Streaming Media, IP TV, and Broadband Transport

Broadband:

Streaming Media, IP TV, and Broadband Transport

Insight Research
Market Study April 2006

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Carriers will soon be offering video and other value-added services geared to spur spending in the consumer and business segments. In this market research report, Insight will examine streaming and other information and entertainment services.

Streaming media—the IP transmission of on-demand rich media that gives the user the ability to listen to audio and view video and graphics animation files from the network without downloading the content—is but one of several technologies being used to deliver information and entertainment services. IPTV, in the context of current broadband transmission technology, will make it possible to move beyond the multicast “time-shift” capabilities of cable’s video-on-demand models so as to deliver true interactivity to unicast, multicast, and broadcast audiences and give carriers a slice of the more than $250 billion forecasted to be spent each year on mass advertising.

In this research report, Insight studies the role and many applications of IPTV and streaming in both the business and consumer markets. In addition, Insight evaluates the broadband infrastructure, hardware, and software necessary to deliver this service to the market, as well as the end user devices at work in homes and businesses. This research study provides a detailed forecast of the video, IPTV, and streaming media markets—including the applications, markets, and equipment.

1.1 Streaming Media Market Today

Streaming media is a method of transferring rich digital media across a network without requiring any local data storage. The streaming media landscape has changed dramatically over the past twenty-four months (see Streaming Media Market Overview, INSIGHT Research, 2004). As an industry, streaming media has survived the introductory phase and evolved to the point at which there are proven business models, a sufficient number of consumers ready to buy, and stable technologies to support the industry’s future growth. As streaming evolves beyond the early adopter phase and strides toward the mainstream, the industry is turning its attention away from the technology in order to concentrate on the applications and communication tools that will restructure the entertainment experience for consumers and increase information productivity for businesses.

The most important factor driving the consumer segment is content on demand. Consumers want to be able to listen and watch anything they want, at any time and in any place. The amount of video content available has grown apace with demand: a few broadcast channels expanded into the hundreds on the cable networks, and now thousands more movies are available at video rental stores. Moreover, the web has conditioned the consumer to expect services at any time, while wireless devices make it possible to connect from any location. Thus, the consumer’s desire for the widest possible array of audio and video content on demand is the most pervasive driver of the streaming media industry.

Consumers have demonstrated a willingness to pay for this content, as well as an acceptance towards exposure to commercials in return for content they want. INSIGHT Research believes that the growth of paid content for individual purchases of video will be quite robust once the mechanisms are in place for consumers to easily find the content they desire and distributors deploy the mechanisms to collect the revenue.

The alternative to paid content is ad-supported content. In 2005, broadband Internet reached 56 percent of households and, in doing so, created a potential audience of critical mass for advertisers. The size and spending power of this online audience has produced significant shifts in advertising spending. According to ZenithOptimedia, spending on Internet advertising will increase from 2.5 percent of total advertising in 2004 to 4.3 percent by 2007. We expect the shift toward online advertising to be a significant factor driving usage of video streaming over the Internet. Advertiser dollars follow the consumer’s eyeballs: as consumers spend more time in front of the PC, advertisers are more willing to spend money to reach them.

High bandwidth at the receiving station has been critical to the development of a robust streaming media industry. Since broadband penetration has increased over the past several years, the use of streaming has increased dramatically. The number of broadband residential subscribers is expected to reach 88 million homes (75 percent of all US homes) by 2011. As broadband users are the group most likely to request streaming content, INSIGHT’s research suggests a tremendous upside to the streaming industry during over our forecast period.

Another factor driving the positive growth of streaming is that the entertainment industry has finally hit upon a few business models related to their content distribution that consumers can understand and value. In 2003 we wrote, “The Recording Industry Association of America’s heavy-handed attempt [i.e., selective criminal prosecutions] to enforce its copyright of digital music files being shared across peer-to-peer networks brings into stark relief the problem of an old business model slamming into a new media—and similar business breakdowns are just down the road. TV and cable broadcasters, movie studios, and content providers of every stripe are about to run up against similar property rights and....

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