The Long Road to Streaming TV

As haltingly slow as the process is, we continue to glacially create all the infrastructure required to enable streaming delivery of television at a revenue-significant level. Better broadband is the first requirement, as is the consumer habit of watching TV on lots of devices connected to the Internet.

Better ways of aggregating content, providing navigation and ease of use also are needed. In many ways, Xbox now provides some of that functionality. Boxee and Roku are other examples.

But content availability remains the biggest blockage. AT the moment, online content still does not feature most of what consumers expect when they buy video entertainment services. To be sure, a growing number of consumers decide to live without traditional video services. But those consumers remain a small percentage of all consumers.

Still, even once the infrastructure to support robust video streaming is in place, there will be key obstacles, namely content availability.

Historically, even content availability has not proven it can create a large market.

According to a new report released by The Diffusion Group (TDG), video-on-demand services provided by PayTV operators should be, but are not, generating significantly higher viewing and advertising revenue. Total VOD use is small, representing only one percent of all U.S. TV viewing.

By some measures, VOD is doing better. Magna Global has estimated that U.S. homes with VOD, a "category that includes both traditional multichannel VOD offerings and over the top services," will hit 70.1 million homes, about 57 percent of all TV homes at the end of 2016.

TDG attributes that failure as a reflection of VOD's inadequate advertising support and awkward program guides that limit availability and viewing of ad-supported VOD content. That also suggests the "for fee" VOD has not gotten widespread interest.

VOD in recent years has contributed about $2 billion a year worth of revenue for U.S. video entertainment providers. U.S. cable TV companies alone booked about $98 billion in 2011 revenue. That doesn't include the sizable revenue earned by satellite and telco providers as well.

The point is that VOD, as a service, has been a modest success, though it has had three decades to make its case.

Content availability is the single biggest key needed to unlock the streaming TV business. But if video on demand is any indication, even that might not be enough to create a robust streaming video business.