Building a Sustainable Streaming Media Model

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Consumers Crave More Choice

A recent survey of more than 15,000 Consumer Reports subscribers found that 81% of those who have used a streaming video service in the last month used Netflix, according to a July 26, 2012, PCMag.com article ("Netflix Most Popular, Not Most Satisfying Streaming Video Service").

Yet, despite its popularity, Netflix isn't exactly scoring high marks with consumers in every area. According to the survey, the biggest problem consumers have with Netflix's streaming service is its limited selection of movies, specifically new releases, says the article.

"The real reason the catalogue is limited is because the content producers are slow in licensing it to Netflix," says Tolu Akinola, founder of StreamThing, a service that notifies people when their favorite movies or shows are available on Netflix's streaming service.

While Akinola believes Netflix is "trying their darnedest" to increase their catalogue, the limited selection "is the biggest threat to Netflix and the reason for all the volatility in their stock price. They have to figure this out and soon, hence my prediction that content and distribution will merge at some point unless they are able to achieve total market dominance (much like Apple did with iTunes) in which case they can negotiate with the studios on a more equal footing."
Hull also believes Netflix should expand its offerings if it wants to increase its subscription base. "Netflix has really not focused on smaller studio movies, independent films, or niches, and consequently, consumers are frustrated. For instance, Hispanics are the fastest growing demo in the US and Netflix's domestic Spanish-language offering is very thin. More Hispanics would love to subscribe to Netflix, but Netflix will first need to offer them more content choices," he adds.

Other all-you-can-watch streaming services such as Amazon Prime and Hulu Plus face the same limited selection issues as Netflix, says the PCMag.com piece. In fact, less than 1 in 5 survey respondents said they were "highly satisfied" with the titles available on these services, according to the article.

Netflix alternatives such as VUDU, iTunes, and Amazon Instant Video all scored higher in terms of user satisfaction rate, according to the article.

Though not everyone is satisfied with their Netflix experience, the company recently surpassed Apple to become the top service in terms of online video market share on a revenue basis, as a result of Netflix's increased focus on its unlimited streaming service, according to the CNNMoney article.

In 2011, Netflix had a 44% market share, while Apple-whose iTunes store does not offer a subscription service-saw its share dip to 32.3% of the market (down significantly from 60.8% the previous year), according to CNN. Microsoft, VUDU, and Sony round out the top five list, but each has just single-digit percentage shares of the market's revenue, says the article.

Bandwidth Budget?

So, as consumers continue to consume streaming video, will bandwidth become an issue?

David says no. "There's a lot of dark fiber still; we still are not consuming all the fiber that was put in the ground in the big boom of a few years ago," he observes. "There's still a lot of excess capacity and if you look at what people like Google are doing with their Kansas City fiber infrastructure now-I don't think the infrastructure is going to be a problem."

Google's Kansas City, Mo., initiative is expected to launch this fall and now includes Google Fiber TV-a TV service with its own, fully searchable interface that mixes DVR results with Netflix and YouTube. Customers of the service, which will have ultra-high-speed web connections, will no longer need to wait for videos to buffer or websites to load.

Ultimately, Hull feels that "the bandwidth market must evolve to meet consumers' desire for streaming content, and not the other way around. Any bandwidth provider that tries to bottleneck content consumption to save bandwidth will be out of business in five years."

According to McClain, "The key to handling any bandwidth constraints is offering adaptive streaming that automatically adjusts to an end-user's available bandwidth," she says. "This allows content to be streamed over broadband and mobile networks to an expanding user-base, while adjusting efficiently to any network congestion and providing an optimal end-user experience ... this is all about monitoring and optimizing the performance of streaming content delivery."

Puentes observes that bandwidth is "always a concern," but as CPUs are continually evolving and memory and hardware are getting faster and cheaper, bandwidth expands with it. "Technology to stream videos is advancing just as fast as technologies to handle bandwidth so we are constantly having to come up with ways to solve the bandwidth problem. So, even though bandwidth issues are not new and they aren't going away, it's not a deal-breaker for the future of streaming video-it's just a hurdle."

The way things are currently going, it seems like nothing is going to be a deal-breaker in the relationship between consumers and streaming video.


CNNMoney

Compuware Corp.

Kaltura, Inc.

Lijit Networks, Inc.

PCMag.com

StreamThing

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