Streaming Medias once-sunny future — like the outlook for much of the digital world — is looking mighty gray these days. Whopping predictions for its usage have withered in the light of reality, shrinking like the investment capital that fattened the industry just months ago.
Today, the fastest-growing streaming statistics seem to be the tallies of dying and dwindling streaming outfits. The list of casualties includes some unlikely corpses, too. Intel — nine months after predicting it would have streaming media revenue of $2.5 billion by 2004 — recently cut off its streaming arm to save face on the money-losing venture. Earlier this month, Loudeye Technologies, which provides digital media encoding services, said it would lay off 45 percent of its 300 employees. Both companies join a list of players wading out of streaming entirely or calling a time-out to repair crashed business plans.
But the streaming media picture is changing.
Granted, the current view is dim. "We havent imploded," says T.S. Kelly, who oversees streaming media research at Nielsen//NetRatings, "but were suffering from a little bit of a slowdown like everything else in traditional media." Part of the drying-up, Kelly and other industry analysts say, is a result of unrealistic expectations of advertising revenue, audience share and investment returns.
Only months ago, notes Ben Rotholtz, general manger of products and systems at RealNetworks, "three people in the back of a garage with half an idea on a napkin were worth a hundred million dollars. It made it difficult for people doing legitimate things and building a legitimate business."
Even supposedly legit businesses face hurdles, including the fact that audiences see streamed content as more of a James Bond-style novelty than real-world, reliable content that theyll pay for. Couple that with viewers who come face-to-interface with technical limitations and pricey bandwidth, and its no wonder the streaming sector flows with red ink.
But Michael Aldridge, lead product manager at Microsofts Windows Digital Media Group, says it may be time for consumers to update their assessment of the streaming format. "Technologically, its perfectly possible to have a rich experience," Aldridge says. "Bandwidth is getting cheaper, the technology is improving. We can now create a better-quality and more cost-effective experience at a lower bandwidth."
Current research suggests other reasons for streaming firms to smile. A report this month from Jupiter Media Metrix projects enterprise spending on streaming video technology to leap from $140 million in 2000 to $2.8 billion in 2005. In February, Nielsen//NetRatings reported a broad jump in broadband users, from 5 million to 12 million, in the past year. Kelly says this demographic is 50 percent more likely to consume rich-media content than analog modem users. Another Jupiter study revealed that the number of at-home media-player users increased 33.2 percent in the past year, to 41 million users, while at-work users bloomed by more than 34 percent, to 15.7 million. These are the kinds of New Economy growth figures that should have rich media firms drooling over their servers.
Despite those uplifting numbers, the challenge for streaming firms remains how to hang on while the market matures to a profit-generating state. For RealNetworks and Microsoft, the game plan is to keep battling each other for market share. Each company claims victory, but Jupiters numbers show RealNetworks as the leader, with 30.7 percent of all Internet users running RealPlayer, while 26.4 percent use Windows Media Player. (For more on the RealNetworks-Microsoft imbroglio, see "The Format Wars" in this section.)
But while those Goliaths squabble over market share, other outfits are fighting for survival.
NaviSite is carving out a niche in the big leagues of content delivery. The company has focused its streaming media services on the entertainment field, which analysts estimate accounts for up to 80 percent of all streaming use. The Microsoft Network used NaviSites technology, streamOS, to broadcast one of the largest Webcasts in history — Madonnas live concert in London last fall. Microsoft claimed more than 9 million viewers streamed the show, at data rates of up to 700 kilobits per second; however, there were reports that many users had technical difficulties tuning in.
NaviSite provides a system of connected distribution networks, across which it shifts traffic as supply peaks and ebbs at any specific point. Before one distribution point gets flooded, traffic is rerouted to less busy content sources. "One of the biggest leverage points of streamOS is the built-in distribution methodology," says Christopher Levy, chief technology manager of NaviSites streaming media division. "It gives us a much greater, instantaneous scalability."
The service aims to alleviate traffic jams that sour consumers on the concept. NaviSites streamOS is vital to Kurt Flint, technical director at MediaX, the Los Angeles Web site developer that runs one of todays hottest sites, that of boy-band phenomenon N Sync. "Traffic and reliability are huge issues for us," Flint says. He says NaviSites streamOS keeps him from stranding millions of swooning viewers in mid-stream.
NaviSites streaming service also features a number of components that make content management easier — from nearly instantaneous reports on viewer usage to drag-and-drop capabilities for posting new content. The services biggest asset, Flint says, "is that its really simple to use and doesnt require an engineer. And its very scalable — I can keep shoving stuff up there without having to worry about capacity."
Gurminder Singh, president and CEO of NewsTakes, is tackling bandwidth capacity issues in a different way. The companys patent-pending encoding technology allows content owners to repurpose streaming media into formats that accommodate bandwidth fluctuations and the limitations of users Internet devices. The goal, Singh says, is to put an end to what he calls "constipated" video. "It doesnt matter what your bandwidth is," Singh says. "What youre seeing stops and starts, and its jiggly."
