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10/13/2005
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Opinion: Apple Rides Online Video Boom

The new video iPod comes as consumer interest in downloadable video is taking off. But it'll need better content to succeed

Apple's new video-capable iPod comes at the right time: Video has escaped the confines of the television and threatens to spread across the Internet and onto portable devices.

Online video has become quite popular. In June, over 94 million people in the U.S. watched streaming video online, according to comScore Media Metrix. In the three months ending June 2005, the average consumer viewed 73 minutes of streaming video content per month.

The trend has significant implications for mainstream media players and for online advertising. Reports this week that Google and Comcast are in talks to acquire a minority stake in America Online suggest that the cable industry can read the writing on the wall: The Internet will eclipse the cable network as a means of content distribution.

Major tech and media companies are well aware of this and are scrambling to stake their claims. While Microsoft's deal this week with RealNetworks is about music, both companies have significant investments in video technology. (Real's Rhapsody music subscription service makes a lot more sense with video content because consumers are used to renting video, as opposed to music which they seem to prefer owning.) SBC and Verizon have big plans for Microsoft's IPTV platform. Apple and Disney are putting aside their differences to jumpstart the video download market. Yahoo is busy developing it own online video content.

The video market all the more appealing because online advertising is booming. For the first six months of 2005, Internet ad revenues reached $5.8 billion, a new record and a 26% increase over the first half of 2004, according to Interactive Advertising Bureau and PricewaterhouseCoopers. Search and rich media advertising--areas of particular interest for search and media companies--saw notable gains, increasing 27% and 26% respectively in that same period.

It remains an open question whether the video distribution and advertising gold rush will coincide with the creation of new video content. Content creation and sharing technologies have significantly increased the text and music available online. But video is significantly harder to produce than words or songs. And without enough fresh, innovative content, the video boom will turn out to be rather boring: It will just be the same old shows piped online, burdened by the same old worries about piracy. The fact that most of the downloads available for Apple's new video iPod are commercials--that's what music videos are--suggests that fresh thinking about new content is in short supply.

There are positive signs, however. Video blogs like RocketBoom.com are attracting a significant number of viewers. Companies like BrightCove are planning a self-service distribution platform that truly benefits independent producers. Channels like Current.TV are offering new venues for videographers. Software like Broadcast Machine promises to make serving video almost as easy as posting HTML pages.

Stay tuned.

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