Is Online Video Ready to Take Over the TV?

Ever since the first grainy streaming video clips appeared on the web about a dozen years ago, courtesy of RealNetworks' RealPlayer and Microsoft's Windows Media Player, pundits have been foreseeing the day when online video would begin to challenge the all-powerful gods of cable and satellite TV for control of the "boob tube."

Not so fast ...
Needless to say, things didn't go as smoothly as the optimists might've hoped, as the slow pace of broadband adoption, the reluctance of TV networks and movie studios to put their content online, and a shortage of good, easy-to-use connectivity options for TV sets long kept this transition under wraps.

Sure, Microsoft has been trying for a while to bring the web to the television via home theater PCs that leverage Windows and the company's Media Center software. But most consumers aren't buying. And to put it mildly, Apple's (NASDAQ:AAPL) Apple TV, with its built-in iTunes support, hasn't given the iPhone a run for its money in the smash-hit department.

But if you look at the flood of headlines in recent months involving hardware and content platforms that enable web video to appear on TV screens, you wouldn't be considered a hopeless optimist to think that we've reached a tipping point.

Netflix, YouTube, and more ...
Foolish writer Anders Bylund talked yesterday about Netflix's (NASDAQ:NFLX) recent deal with Nintendo to make its Watch Now streaming video service available to its 11 million subscribers over the Nintendo Wii, with its built-in Wi-Fi connection, and how it comes on the heels of similar deals involving Sony's (NYSE:SNE) PlayStation 3 and Microsoft's Xbox 360. But gaming consoles are just part of Netflix's distribution strategy -- the company has also gotten Watch Now support built into TiVo's HD line of DVRs; a media receiver box from a start-up called Roku that's reportedly sold more than a million units; and most importantly, a rapidly growing list of Internet-enabled TV sets and Blu-ray players from big-name manufacturers.

And these hardware vendors, for their part, aren't limiting their online video support to Netflix. They've also been throwing their weight behind everything from YouTube to Amazon.com's (NASDAQ:AMZN) Video on Demand service to a variety of proprietary video download and streaming services. And if a report this week from All Things Digital is accurate, Wal-Mart (NYSE:WMT) also wants to get in on the action by acquiring Vudu, a start-up whose on-demand movie service has been adopted by the likes of Sharp, Sanyo, and Toshiba for use with their hardware.

Among major web video providers, Hulu almost stands alone in its reluctance to make its content easily available on TVs, with some speculating that the networks supporting it are scared of further damaging the TV ratings of available shows. But getting Hollywood to embrace the web has been a gradual process, and I think it's only a matter of time before the network suits realize that they've got more to lose than to gain by ceding the world of TV-based web video to rivals.

Nielsen estimated last year that the average American watches 153 hours of TV per month; and from the looks of things, TV viewers in many other countries with high broadband penetration aren't too far behind. Getting any meaningful percentage of that TV viewing time to involve web video will give a huge boost to Internet traffic growth that's already surging on account of PC-based online video. That should be welcome news for everyone from Internet infrastructure giants such as Cisco Systems (NASDAQ:CSCO) and Juniper Networks to content delivery specialists such as Akamai Technologies (NASDAQ:AKAM) and Limelight Networks.