NewsTakes sprang last year from Singhs realization that the ideal bandwidth for efficient content delivery seldom exists. "In reality, network conditions are never stable," Singh says. "The bandwidth fluctuates all over the place. Video encoding doesnt take that into account."
NewsTakes technology does. Developed by Singh and fellow researchers at Singapores Kent Ridge Digital Labs, the encoding technology determines the most important elements of a piece of media and formats it with MPEG-7 metatags — information that describes the content. When bandwidth becomes constricted, the metatag information kicks NewsTakes server into action. Instead of locking up, full-motion video downshifts into a "slide show" of slowly changing stills accompanied by real-time audio. RealNetworks and Microsofts servers provide similar bandwidth-throttling features.
While it can stream music videos to teens at home, NewsTakes system is aimed at the growing number of business users with streaming-enabled handheld or mobile devices. Orange, a European telecommunications company, and Singapores SingTel have invested in NewsTakes and are now testing its technology in their respective markets. The Associated Press has signed an agreement with NewsTakes to use it in Europe, and Dow Jones & Co. and Standard & Poors are preparing to stream financial news via NewsTakes technology to consumers in Europe and Asia. Singh says NewsTakes is in the process of securing content delivery deals with a number of entertainment industry customers, too, which will be served by staff in the U.S., Japan, Singapore and the U.K. The company is also preparing to launch a tool that will convert dated MPEG-1 content into streamable fodder.
Granted, the market for NewsTakes services on wireless devices may not be up to snuff just yet in America. In the U.S., RealNetworks Rotholtz notes, "we live in the backwater of digital phones and mobile devices. Its not like Europe and its not like Japan."
But when that impending wireless wave hits U.S. shores, Singh and his staff will be ready. "What were trying to do is be a universal access solution," Singh says. "Whatever information you want will be available in whatever situation youre in, whatever device you might be using."
Film at 11
For Eveos Olivier Zitoun, how you get your multimedia isnt important. Hes more concerned with what you reel in from the stream. And for those firms looking to wet their feet in the streaming sector, hes taking the turnkey approach a step further. In addition to providing software and platforms for hosting and delivering streamed content, Eveo offers something more: content itself.
Eveo has recruited more than 1,500 independent filmmakers from around the globe who create digital films for corporations. Firms seeking such content typically require a slew of outsourcing partners to create, encode and deliver it. With its EveoPROs program, however, Eveo handles the entire process. The company links clients with film producers, who coordinate everything from scriptwriting and storyboarding to hiring on-screen talent and digital videographers. When the customized piece is completed, Eveo posts it to a given site, along with tools for monitoring stream performance and viewer habits.
EveoPROs also allows Zitoun to fulfill his childhood filmmaking dream. "When I looked at broadband and how it will be changing the Internet," he says, "I realized my dream when I was 14 years old could now come true."
Living that dream has delivered authentic dividends for Zitoun and his firm. Zitoun says EveoPROs is driving most of his companys revenue, accounting for more than 70 percent of its streaming business. "When youre selling heavy machinery, you dont care about getting existing content," Zitoun says. "Youre interested in getting the right video content. Youre interested in content that fits your brand."
Eveo recently produced a series of three-minute short films for Expedia, the first streamed content hosted by the travel site. Renee Russak, Expedias group manager of content, says Eveos production service was more valuable than its delivery skills. "We wanted something that didnt feel like TV brochureware, and Eveo really heard us on that front," Russak says. "It feels authentic and fresh."
Zitoun says his companys approach keeps costs down for clients, while bolstering his business at a time when many of his peers are struggling. He thinks its a situation that can only improve. "There are only about 100,00 sites that use Web video today," Zitoun says. "All the reports now say it will be close to 1 million in two years. So you have 900,000 sites that will be adding video, and I dont think the repurposed content will make it."
He adds, "The streaming space is going through a tough time right now. Market capital has been hammered, and people think broadband is not growing as fast as we think. But it is happening. And its not about if, its about when."
Thats the kind of optimism streaming firms need today. According to NetRatings Kelly, that positive attitude should be matched by business plans that pay the bills.
"The business-to-business model is a little safer bet [in the] short term, because all of these companies are looking for ways to solve communication and productivity issues," Kelly says. In the consumer sector, he says, conditions are less rosy. And for the smaller firms like Zitouns, the margin for error has shrunk. "Little independents can make a mistake or two," Kelly says, "but if it keeps happening, its back to the garage. A small company needs to have a unique value proposition to survive today."
And no matter what the scale of the business, anyone in the streaming fold today should have their heads out of the clouds and their eyes on the bottom line.
"Two years ago, it was almost wrong to talk about making money with streaming media," Rotholtz says. "Today, if it doesnt start with somebody popping out the ROI [return on investment] calculator and figuring how theyre going to make a business out if it, somethings wrong."