Any physicist will tell you energy can neither be created nor destroyed — just changed from one form to another. Much the same can be said these days about television viewing.

Life used to be so simple – one screen, three national broadcast networks and a handful of local TV stations in every market. What’s more, all stations “signed off” sometime after midnight, leaving insomniacs with nothing to watch until morning but the once iconic test pattern. Then along came cable, considerably expanding both the choice of channels and the time available to view them.

Television programming has since migrated online and across a variety of mobile devices, while an array of newer technologies, showcased at this year’s Consumer Electronics Show, promise to deliver all sorts of Internet content to digital TV sets anywhere in the home.

Indeed, television now operates 24X7, the maximum allowed by the laws of science; and in an increasingly global and fragmented media marketplace, it is highly unlikely such time will be reduced. How then will consumers continue to change their viewing experiences? As academically interesting as the question is, for all segments of the industry, getting the answer right will separate winners from losers.

Although the amount of TV fare currently streamed online remains small – and appears to have made no real dent in conventional television viewing – it is growing fast. In fact, Nielsen’s latest Three Screen Report shows that video consumption across all three screens is up compared to last year – with TV reaching an all-time high of 151 hours a month. But what happens if the Internet competes more aggressively for television viewers? Will online advertising become more valuable to all concerned?

For broadcast networks, online ads may present new revenue opportunities – even with smaller audiences online – given the ability to better target advertising and, thus, charge higher CPMs. Right now the theory is being tested at Hulu, which in less than a year has become the fourth-largest video service on the web and is delivering ads on 80 percent of its streams.

Cable networks, on the other hand, may have a higher bar to clear. They have two revenue streams – advertising and subscription fees from carriers like MSOs, satellite companies and telcos. So the break-even point is greater. Nonetheless, several cable programmers, including Time Warner and Viacom, are exploring new ways to make their content available online that will closely replicate their current revenue model.

Adding to the uncertainty, however, is the challenge posed by “all you can eat” Internet access pricing. Since significant increases in streaming video will put a lot more stress on current bandwidth, networks may be looking at a reduction in revenues just as online costs for content distribution go up. This is the basis for accusations that some cable internet service providers are intentionally slowing delivery of content to high bandwidth users.

Still, most consumers know or care little about bandwidth issues and business models. For them, it is the viewing experience that counts, and they will continue to go to the ‘best available screen’ for content. At home, big plasma wins. On the road, the laptop often is the screen of choice. And when literally on the move, they go mobile.

What is more, Nielsen data shows that most people prefer the same source of programming, no matter what the medium. In other words, fans of CNN on cable are most likely to visit CNN.com. That is why content providers must continue to make it as painless as possible for loyal viewers to get their content when and where they want it.

Yet that is the easy part. Altering the underlying economics to accommodate change is a lot more problematical.

For example, the aggregate cost of getting access to information across the three screens can be as much as $100 a month or more. But there are inefficiencies associated with each individual service that will have to be addressed:

• Because cable TV subscribers pay for channels they don’t necessarily watch – and prices go up as more content becomes available – some may eventually decide to cut the cord and move to the Internet. As a result, deals between cable operators and content producers will need to shift to payments based on viewing rather than carriage. In that case, cable operators might sell more (or all) ad inventory, or cable networks may pay a percentage of their ad dollars to operators.
• Internet users who regularly stream or download huge files generally pay the same monthly fee as those who check emails once or twice a day, and perhaps visit a few web sites. Clearly, the former costs an ISP much more than the latter. If distribution costs continue to decrease, the point is pretty much moot. But if and when the cost line rises higher and faster than that of revenues, the industry may need to consider selling the internet access in “bands” or “tiers”.
• While providing streaming video or TV on mobile phones is still in relative infancy, most companies are already charging an extra monthly fee for delivering such content. Adaptation by consumers and further advances in technology will drive any changes in the business model.

Just as the transfer of energy from one place to another can produce new forms of power, shifts in consumer activity across the three screens will generate new opportunities. The challenge in both instances is to find the most effective ways to harness them.

HDTV flat screen televisions dominated, with 3D, Internet-enabled and ultra-thin and flexible screens on display.  New sets with on-screen interactive “widgets” to click to additional information and services were demonstrated by Yahoo!, Intel and Samsung.  Using this functionality, consumers can check their stock portfolios, the weather, sports or a host of other activities.  There were also Blu-ray devices with the ability to access the internet for movies from Netflix with a simple click of the remote.  Tru2way digital set top technology, wireless HD capability and location-aware GPS capability increasingly built into most new products were also featured.  Increasingly, the “always connected” promise of the Internet was featured in an array of devices with location awareness which likely means that targeting applications will rapidly increase to small personal devices we carry in everyday life.

“It’s clear that electronics companies are focused on making products work better and faster and with an eye toward styling and design.  Simplicity is key, as is providing tangible “connected” value to consumers.  Having attended a number of these shows, I was genuinely impressed with the innovation on display, despite a turbulent economy in 2009″ said Scott Brown, SVP, Digital Platforms for Nielsen.

Other key highlights of the show included:

• LG Blu-ray players with built-in streaming for Netflix, CinemaNow and YouTube
• Samsung Blu-ray players with WiFi
• Blu-ray players at the $200 price point
• Significant advances in audio technology for mobile products and gaming applications from Dolby
• CruiseCast, in-car satellite TV service from AT&T
• DVR hard drive capacity expansion
• LG Watch Phone, featuring a touch screen interface, stereo Bluetooth, speakerphone and built-in music player
• NETGEAR’s new portable Internet video player
• Hitachi’s gesture controlled television

Leading up to the Jan. 8 Consumer Electronics Show in Las Vegas, buzz from online boards, forums and blogs increased nearly tenfold from post-2008 holiday levels, according to Nielsen Online.

Key products created much of the excitement, including super-thin, bendable TV screens (using organic light-emitting diode, or OLED technology), new digital cameras and camcorders, smarter-than-ever-smartphones such as the Palm Pre, and tinier, more powerful computers, some of which are being called “netbooks.” Also big: the concept of “convergence,” which means that many electronics devices are now interchangeably converging their functions: computers that download TV content and music and play it throughout the house, cameras that use GPS to tag photos automatically, and phones that serve as music players. Sure, electronics manufacturers are feeling the pinch, but they’re also hoping to benefit from consumers who turn to more home-based entertainment (big-screen TVs, gaming consoles, etc.) to keep their own budgets under control.

Follow more trends at Nielsen Online’s blog, Connecting the Dots.