Currently, Hulu is my favorite online video site. Boxee is my favorite way to bring online video to my TV. Well, what is going to happen going forward? How do companies make enough money from online video? Trading analog dollars for digital pennies is a legitimate concern for these ginormous corporations.
ABC has an interesting strategy. They only allow their content to be streamed from their site, with their player (well, Boxee has it too). The user experience is crap. They make you click to continue the show after the advertisement plays, which makes it tough to watch from across the room. On top of that, they just increased the amount of ads they are going to show. But, if you are a fan of Grey's Anatomy or Lost or anything else on that network and you missed an episode, you can only go to their website. They keep the brand tight, rather than allow it become associated with another site like Hulu or Joost. Plus, if the ratings were one person lower because you didn't watch, they made less money. So, I guess they feel like you need to pay with attention for the show regardless of where you watch it.
As a consumer, I hate the strategy. However, I completely understand where they're coming from. It is a clear example of 'Content is King'.
But, here's where this could get interesting. It's not that the video I want to watch was created by/for the internet. It just happens that is where I can find it now. So, I plug my computer into my TV and use Boxee to get it onto the TV. If I was a cable company, I could cut this whole thing off immediately by just improving the on-demand content library. I cannot think of a good reason why they wouldn't (that's an exaggeration, but in a truly competitive market, it would likely be worth investment). Putting ads into the show on the fly seems relatively trivial at this point (as long as you can sell the inventory).
Hulu and Joost, while great websites with deep content libraries, still don't control their fate, which is their biggest weakness, as evidenced with the hulu-baloo over the removal of It's Always Sunny in Philadelphia (aside: I love that show, but have no idea when it is on. I am without Sunny now. It doesn't seem like FX is making any money by taking it off Hulu). But, maybe what Hulu and Joost do really well is create fantastic user interfaces for quickly browsing through tons of content and choosing just what you want, and then suggesting what to watch next. Which could be the channel for discovery that I mentioned in my last post.
The current on demand channels on Time Warner Cable (in NYC at least) are pretty crappy. But, what's worse is that other than the premium channels (HBO, etc), most people don't even know they exist. There is a music videos on demand channel. Fitness on demand. A&E on demand. National Geographic on Demand. The list goes on. But, most of the channels have very limited selection and the browsing experience is designed to find something only if you know it exists. There is no serendipity button.
If the dream is 'anything at anytime', like I think it is, then this is the time for cable companies to invest in making their on demand offerings amazing. You can even do 'variable pricing' by putting in more or less ads depending on how much people might want to watch. Limiting fast forwarding like on Hulu. And, of course, micropayments for ad-free episodes (not to mention my 'learn the message' free episodes). Cable companies, which already take payments for pay-per-view items, could easily add the ability to buy one episode of a sitcom for 24 hours for $0.20 (the price point obviously needs to be studied in more depth, again with variable pricing depending on how recent the episode is, how many people want to see it, etc.)
I have to imagine that ads placed into on-demand content on a Saturday afternoon when I'm just trying to kill time would be just as profitable as those inserted into whatever crappy show is on FOX.
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