“This hearing is about the emergence of online video and the power of broadband to change the way we watch. This is the start of an exciting and timely conversation,” said Sen. John D. (Jay) Rockefeller (D-W.V.), chairman of the Committee on Commerce, Science, and Transportation, as he kicked off testimony earlier this week on the Hill regarding “The Emergence of Online Video: Is It The Future?”

He continued, “So my first question is how will the disruptive technology that online viewing provides lead to better content and more consumer choice? But more than content is at issue here. Because year-in and year-out consumers face rate increases for pay television that are rising faster than the rate of inflation. We’re paying for so many channels, though we usually only watch a few. So I want to know if the emergence of online video will do more than improve content and expand choice. I want to know if it will bring a halt to escalating bills.”

Several industry players were called to testify regarding video’s online future, and most of them did spend time addressing the issue as they see it. Make no mistake – they also used the opportunity to forward their own agendas.

Opening Up To New Players

Taking the first crack at the senator’s queries was Barry Diller, chairman and senior executive at IAC, an Internet company with more than 50 brands that include Ask.com, Match.com, Citysearch, Electus and Vimeo. However, he also has a vested interest in Aereo (click here for more information), a new “members only” OTT contender, and he took the opportunity to tout the new service as a way consumers are getting more content while saving money on monthly subscriptions. He also wanted to make sure the legislators again heard that content incumbents, in his opinion, continue to quash competitive innovation.

“The Aereo system lets consumers watch Internet-delivered live, local broadcast television on an Internet-connected device,” he told senators. “Essentially, it allows a consumer to outsource or locate remotely an antenna and DVR and to use that equipment to access the over-the-air content to which they are entitled on an Internet-connected device. Aereo reminds consumers that they have a right to access over-the-air broadcasts using an antenna.”

He continued, “Aereo is but one example of how the Internet is injecting some much needed competition into the video marketplace. While all of this competition is good and healthy, the online video marketplace is still in its very early stages of development.”

While noting that “incumbents have the means and incentive to engage in economic and/or technical discrimination against online video distributors,” Diller added, “I’m extremely bullish on the emerging world of Internet-enabled video distribution. If properly nurtured, the marketplace will develop multiple forms of distribution and many new competitors. For consumers, the future of online video is more choice and more control. Consumers have the lawful right to watch the content they want, when the want it, and how they want it. The Internet has spurred technological innovation that now makes the exercise of that right possible.”

Video’s Future By The Numbers

Presenting statistics on consumer viewing habits was Susan D. Whiting, vice chair at Nielsen, who told the committee, “Based on our latest research, the average American watches nearly five hours of video each day, 91 percent of which is done watching traditional television sets in real time or ‘live.’ What has emerged in the last four to five years is a simple message: Consumers watch their favorite content on the best screen available at that moment. And they watch from more locations and on more devices than ever before.” 

She added, “Broadly speaking, each month, the average American spends 146 hours and 45 minutes watching traditional television, 4 hours and 31 minutes watching Internet videos on a personal computer, and 4 hours and 20 minutes watching video on a mobile device. Along with the increase in online video consumption, it is worth noting that 33.5 million mobile-phone users now watch video on their phones, a 35.7-percent increase since last year. Consumers with this access spent 4 hours and 20 minutes each month watching video on a mobile device.”

And because more consumers have adopted a “media multi-tasker” mode due to the proliferation of wireless devices, Whiting concluded, “Consumers are finding and accessing their favorite content on more and more devices, or ‘screens.’ Consumers are saying unequivocally, that online video will continue to play an increasingly larger role in their media choices.”

What Would Microsoft Do?

While spending the majority of his time focusing on his company’s Xbox and its transformational effect on the video industry, Blair Westlake, corporate vice president/Media & Entertainment Group at Microsoft Corporation, did bring up some good points about the future of video.

“Consumers access OTT services, such as Xbox LIVE, using broadband connectivity they obtain from an Internet service provider, such as their cable or telephone operator, and so the expansion of broadband has made OTT services possible,” he began. “In the past two years, these phenomenal changes have migrated to new mobile platforms as smartphones, slates and tablets and have forever changed when, how and where consumers enjoy video content.”

As such, he noted, the entry by Microsoft and others into the video-aggregation and online delivery market has contributed to consumer choice.

“Some of us before the committee today are evidence of the vibrancy of the OTT video-distribution marketplace in 2012. It bears emphasis that a hearing on video competition held only five years ago would have included almost no one on this panel,” Westlake said. “The OTT providers here have afforded consumers new options and created a new dynamic in the video marketplace. These choices complement traditional cable, satellite and telco services, and enhance consumer control.”

He added, “Many in the creative community have recognized what the future holds. Production houses are already developing concepts for new shows that allow viewers to unlock extra content by following along on their second screens. Creating relevant, engaging second screen experiences will encourage fans to interact more deeply with their favorite TV shows.

Westlake did acknowledge that, with the proliferation both of devices and OTT options, traditional service providers may lose business.

“Consumers may elect to drop premium movie channels and supplement their basic service with OTT services such as Netflix,” he pointed out. “While consumers are likely to continue to consume video primarily from traditional cable, satellite, and telco services, the choices in the market today give all consumers more control over their viewing habits, so they are less tied to linear programming that has been the norm in the television business for several decades.”

Even with all these choices, the Microsoft exec reminded senators that “the single most important issue shaping the future of video is the availability of universal, high-speed broadband access.”

Debra Baker

The Daily

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