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The State of Media and Entertainment 2013

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We live in interesting times, and we wouldn't have it any other way. Gone are the days when pay TV channels and Blockbuster provided our only video entertainment. We're on the road to somewhere completely different, but we're not there yet. Who will be the dominant media companies in the new connected age? How will we access our favorite shows? Where are the fortunes just waiting to be made? Plenty of companies are trying to steer the direction, but it's up to the viewers to decide who wins and who loses.

The media and entertainment world was a fascinating place in 2012, showing the emergence of new power players and methods of discovery. We saw plenty of big deals that may pave the way for the entirely new viewing experiences of tomorrow. We'll survey the year behind us and foretell the year ahead by looking at key events from 2012.

TV Everywhere Was Everywhere

"TV Everywhere" is typically written with a capital E, as though it were a policy or a plan put in place by some corporate or government overlords. It's not, though. TV Everywhere is an idea -- the idea that online video is taking off, and the established premium content providers should have a stake in it.

To make sure that online video remains tied to the current pay TV companies, TV Everywhere was created. It requires authentication to view much premium content online. That means that viewers need to prove that they have a pay television account in good standing to view premium video online.

It's the pay TV industry's response to cord-cutting, and it gained a lot of ground this year. If broadcast networks and cable channels simply put their content online once it had aired, that might encourage people to trim their cable bills and live off streamed content, instead. TV Everywhere's authentication stops the free access by requiring pay TV accounts.

To some, that's anti-competitive. Others wonder why cable and satellite companies -- not even a middleman in this transaction -- should have a hand in online streaming, at all. The reason, naturally, has to do with money.

"I think authentication is absolutely here to say," said Sam Blackman, CEO and co-founder of Elemental Technologies, Inc. "I'm personally in favor of high-quality content, and the reality is that somebody has to pay for that content."

Networks and other content creators want to keep their deals with pay TV companies healthy, so they need to help protect the revenue stream for those services.

"if we want to have amazing video, we've got to be willing to pay a little bit for it," Blackman said. "Good quality content is not cheap."

TV everywhere showed up in several places in 2012. In May, Hulu revealed that it would require authentication even for paid accounts. Perhaps not surprising, given that Hulu's owners include NBCUniversal, Fox, and Disney/ABC Television Group, but it was one of the more extreme attacks on cord-cutting and -shaving. Perhaps Hulu is paying the price for it, though. While Hulu said in an end-of-year blog post that its revenues grew by 65% in 2012 and it had 3 million Hulu Plus subscribers, comScore, Inc. video rankings show that it's no longer the ad powerhouse that it once was. While Hulu was long the dominant online video ad streamer, comScore's video ranking showed that it was regularly eclipsed by BrightRoll, Inc. and Google later in the year.

In June, Disney brought TV Everywhere to mobile devices with three iOS apps. Each offered limited content for all users, but full access to Comcast Xfinity TV customers.

The Olympics Were Authenticated

The London Olympics was by far the biggest online video streaming story of the year. Viewers around the world were treated to live views of the events, even events that weren't popular enough for television broadcast. In the United States, NBC again purchased the coverage rights. While the broadcaster did a Herculean job in streaming more than 3,500 hours of live coverage, its coverage of the games was not without controversy. The biggest uproar had to do with the network's decision to delay the more popular events for prime-time airing. The problem is that in our digital culture, viewers often heard who had won the events before they had the chance to watch them.

Also controversial, although not as unpopular, was NBC's decision to require pay TV authentication to view the Olympic online streams. Cord-cutters were out of luck, and it wasn't clear to many why an over-the-air broadcaster would put up roadblocks in service of the pay TV industry.

"You make people do something before watching a video, they're going to be upset over it," said Rick Cordella, NBC Sports Group's senior vice president and general manager of digital media. "We understand that. Our business model is set up in a way that we're partners with our MVPDs [multichannel video programming distributors] and it's part of the overall business model of the Olympics: cable companies are paying the freight for some of it. So TV everywhere is a derivative of that."

The Olympics were seen as a huge success for authentication, as many viewers new to online video went though the authentication process. Many others learned what a virtual private network was, as they did what they needed to view the BBC's online streams.

Olympics Screen

The Olympics were the high point of the online video year in 2012, but they also brought the year’s harshest criticism. 

"It's unfortunate people are trying to work around it. Honestly, it's quite easy. If you know your credentials, you know your log in, you get in," said Cordella. "There's no incremental fee for you to do it. I think some people just saw that as a deterrent and they went a separate direction. The hope is, as we continue to evolve, that TV everywhere, as we head into Sochi and later on Rio, has become second nature to people and it's not a big deal."

The Olympics were a huge opportunity for the online video industry to prove itself. Companies jumped at the chance to take part. Blackman is pleased to say that Elemental streamed video for eight customers to 70-plus countries on four continents, ultimately delivering more than 600 million streams.

"It conclusively proves that it was the first purely digital Olympics. If you look at the number of views over IP devices, it was just a huge number," Blackman said. "I think it proves that the internet can scale for large events. In the past, when there's been large scale events where literally millions of people watch, there's been problems with buffering and low frame rates. With the Olympics, that really wasn't the case."

Big Deals Were Signed

To understand how the business of online video changed in 2012, look at the big deals that were signed. Previously, major networks and studios dipped a toe in the water. In 2012, they cannonballed.

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