Yinka Adegoke wrote earlier this morning, "Microsoft Corp has held talks with media companies to license TV networks for a new online pay-television subscription service through devices such as its Xbox video game console, two people familiar with the plans told Reuters."

Assuming things continue to move forward, this could go a number of ways.  Adegoke wrote, "The maker of the Windows operating system has proposed a range of possibilities in these early talks including creating a ‘virtual cable operator’ . . . ."

Then another possibility is the sort of "a la carte" cable channel selection many people have desired for years.

In any event, plenty of people already own Xboxes, which could give Microsoft’s service one advantage over its rivals.  Toss in the corporation’s considerable financial resources, and it’s easy to imagine one or more ad campaigns making the online TV service highly visible, as well.

Adegoke’s sources imagined the launch of Microsoft’s service might occur in 12 or so months.  We’ll see what happens.

Among Internet users 13-to-54 viewing complete TV show episodes via streaming or downloaded video has grown from 8 percent  to 22 percent. For Internet users 18-to-34 viewing of complete TV show episodes via streaming or downloading has climbed from 12 percent to 30 percent.

"The small but notable level of people watching TV programs via the Internet on regular TV sets suggests that the convergence of the two screens for mainstream audiences may finally be on the horizon," said David Tice, Vice President and Group Account Director at Knowledge Networks. 

"Growing numbers of ‘connected TVs’ – those that access the Internet – are making this option increasingly user-friendly. The fact that over one-third of TV homes now have a bundled TV/Internet service package is no doubt accelerating this blurring of boundaries."

Other highlights from the report include:

   *7 percent in the 13-to-54 age group, and 11 percent of those 18 to 34, have used a TV to watch streamed or downloaded video
   

  *6 percent of those 13 to 54, and 9 percent of 18-to-34 have cut back or cancelled their TV service in the past year due to their online viewing of network programming, or plan to do so in the next year
 

According to Advertising Age, Nielsen is planning on making data available about the viewing of commercials that run in particular shows , whether they are viewed on TV or online. The data would start being available in September, and the publication says it will become the basis for ad negotiations next February.

"But here’s the catch: For Nielsen to be able to provide the commercial rating, shows seen online will have to have the same group of commercials that run on TV," says AdAge’s Brian Steinberg. "If this system were adopted en masse — and it’s not clear that it would be — online viewing might be crammed just as full of commercials as the more traditional TV-watching experience."

"Indeed, viewing programs on Hulu, the online video site owned by NBC Universal, News Corp. and Walt Disney, means encountering significantly fewer ads than one would see watching TV. And Disney’s ABC.com has met with some success by running ABC shows with just a few ads, often from a single advertiser," he adds. "But many TV executives say these methods don’t bring much, if any, profit — and therefore cannot continue."

Online video has enjoyed tremendous growth over the last several years. In December, 178 million Americans watched 33 billion videos online, according to data from comScore. About 40% of that was at Google sites (like YouTube). The second largest amount of market share went to Hulu, at just 3%.

YouTube isn’t necessarily the place people go to watch full episodes of television shows. Hulu is. If videos at sites like Hulu become more ad-heavy, the market share gap could just increase even greater. It could also have an impact on both paid TV show downloads and piracy.
 

Related Articles:

> Google To Get More Interactive With Mobile Video Ads

> IAB Releases Ad Unit Guidelines Updates

> YouTube Videos In Adsense Could Drive Clicks

Nielsen took a look at why people watch online TV, and the leading reason doesn’t have much to do with convenience or fewer commercials.  Instead, 54 percent of people simply watch TV online because they forgot to catch an episode as it aired.  And the next-most common reason, with 47 percent of people citing it, is similar: because they missed a large number of episodes.

It’s not until you get down to the least popular reasons ("Another member of my household watches another program at the same time," "I watch TV programming online when I am at work," and "I watch TV programming online when I travel") that online TV sort of distinguishes itself.  Otherwise, it appears to act as more of a memory aid (or way to avoid buying DVDs) than anything. 

