Getting it all together

It wasn't very long ago that Internet and streaming ventures had big budgets and large ambitions. Today, businesses and investors are leery of serious commitment to the Internet. Their attitude: once bitten, twice shy.

Even so, there are hopeful signs that it is gaining traction as a medium. A key is resetting expectations for its place alongside radio and television.

"There's a clear reason why TV is not all going to flip to the Net," says Timothy Wilson, Digital Island chief marketing officer. "The current model on the Net is, the more content you ship the more expensive it is."

Online-audience measurement company Measurecast Vice President of Marketing Bill Piwonka says there are a number of trends that bode very well for the industry.

Those trends are the broadband buildout, better content and improved performance for the consumer. Another trend is the falling cost of getting the content to the home. That's important in ensuring that, some day, streamers can truly reach broadcast-size audiences. For example, Digital Island, one of the largest companies in the content-delivery-network business, can handle only 700,000 concurrent streams.

"IP transit costs and the amount that the last-mile provider charges to get that into the home have been falling about 30% per year," Wilson says.

Jupiter Media Metrix put the number of consumer homes with broadband access (cable, DSL, satellite or fixed wireless) at 7.9 million as of second quarter 2001 and estimates about 10 million today (barring drop-offs from the Excite@Home debacle). Bill Rose, vice president and general manager, Arbitron Webcast Services, says that the proportion of Internet users who have broadband access at home is at 16%, and that is up 4% from six months ago.

"Of those with dial-up Internet access, another 14% say they'll get broadband access within a year," he says. "So you can pretty much come to the conclusion that broadband penetration according to the consumer will double in the next 12 months."

Along with improvements on the content-provider end are changes on the consumer end. Much of that effort will be up to companies like Microsoft and RealNetworks, the two major forces in the streaming-player market. Piwonka says two key factors will be the recently released AOL version 7.0 and Microsoft XP operating system.

"I think a couple of things are going to bode well for Internet radio," he explains. "One is AOL 7.0, which has an Internet radio button on the home page. AOL has 32 million subscribers. Many of those people may never have been exposed to Internet radio, and now, every time they log on, they're reminded that it's there. The other is Microsoft XP."

The XP platform seems to be especially important. Microsoft's consumer PC operating systems have been less than reliable, crashing much more often than their professional counterparts. Not so with XP. Mark Hall, RealNetworks vice president, media publishing and programming, says the stability offered by the new operating system is important. With computer crashes less likely, the streaming experience will be improved for users. "In a lot of ways, we like XP because it's a more stable platform overall. It's more robust, and there is more power to it so it really helps our player," says Hall.

David Caulton, Microsoft product manager, Windows digital media division, beieves that the reliability of the core architecture of the XP operating system means that broadcasters can deploy Windows Media servers to do the broadcasting and know that the machines can play it. "This is really an industrial-strength operating system brought into the home for the first time," says Caulton. "For the first time, someone can consider having a PVR application on and just letting it run for a week, and it will still be running."

With improvements on the delivery and technology side, the remaining part of the equation is content. There's movement there, too: RealNetworks' revamped subscription service and player, redubbed RealOne, became available last week, and a number of broadcast partners are providing content, including, CNN, E! Entertainment Television and Fox Sports Net.

With more than 400,000 subscribers paying at least $9.95 a month to access the video and audio streams, there is no doubt that Real's presence is becoming more important with network executives.

"This go round we met with the likes of Jamie Kellner [chairman and chief executive of Turner Broadcasting]," says Hall. "One of the things that we think is happening to get that level of executive to meet with us is, they look at us as essentially an MSO and we're the 12th biggest. So, for us, a light bulb went on, and we realized we're important to them."

Real's content-provider partners get a cut of the subscription monies plus a bounty if the content drives the customer to become a RealOne subscriber. "It's all structured very similarly to the way MSOs have deals with their network providers," Hall explains. "The model that exists there seems to work, and it economically makes sense, so we aren't trying to reinvent the wheel here."

CBS is an early supplier to RealOne. As part of the $9.95-per-month package, users got access to 24-hour Web cams during Big Brother II's run and, currently, access to "Survivor
Insider," which makes additional footage not seen on television available every Friday morning. Viewers who didn't want to subscribe to One Pass could buy the programs à la carte for $19.95.

According to David Katz, CBS vice president, strategic planning and interactive ventures, more than 56,000 subscribers signed on for Big Brother II
à la carte. "We thought it might be similar to response rates on direct-response video sales, but they're usually far lower than this," he says.

Katz sees a growing role for show-related subscription packages and video-on-demand. "I'm convinced that the networks will be able to find a compelling business model, but that's a little way away."

Fresh examples make a difference. The VH1 My Music Awards Show
earlier this month had a large Internet component, allowing viewers to vote on awards until the last possible second (more than 4 million people voted). Web users also had access to five Internet-only camera feeds, including one from the red carpet outside, one from the podium and another attached to host Eric McCormick.

"We've made a big point to make this more than just a feed of the show. It has to be complementary," says VH1 Group Senior Vice President Jason Hirschhorn.

To handle surges in traffic, he says, VH1 made sure the number of dynamic elements on the site were limited and bumped up the number of connections on the servers beyond normal day-to-day capacity.

"You can never be perfect," he says. "With a popular event, there is going to be a point where some people are going to have a not-so-perfect experience. But that's sort of being a victim of our own success, and I don't think any big media company isn't dealing with that now."