With Internet TV gaining more popularity, some marketers are prophesising yet another revolution which will mark the end of the TV era. The reality is that with 16 million people watching video online, the revolution has already taken place. However, like the home video and PVR/DTR revolutions, it has not made broadcast TV redundant.

So, what is internet TV? Put simply, this is video content streamed or downloaded from the internet, so anyone with a connection can access the services. In this wave of our Emerging Connections research programme we look into how consumers respond to internet TV; who is watching this new platform, why they watch it, and what its future holds.

Our research shows that 56% of the broadband population have either streamed or downloaded video content from the internet in the past 12 months. To put this into perspective, only 10% of Brits are listening to the radio through the internet. We therefore believe that the point of critical mass has already passed, and we are confident that Internet TV’s penetration and usage will continue to grow, particularly with the rapidly increasing popularity of services such as the BBC’s iPlayer.

Who are the people consuming Internet TV? Apart from being slightly younger and more likely to be male, there is nothing that significantly distinguishes them from the average broadband user. There is a certain image of nerds and geeks that is associated with users of new technologies; however, internet TV viewers, in terms of technology ownership, are in line with that of the average broadband user. And they subscribe to the same television services as the rest of the broadband population— it is neither filling a gap for households without subscription TV, nor is it something that’s just used by heavy TV viewers. They are just mainstream people who are using Internet Television as a source of entertainment.

Internet TV is big not only in terms of the number of people who use it, but also by the number of service providers available. Although YouTube serves the most video, Internet Television viewing is widespread amongst other services. BBC’s iPlayer is particularly noteworthy as it is experiencing such rapid growth, from 750,000 users in January ’08 to 1.4 million in April ’08. (Source: BBC press release.)

“Where have you watched video streamed/where have you downloaded video from the internet in the last 12 months?”

So, what has led to the growth of Internet TV?

Accessing Internet TV services is easier than ever—today’s broadband connections mean streaming video is now possible, so you can just press play and start watching immediately. This also means that you can see straight away if its working- you won’t spend 15 minutes downloading a 5 minute video clip, only to discover that you have to download the latest version of Real Player or a Windows Media Player update before you can watch it.

High speed broadband connections do not only minimise the waiting time—their widespread market penetration positively affects the image quality of the videos available. The majority of internet TV viewers are satisfied with it and they rank 4OD as the best quality internet TV provider.

"How would you rate the quality of the viewing experience at each of the following sites" (top 2 responses on a 5-point scale.)

Finally, there’s also the fact that the majority of internet TV providers offer at least some of their services for free (i.e YouTube, Channel 4’s 4OD, BBC’s iPlayer, ITV.com, Joost, MySpace TV— the list goes on.)

So given that we have good quality, free to view TV content, along with an extensive broadband network, it’s hardly surprising that internet TV is in growth. People are satisfied with it (78%) and they are very likely to recommend it to a friend (68%).

Does this mean the end of broadcast TV, and that the future of TV will be on-demand programming, delivered over the broadband network?

We don’t think so. Our research showed that consumers use the two media in different ways and they have different attitudes towards each of them.

We found that the TV set remains the first port of call when it comes to video entertainment. Sitting on the comfortable sofa in front of the main television set in the living room is still the preferred setting for screen entertainment at home, with nearly 4 out of 5 saying that this is one of their favourite pastimes. Moreover, many of them have invested in HDTVs, subscription TV services and PVR/DTRs. So, one of the main barriers to the growth of Internet TV use is moving the viewer away from the sofa and in front of the PC screen.

Of course, the alternative is moving the Internet TV content to the television set, and with 30% of Internet TV users owning an HDTV set (which can easily be connected directly to a computer), it’s relatively simple for them to overcome at least a part of this barrier and enjoy Internet TV from the comfort of their sofa. However, the reality is that even though the technology is available, very few people are taking the leap and actually doing it—only 3% are watching Internet TV on a TV screen.

