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On Wednesday, Yahoo! and Akimbo announced a new partnership to bring the most popular selections of Yahoo! Video to the Akimbo video-on-demand service. This announcement comes on the heels of the launch of Apple TV, a set top box that wirelessly transfers digital media from user’s computers to their TVs. Both announcements highlight, the increasing convergence of video platforms. As Jeremy points out in his “2007 Consumer Internet Predictions”, time spent consuming videos both online and on the TV are increasing. Not only are people watching more videos than before but they are also watching videos in many more ways. Television/video viewer behavior is in the middle of an evolution.

A number of factors are driving this change:

1) There is the increasing adoption of TV/video technologies such as digital video recorders, video on demand and video downloads/streaming, not to mention Apple TV and iTunes/iPods. According to Forrestor, “DVRs have entered the hypergrowth phase, reaching more than 13 million households, including 17% of digital cable subscribers and 19% of satellite subscribers. DVRs will surpass 50% of homes within four years.” DVRs and the other technologies are enabling the “time shifting” of programs, the skipping of commercials and the ability to consume videos in smaller chunks and in different locations.

2) Decreasing costs of bandwidth and storage are removing the economic and practical barriers of having and distributing videos for both content owners and consumers. Broadband is dramatically improving the user experience of watching streamed videos. Peer-to-peer networks only increase the ease of distribution and access.

3) As everyone knows, alternative video platforms such as YouTube and other streaming videos sites (NBC Rewind, CBS Innertube, ABC.com, Fox On Demand…) are proliferating. The major studios saw what happened to the music industry and are trying to find ways in which they may embrace these changes without losing control over their assets. They are making more and more content available on their online destination sites and iTunes. For the consumer, this equates to more types of content and in more places.

These fundamental changes in the way people can watch videos are shifting mindsets to an “on demand” mentality. People are becoming the programmers of their own personal television network, dictating what they want to watch and when they want to watch it.

In recognizing this shift, two areas of opportunity come to mind.

1) Search/navigation/discovery of content. With so much content coming from so many different sources, the networks and cable channels are no longer the ones telling you what you “must see TV” is. Interesting content can now come from anywhere. However, more video options mean more videos to sort through to find something of interest. Some companies such as Blinkx and CastTV address the problem through improved video search relevancy. While others, such as CozmoTV and StumbleVideo, focus on video discovery through the votes of the community of users. Convergence of platforms and media types only promises more complication.

2) New advertising models that will capitalize on these shifts. As many people have predicted, TV advertisers will to continue to see their 15 and 30 second commercials go increasingly unwatched. Brand advertisers, who spend the $60B a year on television advertising, will still need to find a way to reach their target consumers. Advertisers still don’t seem comfortable associated their brands with the unpredictability of user generated content. While I agree with Jeremy’s assessment that the shift will take time, this advertising budget will go to new ad models that reach consumers in a more targeted and relevant way. One such model is that of broadband television networks, such as Revision3, which produces serialized content targeted towards specific interest groups at a fraction of the cost of mainstream television programs. Brand sponsorships are embedded into the programming itself and can be targeted toward the specific demographic of the show. Revision3 makes their content distribution platform neutral, allowing users to choose how and where they watch each episode.

These are only a few of the many new models bubbling up. I believe there will many opportunities for entrepreneurs who understand the evolution in user behavior and recognize the power of the different players in the value chain.

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