Consumption of video content is primarily conducted on the web. According to a recent report by Nielsen on video consumption, usage in January in the U.S. is up considerably from the same time last year as time spent viewing video on PC/Mac/laptops from home and work locations increased by 45%. And Netflix users on average spend 11 minutes watching videos, which is more than double the amount of time spent by Hulu subscribers.

When considering these numbers, it is clear to see that video on demand services are an integral component of next generation TV or interactive TV (iTV). This begs the question: how will Amazon’s service impact Netflix? To best answer this question, one may want to look at a few factors:

• Number of subscribers. According to a recent report on Neflix vs. Amazon via Investor Business Daily, roughly 13% of Amazon’s 130 million active users are Prime members. Netflix has 20 million subscribers for its streaming and DVD-by-mail services in the U.S. and Canada. So Netflix is only slightly ahead of Amazon in regards to users.
• Availability of Titles. Based on the 20 current bestselling videos on Amazon (see table below), Netflix hosts only 65% of them as video streams while the remainder are available as a only DVD rentals. Unfortunately, these titles are mostly two years old (in some case much older!) which make less attractive in comparison to Netflix which features multiple 2010 and 2011 titles.
• Device Support. While Amazon is only available on Tivo, Google TV, and Roku, Netflix is available on these devices and more, including favorites like the Boxee Box, Apple TV, multiple blue-ray DVD players and Apple’s iPad and iPhone mobile platforms.

It seems that Amazon Prime subscribers would logically try out the service and a fraction would defect to Netflix once they understand the value of unlimited streaming service and the expanded availability of content by latter provider. While Amazon’s foray into unlimited streaming may appear to be a total bust, in actuality it will benefit Amazon as Netflix fully transitioned to Amazon’s cloud infrastructure in 2010. So Amazon will make money out of this deal even if it is only through growing consumer awareness/demand.

The only potential wrinkle in the future of streaming video is broadband metering. While the battle has just begun in the US, Netflix is already contending with ISP’s charging overage fees for video consumption. Netflix has to convince the FCC in the US that unlimited broadband is important for competitive pricing.

A few weeks ago, I tweeted about the streaming service from Comcast called Fancast. While other streaming services allow you to watch videos from the major networks, none give you streaming content from premium channels like HBO, Cinemax and Stars. So when my DVR started being flaky this past Saturday night, I decided to give it a try.

The log-in process was painless and the search functionality worked well. To watch premium content, the service required a special Adobe AIR player, which I promptly downloaded and installed. Everything was smooth sailing until up to the point when I tried to start Watchmen. For some reason, the service kept displaying a message that I was an HBO subscriber thought I was. After reading the FAQ’s, I confirmed that was I logging in with my primary Comcast.net account, which is a requirement, so I decided to call in to Comcast’s local customer service. After waiting on hold for a short while, the representative confirmed that all of my account settings were correct but indicated that another department would be better equipped to handle the issue. She tried to switch me to that department by I kept getting disconnected.

When I called in to customer service again, I spoke with another representative but the second one didn’t even know about Fancast. Yikes! Even though I explained to her how the service worked, she questioned me whether it was something that Comcast offered. My wife, who was sitting in the room, was rolling on the floor laughing as I attempted to convince the woman to help me. When the rep tried to switch, I was promptly disconnected again. So, I searched Fancast and (finally) found the toll-free number for support. When I called it, the Fancast rep informed me that my account was working correctly but error that I kept getting was due to an issue that Comcast/Fancast has been having for a week. And there’s no ETA for when it will be fixed. Now that’s a bummer!

While most would chalk this up to Comcast’s poor service, I think that the issue is actually a combination of poor user experience and internal communication/training. NOTE: I challenge you to name a cable television provider that you think is doing a great job these days! While the integration between Comcast and Fancast isn’t where it should be (and there’s a myriad behind the scenes reasons why that’s the case), I would have liked to see a simple error message that indicates that the service is currently down and that they’re working on it. Also, it would have been nice if the customer service reps at Comcast get training on Fancast so that customers like me don’t have to feel like I’ve just made a prank call. Lastly, both Fancast and Comcast should communicate on a regular basis about system status — it would have been much better if the Comcast rep told me that the service was down and to try again later instead of trying to fix my when in actuality it wasn’t the problem.

Comcast must be feeling the pressure to adapt to shifting consumer behavior and increasing pressure from competitors. According to eMarketer, nearly 25% of all TV content watched each day will be time-shifted, on-demand, on the Web or on a mobile device by 2012 (source). Viewers are abandoning television for the internet. Also, both Apple and Google are looking to challenge traditional video distribution channels by offering their own subscription services (source and source). While the service is still in Beta, it is just a shame that Comcast wasn’t able to deliver on the concept.

After spending more than an hour trying to use Fancast, I’ve decided that I need to give Comcast another few weeks to work out the bugs — eventually this service is going to be Comcastic.