The Evolution of Television

Get ready for a radically different way of watching television. Forget schedules and channels, and don’t assume you’ll actually be watching television on a television set. It’s called on-demand, and it’s already redefining how Canadians watch their favourite shows and movies.

Last month’s Canadian launch of the online streaming movie service Netflix marked another milestone in the gradual transition away from conventional television.

Waiting until 8 p.m. Thursday to watch the latest episode of The Big Bang Theory is out. Watching it on your laptop or smartphone whenever you’ve got some free time is in.

Movies are similarly affected, as the trek to the local video store to pick up a DVD or two is being replaced by streaming services. You’ll never stare at an empty video store shelf again.

“What makes it exciting is you can access your content over any web connected device,” says Edward Williams, a digital entertainment equity analyst with BMO Capital Markets in New York.

“Increasingly, your television is being connected to the web, and with that you end up with a very different experience of finding and consuming content.”

That very different experience is being driven by rapidly changing consumer expectations. The Internet has changed the way we view and consume entertainment content.

“If you look at our entertainment experiences, they used to be very passive, where we’d lean back and just take it all in,” says David Purdy, vice president of video products with Rogers Communications, which has 250,000 registered Rogers On Demand Online users. That’s 10.9 per cent of the company’s total 2.29 million television subscribers

“Increasingly, our customer base multitasks,” adds Purdy. “While they watch television, they may be online researching that show, or in the case of reality programming voting or actually participating in the show in some way. On-demand services enable these kinds of multiplatform and immersive experiences.”

They also don’t just watch TV shows on their TV sets. More powerful and better-connected smartphones and tablets make on-the-go entertainment commonplace.

Even game consoles are getting in on the act, as Netflix also supports Sony’s PS3, Nintendo’s Wii and, soon, the Microsoft Xbox 360. Despite its wave-making Canadian launch, Netflix doesn’t see itself replacing conventional cable and satellite providers.

“There’s a finite number of hours that people have to consume entertainment,” says Catherine Fisher, director of communications with Netflix.

“We see Netflix as a great supplement. I wouldn’t expect people to cancel cable because of Netflix because we’re really competing for people’s time.”

Netflix won’t say how many Canadians have signed up for its service. But in the U.S. it has 15 million subscribers, 60 per cent of whom have watched online.

Informally, a number of Canadian television networks already serve up some of their most popular shows on their own websites. Viewers who miss an episode of CSI can simply visit CTV’s web portal to stream it – and dozens of other shows – to their laptops. But web-based, on demand services like Bell TV Online, Netflix and Rogers On Demand Online take the experience to the next level.

Purdy says three types of viewers can especially benefit from services like these:

• Catchup, where the viewer missed an episode of Glee, for example. On-demand services typically make these available to existing subscribers at no additional charge.

• Look back, where a viewer has fallen in love with a series that’s already been on-air for a year or two, and wants to catch up with earlier episodes. These are often made available to viewers on a pay-as-you-go basis.

• Deep library, where viewers can browse large collections of archived content. Viewers of the new Hawaii Five-0 series, for example, could watch the original series. Such content is often available at no additional cost to consumers, and is ad-supported.

While on-demand online services are becoming more mature, we’re not quite there yet. According to Solutions Research Group data, only 7 per cent of Canadian households currently use at least one video-on-demand service.

Figures from the Nielsen Company show that while mobile TV adoption is growing rapidly – 17.6 million Americans used their smartphones to view video in the last quarter of 2009, up from 11.2 million a year earlier – the monthly average of three hours and 37 minutes of mobile viewing is a fraction of the 153 hours the typical user spends in front of a TV.

Looking ahead, PricewaterhouseCoopers expects Canadian subscription fees to grow a healthy 6.8 per cent annually to $9.1 billion by 2014, largely powered by growth in digital cable, video-on-demand and IP-based television.

Netflix, which started out renting DVDs via mail order – a service not available in Canada – now has 15 million subscribers in North America, 40 per cent of whom use its streaming service. Based on these figures, on-demand’s future growth potential is significant.

Behaviours will need to change, however. Viewers used to picking up a TV remote and flipping through freely-accessible channels may balk at subscription-based services that require them to log in before a show begins playing.

Bridging the Internet-PC-television gap isn’t always a straightforward process, either. Solutions like Apple TV, Boxee, Roku and the just-announced Google TV could help, but it will take a while before most consumers have them. Online on-demand services need to become simpler before they’re as ubiquitous as DVD players.

“People are primarily used to getting access to their content online with one click,” says Kaan Yigit, an industry analyst and president of Solutions Research Group.

“If you have to go through multiple steps, that may slow adoption down. It’s not exactly a mass play yet in my mind.”

Usage caps on consumer Internet subscriptions could also be an issue. Customers who watch even a few movies per month online could quickly surpass their gigabyte limits and incur overage charges from their Internet service providers. Television viewers are also creatures of habit, and even in an Internet-era living room, old habits die hard.

“It’s too early to start turning off channels,” says Purdy. “There are still a large number of people who like to scan through channels and pick something on an opportunistic basis.”

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. carmilevy@gmail.com

The top choices

Rogers On Demand Online

•What works: No additional cost to Rogers customers. Existing subscription packages are similarly available online. Mobile apps available for most popular smartphones.

•What doesn’t: You have to be a Rogers customer to access premium content. Sometimes confused with Rogers On Demand, which is delivered exclusively via conventional television.

•Where to go: www.rogersondemand.com

Netflix

•What works: Netflix dominates the U.S. online movie rental market. Content easily transitions between TV, PC, mobile devices and even game consoles like Sony’s PS3 and Nintendo’s Wii. $7.99 all-you-can-watch plan is a cheap thrill. One-month free trial.

•What doesn’t: Canadians have access to fewer titles than American consumers.

•Where to go: www.netflix.ca

Bell TV Online

• What works: Existing Bell TV customers get it for free.

• What doesn’t: Multiple overlapping offerings difficult to sort out. Non-Bell subscribers have limited options.

• Where to go: http://tvonline.bell.ca