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The State of Media and Entertainment Video 2014
Between Netflix, Hulu, Amazon, UltraViolet, YouTube, and others, viewers have more great content to watch and more ways to stream it.

2013 was a huge year for media and entertainment video. The major players went from simply buying content licenses from broadcasters and distributors to purchasing their own content in an effort to increase the perceived value of their services. Hulu, Netflix, and Amazon all have their own original series online with more in the works. YouTube invested millions into getting more premium content. In general, there looks to be a video entertainment migration taking place. Millennials rarely watch live TV, opting instead to get more of their video entertainment from digital sources via their smartphones and tablets. Some are calling the next generation “cord-nevers,” meaning they will never have a pay-TV subscription and will get all their content online.

Netflix: Original Content Done, 4K Next

Netflix, which reaches 29 percent of U.S. TV homes, learned early on that in order to better compete in a market that was rapidly getting crowded with platforms, it had to separate itself from the others. While Netflix is still buying up previously aired content licenses -- such as the deals that brought the BBC’s "Ripper Street," "Call the Midwife," and "Top of the Lake" as well as new PBS programming -- 2013 was a year in which we saw Netflix go from just a licensee to a competitor for new, first-run content.

It picked up the Kevin Spacey-powered remake of the U.K.’s "House of Cards." "Lilyhammer," with Sopranos star Steven Van Zandt, kicked off a second season in the middle of December; cult favorite "Arrested Development" got a fourth season; and "Hemlock Grove," "Orange Is the New Black," and "Bad Samaritans" saw their first seasons debut on the streaming service. Netflix also broke the “episode a week” tradition when it started making full seasons available all at once. Since Netflix users like to binge on an entire season in a week, why make them wait week after week for a new episode? With no advertising slots to fill, Netflix realized that it didn’t need to take television’s 3 months for the story to unfold; it could do it all at once and let its viewers watch at their own pace and on their own terms.

Later in 2013, Netflix also signed a deal with Marvel Entertainment, a Disney subsidiary, for a five-show deal in 2014 including "Daredevil," "Jessica Jones," "Luke Cage," "Iron Fist," and "The Defenders." In fact, Netflix has seven other new series in the works, many of which will show up in 2014. Also showing up in 2014, according to Netflix CEO Reed Hastings, will be 4K streaming content.

Not content with pushing out “Super HD” to all subscribers, Netflix is continuing to push higher quality streaming video content. While the market is small in terms of households with 4K-ready televisions and displays, it is gaining steam quickly, and Netflix will be there when the market is ready. It is already doing 4K streaming tests and shooting "House of Cards" season 2 in 4K, plus Hastings has openly stated that 15Mbps stable downstream will be sufficient for 4K streaming. In 2012 Netflix expanded its streaming capabilities by building out Netflix Open Connect, which helps ISPs with the primetime bandwidth load.

Netflix made waves with original content in 2013; 2014 will see House of Cards and other shows available in 4K to select subscribers. 

It also realized that the way to its users’ hearts was through their connected devices -- every single one of them. So Netflix boosted its presence on game consoles such as the Xbox 360 (with voice and Kinect control) and PlayStation 3, began in earnest to make its mobile apps for Android and iOS the best and most useful experiences possible, and embraced OTT boxes such as Apple TV, Chromecast, and Roku as well as smart TVs. The company realized that households shared accounts and began offering profiles for individuals on a single account, and it is actively curating content such as documentaries to offer the best on each topic, not endless mediocre ones.

Whew! 2013 was a big year for Netflix, and that recap didn’t even touch on some of the amazing technological stuff it does regularly. One could probably write an article just on Netflix alone, but there is a lot of other ground to cover yet.

Hulu: $1 Billion Revenue, 5 Million Hulu Plus Accounts

Since it was up for sale not once but twice in a year’s time, one might think that the owners of Hulu -- a partnership of FOX, NBCUniversal, and ABC (Disney) -- aren’t sure what to make of their ad-supported streaming video service. Perhaps they have yet to realize its ultimate potential. It’s the closest thing we have today to a virtual multichannel video programming distributor (MVPD), and yet it’s nowhere near an actual virtual MVPD. Instead, it’s an odd mix of ad-supported video on demand (VOD) and subscription VOD (SVOD), although even the subscription-based Hulu Plus features a pretty heavy advertising load. It’s entirely possible that the current format is exactly what is holding Hulu back from really exploding in terms of growth.

Reports put Hulu Plus accounts at around the 5 million mark, not even a fifth of what Netflix has, and the latter doesn’t offer current-season TV at all. Perhaps 2014 will be the year that Hulu sells, which seems unlikely. Perhaps because of Hulu ex-CEO Jason Kilar’s leaving, it might be more likely that Hulu finally figures out its own business model and sorts itself. That’s not to say it isn’t generating revenue, as it reported in mid-December that it would top $1 billion this year.

Maybe the new CEO will be able to tie together the diverse interests of its owners and show them what the service could achieve while still maintaining its revenue levels and other strategic business partnerships. It certainly seems like Hulu is depending less and less on content from the partners and more on content partnerships, and original series, such as its "The Wrong Mans" in co-production with the BBC, "Spoilers" with Kevin Smith, "The Awesomes," "Behind the Mask," and "The Booth at the End."

2014 could be the year that Hulu finally figures out its business model and direction, but right now Hulu Plus accounts number only around 5 million, a fraction of Netflix’s customer base. 

Or things might go in a completely different direction. 2013 saw a long list of retransmission fee struggles between broadcasters and cable/satellite providers. Perhaps the Hulu partners have all learned from that and are working on a way to reach more people through their online portal along with providing new original content. Could it be that they are getting ready to begin offering live TV through the service? That could put a big pinch in retransmission fee negotiations of the future. They could easily say, “If you don’t like the fees, we can easily accommodate your customers without you.” They might also be able to better put a price on their content by taking it off pay TV and offering it directly to viewers. It would be a big leap and might alienate millions of cable and satellite viewers, but it’s not out of the question.

Amazon: Challenging Netflix?

Where Netflix is SVOD, Amazon falls into the transactional VOD (TVOD) market by charging per purchase or rental, but it also features an SVOD option with its Amazon Prime, a major competitor to Netflix, not so much in terms of customer competition but in content licensing. Amazon Prime has also moved away from strictly licensing the content of others into the realm of building out its own, exclusive, unique series.

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