"The Internet is the new ether," said Paul Liao, chief technical officer for Panasonic. "First you had broadcasting over the air. Then you had cable, and then satellite. Now fiber optics are bringing programming to the TV."
Television makers face competition from Apple Inc., Microsoft Corp. and TiVo Inc., which are among the many companies trying to connect the PC with the TV.
Few consumers have embraced these attempts. That's because people don't want to buy another box to connect to their television sets, said George Kliavkoff, NBC Universal's chief digital officer. He said that left three viable players: set-top boxes from cable and satellite providers, video game consoles and the TVs themselves.
"I don't know who wins, but I think those are the only folks who have a chance," Kliavkoff said. "It brings the ability to have unlimited channel capacity, personalized channels -- a celestial video jukebox in the sky."
In addition to technical hurdles, there's a business problem: winning shelf space in stores. Retailers make "a ton of money" selling DVDs and might balk at selling a network-connected TV that could potentially undercut the sale of home movies, said Kurt Scherf, principal analyst for Parks Associates in Dallas.
Electronics makers have two powerful allies: TV networks and Internet companies such as Google Inc.
For networks, providing shows via the Internet broadens their potential audience and creates opportunities for interactive advertising.
Web search guru Google also is seeking new advertising formats, especially video. In January it announced a deal to make YouTube videos available on Internet-connected Panasonic sets.
"We are making a video platform that gives users a sense of infinite choice," said David Eun, Google's vice president of content partnerships. "This is about making content accessible to as many viewers as possible."
That's potentially bad news for local TV stations, which for decades have collected money for distributing networks' shows. Local stations still retain exclusive first-run rights to prime-time shows, and the networks are trying to maintain good relationships with the affiliates, allowing them to offer programming on their websites.
Still, Internet distribution lets TV viewers go around affiliates to watch shows.
"When you do these direct deals between TV manufacturers and content providers, the entity getting squeezed out is the middleman," said Will Richmond, president of Broadband Directions, a market intelligence and consulting firm.
