Streaming media sounded like a hot business last year, until companies found themselves faced with Titanic-sized costs to put entertainment content on the Internet. Those expenses have since sunk to all-time lows today, leaving industry survivors with a welcome sight on the horizon: economic viability.
“You can stream a full-length, 120-minute movie for less than $1.50 today,” says Doug McIntyre, prexy and CEO of On2.com, which handles the streaming of Internet content for clients such as USA Network’s Scifi.com. “What that means is that you now have the technology that makes it cost effective to do things like video-on-demand.”
Lower prices throughout the industry are being driven by the availability of more bandwidth, new technologies that improve the process for encoding and storing media, and hot competition among providers of bandwidth.
Industry insiders agree that the price of bandwidth — the infrastructure that carries content to consumers — has dropped by 30% to 40% from the same time last year as more and more companies from AT&T to PacBell and even start-ups step into the marketplace.
“Everybody and their uncle is on the phone trying to sell you bandwidth,” McIntyre says. He points out that most companies are now offering the same service, so “there’s really nothing to compete on other than price.”
That allows hosting and delivery companies that buy bandwidth such as On2, iBeam, and Real Broadcast Network to pass along lower costs to their clients. While streaming costs vary from project to project, McIntyre says that they now charge about 1.1¢ per minute to handle a 500 kb data stream at On2.com, down from 1.5¢ last year.
Real Broadcast has seen similar declines, according to Adam Selipsky, general manager of solutions marketing. He says Real charges about 1¢ to 2¢ per megabyte for high-quality video.
Better technology for storage and encoding of content is also helping to lower costs. Philip Graham, veep of the Internet Streaming Media Alliance (ISMA), points out that an 80 gigabyte disk drive — enough space to store about 40 full length films — costs about $270 today. Last year, the price was almost double that. As with computers, he predicts that speed and capacity will continue to improve while prices continue to decrease. That reduction, he says, makes appliances like TiVo possible from an economic standpoint.
But other areas of streaming media are seeing costs hold steady — or even rise. Graham points out that in the past year, companies such as Quicktime, RealNetworks and Microsoft’s Windows Media Player have all come out with updated encoding processes that can send more information in a smaller amount of bandwidth, but that are incompatible with one another.
While each individual system reduces costs, a single piece of content needs to be encoded in a multiple of different formats in order to ensure that every Netizen across the Web is able to view it.
That complexity is a “huge factor in the overall cost,” according to ISMA’s Tim Schaaff, and one that won’t disappear until a standardized format is agreed upon, similar to the way standards were set in the infancy of broadcast.
But despite the remaining glitches, most experts agree that streaming media prices will continue their decline, even as the popularity of the medium continues to increase. That combination could lead to an unusual phenomenon for Internet entertainment companies — businesses that turn a profit.