The details relating to how people watch TV online also make the activity look like less than an integral part of everyday life.  Jon Gibs, Nielsen’s Vice President for Insights, Online and Cross Media, noted, "When we go online to watch TV shows, that activity dominates that particular online session," and "the viewing of TV shows online proves to be a rather solitary activity."

This all makes for less than fantastic news for Hulu and YouTube.  Of course, we have to note that neither site is exactly starving for page views, regardless of people’s reasons for visiting them.

Related Articles:

> DivX Rolls Out Online TV Platform At CES

> More People Watching Online TV

> DVR Users Fans Of Online Television

DivX TV does not require a PC or a set-top box to access online content. The platform can be supported on almost any kind of Internet connected device, including digital televisions, blu-ray players and gaming consoles.

"DivX TV revolutionizes the television experience by giving consumers quick and easy access to a virtually limitless universe of online content, and it’s as simple to operate as changing channels with a remote control," said Kevin Hell, CEO of DivX, Inc.

"Our partners will also be pleased to know that DivX TV is designed specifically to work with today’s mass market consumer electronics. It’s easy to implement and support and new content sources can be added with very little effort."

LG Electronics has signed as the first manufacturer to license the DivX TV platform for upcoming Blu-ray players and home theaters.

DivX TV will offer content including online video, movies, music channels, social networking and photo-sharing sites. Currently there are more than 70 content channels in place and the company says it expects to sign on more partners by the first launch of a DivX TV device.

Related Articles:

> CES About to Kick Off the Year in Technology

> Cisco Leaving a Big Mark on Consumer Electronics Show

> Looking Back on CES

Nearly 80 percent of consumers go online daily for entertainment. Entertainment was cited as one of the most important Internet activities, behind only personal communication and work related activities.

Lynn Franco
Director of Consumer
Research Center,
The Conference Board

Consumers are moving away from traditional TV viewing, preferring to watch programs whenever they choose. Being able to view favorite shows at any time, along with personal convenience, are the two major reasons given by more than half of people watching TV online.

"Online viewing allows users to watch TV on their own schedule, catch up on missed content and focus on their favorite programs," said Lynn Franco, Director of The Conference Board Consumer Research Center.

"As a result, about 20 percent of consumers say their traditional TV viewing has declined."

Shows focused on news are the most popular online programs, watched by 43 percent of Internet users. Sitcoms, comedies and dramas are watched by 35 percent, while 19 percent of online TV viewers prefer reality shows and 18 percent follow sports. Other forms of online content include previews, user-generated content, additional content from favorite shows, soap operas and advertisements.

Two-thirds of all online TV viewers access their favorite programs through streaming video, while 41 percent access programs via free download. Nine out of ten online viewers watch online TV from their home. On out of ten watch online TV at work.

More than two-thirds of online TV viewers access content through the official TV channel’s homepage. YouTube is in second place, accessed by 42 percent of online TV viewers. Hulu has seen an increasing gain in popularity, with its usage growing from 8 percent of households in 2008 to 32 percent this year.

"The rise of Hulu is not just a coincidence," said Bernard Brenner, Senior Vice President, Innovation & Product Development at TNS.

"Hulu and other online TV viewing options have created a user experience equivalent to how people self categorize content – sorting by brand, genre and popularity. This user experience, along with a deep library of branded content, has created a service that continues to resonate with users."

Among the people who watched primetime programming both online and on a DVR, 35 percent watched four or more episodes online, compared with 15 percent for people who watched primetime programming both online and on live television.

"During the past year, there has been much debate about the perils of making television programming available via the Internet," said Amanda Welsh, head of research for Integrated Media Measurement Inc.

"While some have speculated or feared that online accessibility would cannibalize television audiences, our data shows that the affinity of DVR users to view television episodes online offers advertisers new opportunities to recapture a desirable audience that had been slipping away."

Among people who watched primetime programming both online and on a DVR, 30 percent went online only once, compared with 57 percent for people who watched primetime programming both online and on live television.

