be swallowed up (or simply risk being marginalized). Expect significant consolidation in 2012.

(4) Personal Video Breakthrough. But 2012 won’t be just about premium video content. As a result of massive growth of smart phones with easy HD video capture anytime and anywhere, your “personal video”—intimate family and friend video memories/keep-sakes that you do not wish to share with the world on YouTube—will be, for the first time, easily archived, managed, shared and played back securely on any device and at any time (including in your living room and on the big screen) — and with HD quality intact. Think of Shutterfly for video.  A number of services have popped up in the past several weeks seeking to address this potential market (Shutterfly has its own video service, but it has not yet implemented mobile video sharing; Path is mobile and already supports private sharing of videos).  Companies will begin to significantly monetize this personal video opportunity in the latter half of 2012. Remember, family video memories are perhaps the single most valuable possessions we have . . . these are snippets of your life that can live on forever. And, once you invest in making a particular service a “home” for your personal video memories, you likely will never leave.  The switching “pain” is simply too great.  That is good for service providers.  Really good.  They now will have new ways to monetize with significant numbers.

(5) HD Video Ecosystem Growth Explodes. As a result of these and other forces, the demand for HD video-enabling products and services will grow exponentially—and video workflows will move at scale into the Cloud, beginning to seriously challenge legacy hardware providers.  All video must be prepared and optimized for delivery across all screens—including mobile and the living room.  This means solving all relevant and increasingly complex delivery issues that make heads spin for any content creator—device specification and detection, format and codec licensing and optimization, video resolution, frame size, network detection and optimization, adaptive bitrate delivery. (Disclosure: I believe video transcoding, which is what my company does, will be a key driver of this video enabling universe). Those services that easily and cost-effectively solve all of this complexity for content creators should fare well in the coming year.  After all, content creators want to focus on creation—especially when their avenues for distribution are becoming far greater than ever before.

Image via James Vaughn