Is Online Video Killing Best Buy’s TV Star?

An  unassuming contributor to Best Buy’s latest big quarterly earnings miss could be consumer willingness to view video online on PCs and mobile connected devices, breaking the sacred bond with home TVs.

Lower than expected television sales in the latest quarter partly reflect that consumers are no longer tethered to their home TVs for all but big, live sporting and other events.

Although the number of US online video  viewers continues to grow steadily, up a more modest 8% in 2010, more than three-quarters of them routinely watch video on connected devices, according to eMarketer. More than one-third of online adults in the US, or nearly 60 million people, routinely watch full-length television shows online.

While mobile video is rapidly growing from a smaller base, 40% of the US population will rely on some kind of mobile Internet device by 2013, and advertisers will be sure to follow, eMarketer predicts.

Seeing evidence of these trends on a consumer electronics giant’s balance sheet could be the first convincing indicator that mass audiences are settling to view video on virtually any size screen in exchange for convenience  and lower cost  –  especially during a painfully slow economic recovery.

“Consumer spending has been episodic and (it) appears that our customers are operating on cues from the broader environment,”  Best Buy CEO Brian Dunn said on a conference call with analysts. today.

Although Best Buy cited a number of one-time negative earnings factors, it reported a low-single digit comparable-store sales decline in televisions during the first quarter as well as weakness in other discretionary sales of video gaming, music and movies.

By comparison, the sale of high definition and 3D TV screens for the home  continue unabated as do  wildly popular Apple and other mobile connected devices. Apple’s new Mac Mimi is suspected by many to be a precursor to a new portable compact Apple TV.  If it ever takes off, a new iteration of Apple’s iTV could represent the first pass at what the Yankee Group calls “TV service without the content,” catering to consumers already watching less video on TV than they do online. “Connected devices with prepaid data plans such as Apple iPad allow consumers to be Anywhere without tying themselves to a monthly payment,” a new Yankee report observes.

eMarketer estimates the highest penetration of online video viewing is among 18- to 24-year-olds, with 25- to 34-year-olds and teens not far behind. By the middle of this decade, those age groups will collectively represent more than  90% penetration, with the ability to dramatically alter consumption patterns. Even now,  29% of consumers under 25 get all or most of their TV online, compared with 8% of the overall video viewing population, according to Retrevo.

More than half of today’s mobile video audience (about 55%) is adults ages 25 to 49, according to Nielsen latest Three Screen report. So, it is not surprising that video-on-the-go has prompted the likes of Starbucks and McDonald to compete with free Wi-Fi service that lures consumers to sit and browse free online music, videos and local information.

Walt Disney CEO Bob Iger, who has steadily and smartly advanced its global franchises into the mobile space, explained at a Financial Time conference Monday, “We didn’t want to be marginalized. We have to be where the fish are.”

That seems like ike sound advice for all media, entertainment businesses and retailers including Best Buy.

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