Thursday, December 23, 2010, 10:29 AM ET
2010 was another spectacular year of growth and innovation in online and mobile video, so it's no easy feat to choose the 10 most significant things that happened during the year. However, I've taken my best shot below, and offered explanations. No doubt I've forgotten a few things, but I think it's a pretty solid list. As much as happened in 2010 though, I expect even more next year, with plenty of surprises.
My top 10 are as follows:
1. Netflix's content deal-making - Did Netflix announce a significant content deal every other week this year, or did it just seem that way? Epix. NBCU. Disney-ABC. Relativity Media. 28-day window deals with Warner Bros., Universal and Fox. Plus a host of smaller deals. Netflix's content acquisition team was working overtime in 2010, and the bevy of movies and TV shows available for streaming contributed significantly to the company adding 4.7 million subscribers in the first 3 quarters of the year, and possibly another 2-3 million in Q4 alone. As it approaches 25-30 million subscribers in 2011, Netflix will be front and center for every content provider's attention.
2. Pay-TV subscriber losses/cord-cutting interest gains - This year saw the overall U.S. pay-TV industry lose subscribers for the first time (216K in Q2 and then another 119K in Q3), which helped to accelerate talk of consumers cutting the cord to instead use over the top Internet sources. But for all the media hype around cord-cutting, little actual data yet exists supporting the idea, and cable industry CEOs strenuously object that it's happening. Still, as losses mount next year, it will be harder for the industry to continue pointing to the economy. This in turn could increase the risk of "perception becoming reality" as consumer awareness of cord-cutting increases.
3. Video advertising and innovation ramp up - Even as Netflix was helping prove the appeal of the subscription streaming video model, free, ad-supported video continued to dominate overall viewing. Innovations in video ad units were numerous, and brands continued to realize that better targeting, engagement and tracking make online video advertising irresistible. Broadcast TV networks, which have had a huge impact in bringing premium quality video to the Internet, all doubled their ads loads or more during the year, helping make online a new growth driver. There seems to be no let up in sight; eMarketer is now forecasting 30%+/year growth in online video, growing the category to nearly $6 billion in 2014. 2011 will bring even stronger gains.
4. Google TV launches, but broadcast networks stiff-arm it - Among the most high-profile device launches of the year was Google TV's. However, Google TV proved to be clunky and its price point high relative to competing connected devices which proliferated this year. The biggest blow to Google TV though was the unexpected decision by the broadcast TV networks and Hulu to block it. The decision was mainly driven by their focus on retransmission consent payments and suspicion about Google's motives. However, with Google's vast resources and willingness to tinker in public, there are still many chapters to be written about Google TV in 2011.
5. iPad launches/ Android gains momentum - Speaking of high-profile devices, in 2010 nothing came close to the success of the iPad and smartphones running the Android OS. Once again Steve Jobs proved prescient in identifying an unmet consumer need and designing a sexy device to meet it. Given its relatively high price and the ongoing recession, I was a skeptic initially. The iPad is still sub-optimal for video since it doesn't play Flash video, but it has helped spark HTML5's strong momentum this year. With 30 million or more iPad sales forecast for next year, video providers increasingly see the iPad as must for video consumption. Meanwhile, Android (which does run Flash) has emerged as serious competitor to the iPhone, accounting for 44% of all smartphones purchased in the U.S. in Q3. Verizon Wireless' high-profile Droid marketing campaign has been a huge factor, and the open question is what happens with Verizon's Android support when the company begins offering the iPhone early next year as rumored.
6. 4G rollouts - 2010 was the year that wireless carriers introduced speedy 4G service throughout the U.S. While the plans are still relatively limited and mostly have usage caps, as they are more widely adopted in 2011, they will significantly help drive mobile video consumption on both smartphones and tablets. Mobile video is poised to follow the same adoption curve as wired online video did; the key building block is solid connectivity.
7. Sports benefits from online/mobile distribution - Sports and online/mobile video are like peanut butter and chocolate - a natural combination. The interesting thing about sports is that just about every possible business model is being used. This year sports again saw success in free, ad-supported (Winter Olympics, March Madness, Sunday Night Football) and subscriptions (MLB.TV, NBA League Pass, numerous college packages). Meanwhile short highlight clips could be found everywhere online. Apps also started gaining traction, and even archives like NCAA Vault and ACC Vault showed how online provides on demand access to the best moments of the past. With sports in general, and football in particular among the most popular programming on TV, there will be no let up in online/mobile video activity next year.
8. Financings and M&A - As all the building blocks of online and mobile video continue to fall into place, investors showed continued enthusiasm, pouring nearly $700 million into private companies in the first 3 quarters of the year. In addition, the year saw lots of M&A activity including AOL acquiring StudioNow and 5Min (among others), Google (On2, Widevine, Global IP Solutions), Digitalsmiths buying Gotuit, KIT Digital rolling up a number of smaller players, Cisco acquiring ExtendMedia, Telestream adding Anystream, and today's Rovi acquisition of Sonic Solutions (which itself bought DivX earlier this year) among the year's many deals. The industry also saw its first successful IPO, by Chinese video portal Youku. Financings and M&A should stay strong in 2011, as well as the likelihood of further industry IPOs.
9. YouTube's dominance continues - In 2010 YouTube continued to maintain its share of online video viewing at approximately 40% month in and month out, extending its incredible run. YouTube now gets more than 35 hours of video uploaded each hour, but just as important, it has made tremendous strides in legitimizing itself, through its Content ID program, increased professional content and innovative advertising formats. All of this will continue in 2011, and as Google builds its relationships with Hollywood, YouTube is poised to gain further.
10. Net neutrality passes, for now - A compromise set of net neutrality rules was adopted by the FCC this week, after a long, hard fight filled with many twists and turns. However, the rules may be short-lived as House Republicans and broadband ISPs immediately threatened to challenge them. With or without formal net neutrality, in 2011, broadband ISPs' actions are going to be closely scrutinized. Level 3's recent allegations against Comcast provide ample evidence that other players in the ecosystem are going to play a self-policing function.
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Advertising, Aggregators, Broadband ISPs, Broadcasters, Cable Networks, Cable TV Operators, Deals & Financings, Devices, Mobile Video, Regulation, Satellite, Technology, Telcos
4G, Android, Apple, Google TV, iPad, Net Neutrality, Netflix, YouTube