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Future prospects
Recipe for success
Enough Capacity

Streaming Gets Reality Check

keynote speech by Martin Tobias of Loudeye at Streaming Media Europe 2000

by David Fox

Streaming media on the Internet is being driven "more by fear than greed", which is fortunate, as hardly anyone is making money and short term prospects are grim, Martin Tobias, founder and CEO of the Internet media infrastructure provider, Loudeye, told the Streaming Media Europe 2000 conference in London.

He believes the long term prospects for the industry are bright, especially for broadcasters, but there are many barriers in the way. The industry is currently "standing on a cliff" and that while it may have grown rapidly, it still "has to decide if it's going to grow up," he said.

Although RealNetworks can currently claim 150 million users (and Windows Media and QuickTime slightly more combined), "actual media player usage is a tiny percentage of downloads - less than 10%," he added.

There have been a lot of business failures, including big names like Pop, DEN, and Pseudo. "Fewer than half of the sponsors of this event two years ago are still in business," he claimed. There are only a "handful of profitable Internet media companies." Partly because "most business models provide free content, which is not an easy way to make money," he said. The business is almost completely built on the delivery of narrowband services, as broadband is only starting its roll-out. Indeed, the Internet itself still reaches relatively small numbers.

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However, the prospects for the future should be better. All types of networks (video, audio, voice and data) are moving to TCP/IP and, if the rate of technological development remains the same, in 20 years a Terabyte of storage will not only cost just 20 cents (compared to $200,000 today) it will fit in a person's hand. In the shorter term, analysts predict that Internet media will be worth $25 billion in 2004, with 500 million people online worldwide. By 2005, the average bandwidth should be 1.2Mbps, which will give a good broadband experience.

But, Tobias believes most of today's business models are too complex and tenuous to work. "We've built a house, but the foundation is unsound, the walls are a bit thin and the roof leaks." There is no clear return on investment for media owners, and no agreement between producer and consumer on what exactly the product is, never mind what is a fair price to pay for it. There are also too many technologies to deal with, which puts consumers off, and not enough interesting content - and what there is is too hard to find. Because of this, the investment community has moved on, so even companies with good ideas are finding it hard to get funding. He foresees many more failures, with investors wary of all the talk of technology rather than business. "There are too many business models, which are too similar, and very few clear winners, but lots of clear losers," he said.

"We've been focused on the wrong things over the last three years, especially the technology. Consumers don't care about codec wars or the number of installations." However, he sees no prospect for a single universal standard. "We should work with what's on the market," he said.

Pointing to the legal dispute over Napster, he said: "You can't build businesses on top of someone else's copyright material." He believes the legal battles have only just begun, and there will be lots of copyright and patent lawsuits. Unlike some Internet gurus, he believes that copyright will not only be enforced, but strengthened. "Without it, good content won't be created and it will be harder to raise money."

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If anyone can gain from streaming, he believes broadcasters are well placed, as cross-media brands are a great deal more likely to succeed than Web-only brands. "The value of something like Mickey Mouse is that it is across so many media." This benefit will only be realised through greater cross-media promotion, which he says the BBC is doing well, with its Web address promoted on every programme.

However, he doesn't advise businesses to try to do everything themselves (from content creation to encoding and distribution). "People are trying to do too much without enough money."

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His recipe for success is to:

  • "Listen to customers and sell them what they want. It's not a matter of selling technology, but of answering the question: 'Is there anything on, and do I want to watch it?'."
  • Deploy truly innovative technology, which isn't proprietary. "One thing Napster has done is shown that innovative applications can still be manufactured in a college dorm."
  • Figure out your business and do it well.
  • Pick your partners carefully.
  • Don't do things which are blatantly illegal and don't build a business on other people's copyright.

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There are also infrastructure problems to address. "We don't have enough capacity to deliver large scale events," he said. There are also significant content management issues. "We need to develop applications to drive business models, such as syndication and windows of distribution." There also needs to be a universal ad insertion system which works on TV, radio and the Internet (to make it cost effective and efficient), and an accepted subscription infrastructure.

He doesn't see TV on the Net taking off in a broadcast model, partly because if you want to deliver the same programme to lots a people at once, TV is a much better way to do it than the Web, which is better at delivering on-demand services. But, there is also no incentive for Internet Service Providers to make Multicast delivery easy, as they sell less bandwidth that way, so he sees Unicast remaining dominant.

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© 2000 - 2010

Successful Streaming - how to get it right.
Making streaming work - A seminar report from Sreaming Media Europe 2000.
Making money from your streaming media websites - you want business models? we got business models.
Webstation: Gritted.com - how one post house launched its own Web channel.
Akamai - leading edge streamers!

David Fox