BROADBAND’S BETTER THAN EVER, AND CONSUMERS ARE WATCHING MORE ONLINE. SO HOW DO PRODUCERS GROW THEIR AUDIENCE AND CASH IN ON THE LATEST STREAMING CRAZE?
Streaming video has become a red-hot topic. Almost every day there’s a new corporate development. Amazon plans to stream 40,000 titles from its Web site. NetFlix will deliver more than 12,000 movies and television episodes directly to Microsoft’s Xbox 360 and LG’s BD300 Blu-ray disc player. ABC/Disney executives deny they might switch to Hulu from the company’s current Web-based video player.

This flurry of activity raises some fundamental questions. Is streaming video beginning to take off? Are there technical hurdles that might stand in the way of its being widely adopted? And will growth bring new opportunities for independent video and film producers?

There’s a definite trend toward online video. "We did a study and found that 12 percent of broadband users were watching 25 percent or more of their television on broadband," says Colin Dixon, a broadband media analyst with The Diffusion Group, a Dallas-based research firm. "That’s a very large number. And you know who those folks are? They’re the younger people."

Web video has the potential to expand the pool of content for consumers — well beyond what is currently available. "It’s all about reaching the groups that are interested in this marginal content," says Dixon. "If ever there were a time when people would want to jump in and bring video content to their audience, it’s now. Because now you can begin to establish yourself as a provider in this space."

Along with driving niche content, streaming video will likely shift from PCs to TVs. "Television is overwhelmingly where people want this video to be," Dixon explains. "More than 80 percent of the folks we spoke to about movie download services said they wanted it on a television." Dixon has checked with the major manufacturers, and "they all pretty much said the same thing — that they’re adding broadband connections to their televisions. We’re in a five-year transition period where televisions are becoming connected to the Internet."

Keep It Rolling
Sounds like a bright future. Are there any technical challenges? "The first and most basic technical challenge you have to face when you’re streaming is the fact you’re providing live video on what is in effect an unmanaged connection," says Dixon. "With broadcast television, you have a certain amount of bandwidth you can transmit on, and there’s no contention for that bandwidth — it’s yours. With the Internet, it’s all contended. It’s very difficult technically to deliver a consistent video stream across the Internet." Add millions of simultaneous streams, and the challenges grow exponentially. "Today’s Internet cannot scale to television numbers for the delivery of live video," he says. "There just isn’t enough bandwidth."

How much bandwidth would you need for a single stream? "With the new codecs, such as H.264 and the most recent Windows Media, you can do standard definition in about 600 to 700 kilobits per second, depending on the content," says Dixon. "If it’s the Cartoon Network, you can probably do it at 550 to 600. Sports would be higher, probably 900. A good average is about 700."

The requirements become even muddier when you move to HD. "If you talk to the encoder vendors, such as Harmonic, Tandberg and On2 Technologies, they’ll tell you that for standard HD material — not fast-action sports — the bandwidth requirements are between 6 and 8 megabits per second," explains Dixon. "But if you talk to the online crowd, they claim to do HD on standard DSL and cable connections at sub-3 megabits." The actual number depends on how willing you are to sacrifice image quality for higher compression rates.

Among the current success stories is Move Networks, which has "figured out how to deliver fairly high-quality streams on a very consistent basis," says Dixon. Move Networks is the streaming engine behind ABC and Fox. "When you look for full episodes, they’re the guys who are delivering that experience," he explains. Another innovator is KyLin TV, which offers U.S. audiences 25 channels of live Chinese television over the Web. "They send you a set-top box that you plug into your TV and an Internet connection," Dixon says. "They’re telling us they have something north of 100,000 subscribers today." NeuLion provides the streaming capabilities for KyLin TV. ESPN can’t cover every sport, so the company has bundled affiliate sites that are dedicated to niche sports. "ESPN founded the X Games, and that’s what this is," he says. "It’s online, and it’s 24/7."

Billions Served
The Diffusion Group predicts that by 2011 there will be 100 million households worldwide that regularly watch broadband video on their televisions. By 2013, Dixon expects that long-form video (anything longer than a few minutes) will grow to about 23 billion streams per year. Short-clip video will increase to about 150 billion streams. User-generated video (think YouTube) will be even larger at roughly 273 billion streams.

Much of the video will be supported with inserted ads. "Free wins every time," says Dixon. "Over the next several years, we’ll figure out how to do video advertising online." The bulk of the revenue will be generated from long-form video and sponsored short clips. "By 2013, some $7 billion annually will be coming from long-form advertising online. Nearly $3 billion will come with short clips, with very little from user-generated video."

With substantial growth and revenue expected for streaming video, there’s a golden opportunity to serve niche markets that aren’t being served by cable or broadcast television. "That’s the big news for independent producers," says Dixon. "They’ll have a channel to aggregate national audiences into addressable demographics, which is exactly what the Web does best.