Another difference is the solitary nature of Internet TV viewing. Unlike broadcast TV, Internet TV tends to be consumed alone (61% of internet TV users say that they watch by themselves). Also, people enjoy talking about the programmes they watch with their friends; broadcast TV (especially live broadcasts) can facilitate this dialogue, since everyone is watching the same programme. This is not the case with Internet TV, where the wide range of content available at any given time means that the chances of being able to discuss last nights viewing with other people in that “coffee machine moment” are greatly diminished.

As a result, internet TV so far serves a specific role. When there’s nothing they want to watch on TV, then they turn to Internet TV. Other reasons include catching up with a programme they missed from TV or viewing supplemental content (eg. X-Factor, Big Brother).

But this isn’t necessarily a drawback for the medium; while Ofcom report that over 80% of households now have access to multichannel digital TV on their main sets, their figures suggest that almost half of secondary sets are still only receiving analogue broadcasting, and of those that are receiving digital television, only a handful will have access to PVR/DTR or VOD services. This means that there could be a window of opportunity for the PC screen to become the secondary set; when the main set has been taken over by another member of the household, there are on-demand services on a different set that will still allow you to watch what you want to watch.

It is therefore clear that Internet TV and broadcast TV are two distinct media. It is better not to think of them as competing platforms, but simply as different. In the same way that newspapers, magazines and books are all “print”, yet fit with very different reading occasions and behaviours, broadcast TV and internet TV each play different roles in viewers’ media repertoire.

The Future

What we (as advertisers) have to focus on is keeping up to speed with the developments in technology and making sure that we adapt our work accordingly.

On the distribution side, the consolidation of services is beginning; Project Kangaroo, which is expected to launch in the UK before the end of the year (pending approval by the Competition Commission), will provide content from the BBC, ITV and Channel 4 from a single point. Other content providers and aggregators such as Apple and more recently Yahoo are already redistributing TV content from major UK broadcasters (albeit on a paid-for basis.) In the EU, there is a wider project to create a technological standard for Internet TV called “P2P Next”, which aims to reach fruition in the next 5 years.

In the longer term, as the broadband network continues to improve (with BT planning to invest £1.5 billion over the next 4 years on super-high-speed broadband), there could come a point where TV broadcasting that’s received through the TV aerial or satellite dish might just as well come through the broadband connection. When we reach this point, the distinction between “broadcast” and “internet” TV will become meaningless, and the nature of the content will be what separates the two media.

So from a consumer point of view, we expect to see the technology continue to improve, to a point where viewers will be able to freely move between the PC screen and the TV screen (or even the mobile phone screen), in the way that you might listen to the radio at home, then leave the house and carry on listening to the same station in the car without needing to worry about the technology behind it.

Finally, we expect that advertising will fully take advantage of the interactive nature of the medium.  For an example, visit the demonstration videos at www.Videoclix.tv - while a user can watch a video without advertising messages, they can also interact with the video; pointing the mouse at certain points of interest reveals information about what they are pointing at, and clicking on them will trigger an overlay with more information- which could range from information about the people or location to a link to a shop that sells the clothes the presenter is wearing.

It’s technologies like this that will shape the future of Internet TV. Although at the moment, we are mainly seeing traditional, linear TV or video content being redistributed online, it’s only a matter of time before we see video content that makes the most of the interactive nature of the platform, and this kind of “additional content” makes its way into the storytelling process.

At the same time, Internet TV advertisers are taking elements from both TV advertising models (pre-roll and mid-roll) and online display advertising models (clickable ads, with the potential for tracking, targeting etc.) and learning the best way to use video advertising in an interactive medium. But the lessons that they are learning now won’t only be applicable to an online audience. As digital broadcast television gets more sophisticated and new interactive opportunities arise, we expect to see the advertising lessons learned from this new platform feeding back into broadcast television…..

….then the real video revolution can begin.