Internet video consumption rivals basic cable

Online video has reached the tipping point. What will cable providers and content producers do to keep us glued to TV?

New data from network policy control provider Sandvine reveals what many have suspected: Internet video usage now rivals basic cable.

Sandvine's Global Internet Phenomena Report: Fall 2011 (PDF) (registration required) shows that real-time entertainment applications are the primary drivers of network capacity on fixed access (non-wireless) networks in North America, accounting for 60 percent of peak downstream network traffic from 7 p.m.-9 p.m., up from 50 percent in 2010.

The report also reveals that we've entered a post-PC era where the majority of the traffic is destined for devices other than a laptop or desktop computer. Fifty-five percent of the real-time entertainment traffic is consumed via game consoles, set-top boxes, smart TVs, tablets, and mobile devices and is reflected in the average daily downstream data analysis chart below:

Average downstream bandwidth usage
Average downstream bandwidth usage Sandvine

It's interesting to note that Netflix outpaces basic HTTP (Web) traffic, which I assume also includes Hulu, a major-network backed provider of content. Despite Netflix's missteps and stock price plunge, the company's vision for providing content over the internet is clearly working.

Video usage online Video usage online

But the bigger question is what this portends for the future of pay TV as a whole. Companies like Comcast have developed a bit of a monopoly in certain geographies as the primary (often only) choice for cable TV and/or Internet service. And considering that broadband Internet prices have largely normalized and cable prices have increased, one has to wonder how Comcast will protect its margins as users take advantage of cheap bandwidth to get online content.

A number of recent articles have suggested that TV is the next battleground for both Apple and Google, though to date neither company's foray has been spectacularly successful. To some extent, this is due to the fact that much of the content that is on basic and network TV is expensive to produce, and without guaranteed advertising income, many content producers have avoided Internet-based services.

That said, Apple's success with iTunes content sales, which are expected to reach $13 billion in 2013, ushered in a new way for users to pay for content. And in the new biography of Steve Jobs, author Walter Isaacson wrote that Jobs told him , "I'd like to create an integrated television set that is completely easy to use. It would be seamlessly synced with all of your devices and with iCloud."

This is somewhat in contrast to Google's approach, which has largely avoided producing hardware and instead has worked through distribution channels such as TiVo to get YouTube on set-top boxes. Google, however, has already shown that it can keep content in sync across browsers and mobile devices, so it clearly has a huge opportunity here as well.

The other company that can't be counted out is Amazon, which has both the commerce and technical prowess to take online content to another level. In fact, you could argue that Amazon is already winning considering that most of Netflix content delivery runs off of Amazon Web Services cloud platform.

What happens next is still up in the air. In addition to the content producers, there are also a number of hardware providers who would have to get on board with any of these strategies and realistically, while Apple generally does a better job of offering a complete solution, Google's ubiquity and desire to sell ads, rather than hardware, could give them an upper hand.

 

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