Online Video's 2011 Story a Bestseller in the Making

Looking back at the headlines in online video for 2011 makes it clear that it has been a huge year for the industry -- a transformative one.

We were hopeful, just 18 months ago, that online video could someday make it into the living room. Today, it has, and the industry is looking past early adopters to a mainstream audience.

Consider this: Last week, comScore released viewing numbers for November that showed U.S. Internet viewers watched 20.5 hours of video last month, a total of 40.9 billion videos. A year ago, those numbers were 14.7 hours and 5.1 billion videos.

And this: The NFL is streaming the Super Bowl online this year. While the NFL and partner don't expect the addition of the Super Bowl to erode their television audience -- any more than saw online streaming of March Madness hurt its audience numbers -- it nevertheless speaks to an increasing awareness among content owners that online video finally has arrived.

It has been a busy year, and selecting five, or 10, of the top headlines is like asking someone to pick out their Top 10 songs of all time. It can be done, but it often comes down to "what have I heard lately."

With that in mind, here are several of the top stories in online video from the past year.

The NFL and NBC plan to stream the Super Bowl
It may not be the biggest story of the year, but it's certainly close to it. Industry analysts point to live sports as the prime reason viewers cite for not cutting the cord. ESPN manages to pull nearly $5 from every pay-TV subscriber in America. A la carte is dismissed as a potential model because, for the most part, sports aren't included in the mix.

Now they are, and in a big way. There is little chance that a significant percentage of the Super Bowl's 111 million viewers will abandon the big screen for a tablet, smartphone or laptop, but there's a very good chance they'll use these devices as second screens to get a different look at the game, to be social or to catch up when they're away from the action.

...And then drops off a cliff as CEO Reed Hastings and the Netflix (NAS: NFLX) executive team lose touch with their customers, forcing what proves to be a catastrophic 60 percent price hike upon what had been an adoring audience, and vowing to spinoff its DVD-by-mail business into Qwikster.

In September, Netflix announced it would abandon the Qwikster idea, but stood by the price hike. It managed to keep most of its subscribers, in the range of 23 million. Netflix also was busy elsewhere, launching a business in Latin America and the Caribbean, announcing plans to expand to the U.K. and Ireland in 2012, contracting for original programming and scoring an increasing number of content deals.

Connected TVs and devices emerge
Getting online video to the living room was once the Holy Grail. Now, it has become an everyday occurrence, literally.

An increasing array of Smart televisions and connected devices -- ranging from dedicated boxes built by Roku, Boxee and Apple (NAS: AAPL) , to Blu-ray players and gaming consoles -- are flooding the consumer market.

Research shows Apple currently has a third of the connected device market with some 4 million Apple TV devices in U.S. households; more importantly, it forecast the total device market will likely double in 2012 to more than 24 million units.

Nielsen, meanwhile, said game consoles like the Xbox, PS3 and Wii all saw significant increases in the amount of time consumers reported using the devices watching streaming video.

As for connected TVs, interest in them has been growing, too, with new research saying that middle class Americans have jumped on board. Some 20 percent of American households plan to buy a flat-panel TV by the close of the year, making it the most popular CE device of the season. And, Parks Associates reported nearly 75 percent saying they'll be getting a feature rich TV, with smart capabilities outshining 3D by a 2-1 margin.

The impetus, according to the research, stems from the availability of over-the-top programming.

Tablets, meanwhile, created a category all their own.

Apple's iPad 2 and, more recently, (NAS: AMZN) 's Kindle Fire, have provided users with an easy video alternative to TV, computers and smartphones. Both have also spurred sales and rentals of video from their respective content stores.

Content goes over-the-top
Sure, that's what the industry has been doing for years. But in 2011, the amount of content available to users and the potential delivery points exploded.

The networks, CBS, NBC, ABC and Fox, all increased the pace of their digital deal making. CBS's head honcho, Les Moonves, even took time during the network's earnings call to give props to Netflix for the amount of income it has provided to the broadcaster's bottom line, crowing about how it was "another example of how we are capitalizing on the value of our content by selling it to new distributors without taking away from established revenue streams." A year earlier, he had worried about "only getting pennies online."

Comcast, too, which took ownership of NBCUniversal just after the start of the year, also raved: "The kind of money that online video providers are paying for content is infinitely, almost significantly greater than it was 18 months ago," said Comcast COO Stephen Burke.

Time Warner (NYS: TWX) , which owns content factory HBO, pushed that content online, through its HBO Go portal. A flurry of deals at the end of this year means that the site is now available to 98 percent of its subscribers.

Other players in the space, Vudu, for example, also saw their virtual stock rise as consumers looked for more ways to watch video online.

Online video makes a social connection
Of all the stories that is still being written, Facebook's emergence as an online video player is perhaps one of the most interesting. The social networking site, which has 800 million registered users, added a number of chapters to its own tale in 2011.

In March, the social media Goliath signed a deal to partner with Warner Bros. to allow users to rent content from the studio through the Facebook site using Facebook credits. First up was The Dark Knight. At the time, Goldman Sachs analyst Ingrid Chung said Facebook "could some day be a credible threat to Netflix." Facebook continues to experiment. It has signed deals to stream live major league baseball games during spring training, live FA soccer matches, a Miramax outlet, video-on-demand episodes of Dr. Who and Top Gear and more.

With television viewers increasingly adopting social TV, the Facebook connection could be huge.

The Google effect
Search giant Google (NAS: GOOG) and its YouTube property simply continued to grow. It made a number of big acquisitions -- Motorola Mobility, for example -- and several smaller ones like Next New Networks and Green Parrot. And, it fueled rumors about its intentions. Its $100 million commitment to fund new channels of original content for YouTube and its ongoing drive for content deals with companies like Disney made it clear that it has big designs for the space.

There was more than one rumor that saw Google developing into a network on it own.

And more...
That's just a sampling of what went on in the online video space this year.

There were some big acquisitions, among them: Rovi's purchase of SonicSolutions; Tata's acquisition of CDN BitGravity; KIT digital's buy of Kyte and a plethora of other companies in the space; Cisco's surprise buy of Inlet Technologies, as it expanded a push into online video with its VideoScape product; online video platform Fliqz acquisition by VBrick; Dish Network buying Blockbuster and its subsequent launch of an on-demand platform, the Blockbuster Movie Pass; and, a dozen more that showed rather than consolidating, the space expanded as companies looked to bolster their product offerings.

And, you can't talk about sales without mentioning one that didn't happen.

Hulu's owners put the company on the auction block, saw a lot of interest, including a reported $1.9 billion bid from Dish Network. In the end, like CBS's Moonves, they realized there was gold in online video and decided to continue prospecting.

There are more stories that could have been included. Let me know what you would have picked.

This article originally published here. Get your online video industry briefing here.

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