What’s Holding Back ‘Online’ Video?

So…Blockbuster files for bankruptcy and Netflix continues to rule.

The grand idea of “convergence” continues to slouch forward.

Plenty of folks have written some smart stuff about what Blockbuster’s demise and the continued rise of Netflix mean as far as online video goes. Some have written about why Netflix continues to be positioned for dominance over other online video choices. Others have seen the story of Blockbuster’s demise as a chance for cable companies to wake up before they’re pushed into irrelevance. And others have used the death of the once-ubiquitous-late-fee-collecting-giant as a case study in bad management and shoddy business practices. There’s no doubt about it: the end of Blockbuster marks another milestone in the great move from “atoms to bits” (as Nicholas Negroponte calls it) that we’re living through.

But what’s it going to take for the lines to finally blur between “online” video and television? When is “online video” simply going to become “video”? When will we be able to sit back and watch our TVs without having to care about where our video is coming from?

If you want to get online video into your TV today, there are several routes you can take.

Netflix has done a great job of getting hardware manufacturers to include functionality that lets you access its streaming services. If you don’t have a TV that receives Netflix, you can get your streaming Netflix fix via most major video game consoles, your TiVo box, many newer Blu-ray boxes, a number of home theater systems, and a few assorted other set-top boxes and Internet-connected entertainment appliances. For those who don’t want to go the Netflix route, there’s the Zune network (available via the Xbox), Amazon (available through many of the same types of devices as Netflix), and the new $99 Apple TV which gives access to iTunes and assorted other types of online video. And, of course, for the geekier folks there’s always hooking up your computer to your TV.

For the most part, watching movies or TV reruns on these devices presents a pretty “TV-like” experience, especially if you’re using a box that allows you to control your streaming content with your remote. But as far as online video from other media channels goes, we’re a long way off. Watching content from Google Video, YouTube, Hulu, or other Web-based video sources is still pretty annoying. And usually if you want to view video sources that aren’t pre-programmed into your set-top box, you’re out of luck unless you want to hook up a computer to your TV and add a keyboard to your pile of remotes…or deal with one of these Frankenstein-like remote/keyboard combos.

Online video is on the way to being huge, but it’s still a ways away from replacing cable TV in most households and a long way from true “convergence.” But we’re getting there. And the Blockbuster/Netflix story holds the key to understanding where we’re going.

What happened to Blockbuster and what’s happening to make Netflix a success is the same thing that happened to the record industry. Blockbuster, like the recording industry, at one time controlled the means of distribution of video content. First on VHS cassettes, then on DVDs, it made the mistake of thinking that what it was trading in was hunks of plastic. But it wasn’t the plastic it was renting…it was the information (the video) on those hunks of plastic. And moving all that plastic back and forth was pretty inconvenient for consumers.

Netflix understood this, but it also understood that the digital infrastructure didn’t exist yet to separate the information from the plastic it was housed in. So they did the next best thing: it turned the Postal Service into its “network,” greatly reducing the effort consumers had to expend to move those hunks of plastic around. It didn’t completely separate the information from the means of distribution, but it served as the analog equivalent.

Digital distribution over the Internet was the logical next step, finally separating the information from physical distribution. Of course, this scares the bejeezus out of the entertainment industry who continues to fight this separation on all fronts: video, audio, and in print. But, of course, as we’re all witnessing, it’s a losing battle. The trend vectors all point toward the eventual digital distribution of all digitizable content. See iTunes and the Kindle for examples.

But all online video isn’t on Netflix. There are competing services that offer much the same content. And there’s an enormous amount of online video on YouTube, Google Video, Hulu, and other Web-based channels that suffer from the fact that they’re not easy to access from your couch. Where are things going?

Perhaps some very interesting places. Tune in next time (October 11) to learn what the future of online video and convergence might just look like.

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