2009: A Year in Streaming

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Video streaming came into its own this year.

Sure, 2009 may have started in ho-hum fashion. There were certainly plenty of companies offering up content on the web long before the year began:

  • Disney's (NYSE: DIS  ) ABC began streaming free ad-supported versions of hit primetime shows, including Lost and Desperate Housewives, in 2006.
  • A few months later, Google (Nasdaq: GOOG  ) paid $1.65 billion for YouTube. The leading video-sharing site continues to explode in popularity.
  • As early as 2007, Netflix (Nasdaq: NFLX  ) began offering online streams of select titles in its library to active subscribers at no additional cost. It moved to offer unlimited streaming in 2008.

The problem, of course, was that couch potatoes weren't about to start huddling around a tiny computer monitor to watch a feature film. A site like YouTube can flourish by serving up short clips to single users on their computers, but the niche needed to migrate from the desktop to the living room if it wanted to hit the big time.

There were certainly plenty of inroads on that front in 2008. Roku introduced The Netflix Player in May of last year, a $99 set-top box that let users with Wi-Fi connectivity or living-room Ethernet connections take advantage of Netflix's growing titles available for streaming. Netflix also brokered deals with select Blu-ray players, but it wasn't until the tail end of 2008 that Netflix truly crossed the bridge by offering up its streams through Microsoft (Nasdaq: MSFT  ) Xbox 360 consoles and TiVo (Nasdaq: TIVO  ) digital video recorders.

Thinking inside the Xbox
The Xbox 360 initiative was the true game-changer here. Xbox Live Gold subscribers began accessing Netflix's streams through their consoles -- on their televisions, naturally -- in November 2008. By February 2009, Microsoft revealed how popular the offering had become.

More than a million Xbox LIVE Gold members had downloaded and activated the Netflix application, watching a whopping 1.5 billion minutes of movies and television shows from the Netflix streaming catalog.

This was the niche's head-turning moment, since the Xbox total represented more than 10% of Netflix's membership base at the time. Did anyone even know that more than 10% of Netflix users were paying Microsoft $50 a year for Xbox Live Gold subscriptions?

With that bracing news, the rush was on to serve content to the masses through video game consoles, DVRs, laptops, and even smartphones.

Comcast raises the stakes
The country's largest cable giant became a surprising proponent of content streaming when Comcast (Nasdaq: CMCSA  ) decided to join forces with Time Warner (NYSE: TWX  ) to launch the TV Everywhere initiative.

In Comcast's eyes, if a cable subscriber is paying to receive HBO or ESPN through their televisions, that same customer should be able to have streaming access to the content across a broad spectrum of connected devices.

Comcast's forward thinking wasn't just a moment of clarity. It was also a defensive measure. Over the past year, Comcast's video customers have shrunk by 3%. That may not seem like much, but when you're as big as Comcast, it translates into 656,000 fewer monthly bills to send out. If a cable giant has to bend to the streaming demands of wired consumers to keep defections in check, Comcast can be surprisingly limber.

Stream on in 2010
Movie studios have no choice but to deal with the new normal. They've run out of scapegoats to blame for DVD sales peaking three years ago. When discs don't sell unless you pack Blu-ray discs with DVD and digital copies, the studios get humbled.

Piracy and $1 rentals are no longer discs' only rivals. Folks are streaming a lot of video. YouTube alone attracts a crowd of more than 100 unique million visitors, streaming billions of video a month. Getting noticed isn't easy anymore, and it will force even more content online next year.

Streaming took a big step forward in 2009. Just watch and see -- literally and figuratively -- what 2010 has in store.

What will it take for DVD sales to grow again? Is that effort hopeless? Share your ideas in the comment box below.

Google is a Motley Fool Rule Breakers pick. Microsoft and Disney are on the Motley Fool Inside Value scoreboard. Walt Disney and Netflix are Motley Fool Stock Advisor recommendations. Microsoft is a Motley Fool Options selection. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He also owns shares in TiVo and Disney. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 16, 2009, at 12:02 PM, seethruU wrote:

    Hmmm....1 million subscribers used 1.5 billion minutes or 25 hours each...not a lot...seems like you're trying to push Netflix stock Rick!

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