"Rather than simply cannibalizing audiences as has been feared, offering content online presents a huge opportunity for television content providers and advertisers to reach elusive ad-avoiding audiences and to achieve higher engagement with them," said Welsh.

The new feature is called Social Viewing Rooms and is available for primetime, daytime, and CBS Classics. Social Viewing Rooms allows TV fans to chat, make comments, and or animate customized virtual objects on the screen.

Users will be able to find, make friends with, and have conversations with others who are fans of CBS programming. Viewers will see a list of everyone else in the room, and can chat with any or all of them directly during the show.

CBS says it Social Viewing Rooms forms a key part of its interactive division’s goal to engage TV fans online while adding a social dimension to the online viewing experience.

The company says that over time it will expand the Social Viewing to other CBS Interactive properties.

"The Web offers a unique opportunity to do more than just rebroadcast entertainment content," said Anthony Soohoo, Senior Vice President & General Manager, Entertainment at CBS Interactive.

"The CBS.com Social Viewing Room is a next-generation social media platform that lets users engage with each other and the content they are watching in a fun new way, while at the same time giving advertisers an opportunity to connect with this engaged audience."

Being able to watch content on their own time and their own convenience are the main reasons people go online. Other reasons include skipping commercials and portability. About 72 percent of households log on for entertainment purposes daily, and in one in ten cities entertainment is the most popular Internet activity.

"Most consumers are pressed for time and require flexibility in their daily schedules and TV viewing habits," says Lynn Franco, Director of The Conference Board Consumer Research Center.

"Being able to watch broadcasts on their own time and at their convenience are clearly reasons why we are seeing a greater number turning to the Internet. And, it is the reason why we would expect to see this trend continue."

The most popular types of programming viewed online are news, drama, comedy, reality shows and sports, with user generated content trailing close behind. Among people connecting to online programming, 43 percent view the news, 39 percent watch dramas, 34 percent watch comedies, 23 percent watch reality shows, 16 percent view sports, and 15 percent view user generated content.

Other categories attracting viewers include previews, additional content from popular shows, soap operas and advertisements.

Almost nine out of ten online TV viewers watch online broadcasts at home. About 15 percent watch at work, and 6 percent watch TV online from other locations, including the library or a friend’s home.

"The shift from appointment TV to content on demand is well underway," says Michael Saxon, Senior Vice President, Brand and Communications, TNS.

"Fundamentally, consumers expect content to be available when they want it, and on the screen of their choice – TV, PC, or mobile. For consumers, PCs enhance content on demand from simply time-shifting to place-shifting. Online content can be viewed in any room in the house, or at work or school."
 
The most common ways to watch broadcasts online are streaming video, used by 68 percent of online TV viewers, and free download, used by 38 percent of viewers.

The most popular online destination for broadcasts are the official TV channel homepage, visited by 65 percent of viewers, and YouTube visited by 41 percent of viewers. Other sites used for access include iTunes, Hulu, file sharing sites, social networking sites and Limewire.

The report is based on a quarterly survey of 10,000 households.
 

More than twenty percent of people view some amount of primetime television online. Within the group of online viewers, 50 percent are watching programming as it becomes available and are using the computer as replacement for the television set. 

The other 50 percent are using the Internet to watch previous programs they missed, or to re-watch clips of episodes they have already seen.

The report indicated that in a number of instances, online viewing of a particular program was higher than DVR viewing of that same program. This suggests that a fair large proportion of non-DVR owners are using their PCs to watch TV online instead of buying a DVR.

The report found that the largest group of online TV viewers are white, affluent, well-educated, working women between the ages of 25 to 44. This group of women don’t have time to watch all of their shows live so they use the Internet as a way to watch shows they have missed on TV.

"This is the first study to show there are a significant amount of people watching primetime shows online who are not watching some portion of those shows on television," said Amanda Welsh, head of research for IMMI.

"Everyone’s been talking about the Internet becoming a substitute for television; however, this is the first single-source passive data to show that the migration from one platform to another is actually occurring — and it’s happening fast."