The battle for Internet TV

January 10, 2008: 12:23 PM ET

By Yi-Wyn Yen

LAS VEGAS – Last month Veoh, an Internet TV startup that offers shows from "30 Rock" to "The Young and the Restless" online, discovered a telling statistic about consumers. Of the 23 million viewers who visited the site, a whopping 40 percent of them were watching shows on the Web during prime-time hours.

"Given the option, instead of sitting in front of the TV watching cable or satellite broadcasts, they were sitting in front of their computers watching Internet shows," says Dmitry Shapiro, founder and chief innovation officer of Veoh.

"It's the dream of every lazy employee to watch episodes of "Lost" at work," says Shapiro. "But really, the better value is the ability to watch shows at any time. Whether you're sitting at Starbucks with your laptop or watching TV in your living room, people want access to the same content. And they want it now."

That message rang clear at the Consumer Electronic Show this week. TV manufacturers like Samsung, Sharp, and Panasonic all announced deals to stream content from companies like Google to wireless televisions in an effort to bridge the gap between TV and the Internet. HP (HPQ), which along with Sony (SNE) began offering Internet-enabled flat-screens in 2006, announced that all future HP televisions will be wireless.

"A big indicator that this is really happening is that three years ago, we went to content providers and studios to talk about wireless TV," says Alex Thatcher, a product marketing manager for HP's Digital TV Solutions. "They were pretty lukewarm. They were focused on distributing their content with Blu-Ray discs. Now, we have content providers approaching us and asking how can they get their videos onto our TVs."

As the technology improves for TV sets to stream content to and from the Internet and Hollywood continues to port digital movies and shows onto the Web, the prediction that viewers will be able to call up every past episode of "Law & Order" or the Spiderman movies in high definition on the tube doesn't seem so far-fetched.

"In 2018, the idea that you once had to drive to a store and pick up a movie to rent will seem so strange," says Curt Marvis, CEO of CinemaNow, which sells and rents digital movies and TV shows online.

A number of Internet distributors are racing to offer digital video on the web. Veoh announced a partnership with Viacom (VIA) this week that will expand its lineup to include hit shows like MTV's "The Hills," Comedy Central's "The Daily Show," and Nickelodeon's "iCarly." Last quarter, CinemaNow struck a deal with HP to provide its movies on HP's MediaSmart TV sets. Vudu, a newcomer that offers more than 5,000 movie titles on demand with the purchase of a $300 set-top box, will expand its HD service to more than 70 titles next month.

Apple's iTunes may be responsible for the consumption of digital music, but online video providers say there is still no clear winner in the Internet TV market. "The question is, who's going to build the right interface and the right model and right set of content where consumers say, `That's what I want,' " says Shapiro.

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