Streaming Entertainment's Big Moment

The likes of Comcast and DirecTV face accelerating competition from ZillionTV, Hulu, and other upstarts eager to provide programming on demand

By Cliff Edwards

Life may soon get even harder for satellite and cable TV providers. Already under pressure from phone companies eager to enter the video market, operators like Comcast (CMCSA) and DirecTV (DTV) are facing accelerating competition from a host of upstarts eager to deliver movies and TV programming on demand.

ZillionTV on Mar. 4 became the newest rival intent on giving consumers an alternative way to get their entertainment fix: delivered à la carte, via home Internet connections, instead of on a slate of channels in a monthly subscription package the way cable and satellite companies do. Once ZillionTV's set-top box offering is available later this year, it will compete in a crowded field that includes game consoles, Apple's (AAPL) Apple TV, Roku, TiVo (TIVO), and Hulu's video-streaming portal on the Web.

Companies are trying to come up with just the right mix of video to beat out the competition. On Mar. 3, Roku announced it was adding Amazon.com's (AMZN) Video on Demand library of 40,000 titles to its $99 Roku Video Player, joining Netflix's (NFLX) streaming video service, which offers about 14,000 titles of mostly older movies and TV shows. "Customers…are trading off cable or satellite subscriptions," says Tim Twerdahl, Roku's vice-president of consumer products.

A Future Only with Streaming?

A week earlier, Netflix CEO Reed Hastings suggested his company might launch a streaming video-only service later this year or early in 2010 for customers who no longer want to have DVDs mailed to them. "We recognize at some point in the long term, the streaming will be good enough that an appreciable number of people will find streaming is all they need," Hastings says.

There's no question that demand for video is on the rise. In the quarter ended Sept. 30, the typical American watched 142 hours of TV monthly, up about five hours from the same quarter the previous year, Nielsen Research shows. Internet use averaged more than 27 hours monthly, an increase of an hour and a half, according to Nielsen.

On-demand providers are betting consumers will opt for customized programming tailored to a person's tastes and schedule rather than watching at a set time or place—known in the industry as linear viewing. "Linear TV of yesterday is exactly that—the television model of yesterday," says Patrick Gauthier, ZillionTV's senior vice-president of product marketing and strategy.