The first quarter of 2010 was, in many ways, characterized by companies moving away from traditional products into new territory. For instance, Vudu finally abandoned its failing set-top box product in favor of embedding its software in CE devices. As part of this transition, Vudu announced new relationships with a variety of manufacturers including Mitsubishi, Sanyo, Sharp, and Toshiba. Netflix was also highly focused on promoting its Watch Instantly service in the first quarter, which moves the company away from its original DVDs-by-mail model, resulting in significant savings for the company.
There were innovations in the hardware space as well. TVs have been a significant topic early in 2010, with a variety of initiatives bringing new features to TV sets such as 3-D, Internet connectivity and video conferencing. Another prominent hardware news item this quarter was the introduction of Apple’s large-screened iPad, which many speculate will revolutionize online media consumption, from print publications to online video.
Online video viewership is growing and the market ecosystem around it is maturing. Among significant milestones is one forecast that predicts YouTube will become profitable for the first time in 2010. The transition of this market into mainstream has been further evidenced over the quarter with traditional hardware and distribution players becoming increasingly enmeshed in the space.
However, despite this growing maturity, online video advertising struggled a bit in the first quarter. Several studies pointed to the lasting impact advertising has on it audience, with many intended recipients clicking away before viewing ads. Advertising companies are realizing that in order to survive they must differentiate and offer more targeted and compelling services. Ad supported sites are suffering, as ad spending declines. Veoh, for instance, recently filed for bankruptcy after failing to make a business out of its video destination site.
TV Everywhere initiatives were relatively quiet during the first quarter, but traditional broadcasters were far from idle. Cable and the broadcast companies spent much of the first quarter battling over fees. First, a clash between Cablevision and Scripps over higher retransmission fees resulted in Scripps cutting off Cablevision’s access to the networks on Jan. 1. Then it was Fox and Time Warner Cable, with Fox threatening to cut off Time Warner as part of a transmission fee standoff. In a final episode, ABC threatened to cut off Cablevision, again over disputed retransmission fees.