Streaming and Digital Media

Understanding the Business and Technology

Dan Rayburn

• Publisher: Routledge
• Year: 2012
• Print ISBN:
  9781138143623
• eBook ISBN:
  9781136032172
• Topic: Languages & Linguistics
• Subtopic: Communication Studies
• Index: Languages & Linguistics

Steaming and Digital Media gives you a concise and direct analysis to understand a scalable, profitable venture, as well as the common and hidden pitfalls to avoid in your business. By focusing on both the business implications and technical differences between online video and traditional broadcast distribution, you will learn how to gain significant time-to-market and cost-saving advantages by effectively using streaming and digital media technologies. As part of the NAB Executive Technology Briefing series, the book is geared towards the manager or executive and no technical prerequisite is required. You can quickly learn the technical speak as well as the market and business implications. New In The Book: - Consumer generated content and portals - Distribution of full-length video content - New distribution outlets for delivering content (Sling, TiVO, IPTV) - Addition of Flash streaming technology and Podcasting - Up-to-date market research and data - New industry pricing data

1 Why Get into Streaming and Digital Media?

The Key Question is not can You Build a Streaming Business, but Should You?

Streaming and online video is hot, no question about it. This book is in your hands because you have some driving need, burning issue, or passing curiosity. Maybe your company has recently started a streaming project, or maybe you’ve been streaming for years. Perhaps you build the technologies that make streaming possible, or perhaps you are wondering what kinds of businesses, apart from adult entertainment, can possibly make money with streaming. You are not alone. Streaming has survived from its buzzword start through its blacklisted backlash to become a major movement in nearly every industry. From the obvious such as media/entertainment and financial services to the less sexy worlds of pharmaceuticals, automotive, and aerospace, digital audio and video content delivered over a network or the Internet is grabbing headlines.

Admittedly, not everyone is yelling “Full stream ahead!” The Internet is widespread, but not ever-present. Certainly farmers from Iowa to the Ukraine are using slow dial-up connections, if anything at all. Many parents and grandparents may have e-mail accounts to write to children and distant relatives, but they do not use their AOL accounts to watch movie trailers, stream Internet radio, or other more advanced streaming applications, yet.

With that said, virtually every vertical business segment today is finding value in some form of online video. Besides the Internet itself, there is no other technology that allows you to communicate more efficiently and effectively than streaming media.

Digital Media’s Rapid Rise

The relatively small size of the digital media technology and services market highlights the fact that streaming is still in its infancy. Depending on who you ask and which technologies you call “streaming,” the market size in 2005 ranged from $800 million to $2 billion. Market forecasts for the growth rate of the digital media market over the past four years have been remarkable only for their inaccuracy.

Although the market itself is small, when compared to traditional TV or broadcast markets, current research indicates that the majority of enterprises, broadcasters, media and entertainment organizations and government institutions are adopting and consuming more and more streaming media products and services. Each quarter the number of Fortune 1000 corporations setting aside a separate budget for streaming and digital media services continues to rise (see Figure 1.1).

FIGURE 1.1 Planned spending on products/services.

(From Uses of Streaming and Digital Media report published 2004 by www.StreamingMedia.com/Aberdeen.)

These services are either for a narrowly focused application such as distance learning, for intermittent usage to supplementing an event such as a quarterly executive address, or for a specific audience such as earning calls to investors. There are several nonfinancial or market measures to show how popular digital media is becoming. Nearly 98 percent of home consumers use a media player on a regular basis to play music and watch video clips. In 2006, the www.StreamingMedia.com website had over 100,000 monthly unique users, and recorded upward of 4 million hits per month from corporations wanting to know more about ways to adopt streaming media solutions at their company.

On the consumer side, Google bought YouTube.com for over $1.5 billion and the newest buzz phrase everywhere in 2006 was “user generated media.” At the end of 2006, Apple Computer had sold nearly 2 billion single-song units at $0.99 since the service launched three years earlier. The legal wrangling over music and movie file sharing made weekly, and sometimes daily, headlines in major print publications from the Wall Street Journal and the Herald-Tribune to the Economist and Business Week. Niche segments of digital and streaming media entertainment, such as sites filled with sports, news, religious, and adult content, pulled in an estimated $25 billion in 2002 and grew to an estimated $400 billion in 2005 depending on who you ask. So regardless of the size, streaming is here to stay, and it is only getting more popular.

The term “streaming” itself needs to be revisited. It has become the shorthand phrase to refer to any audio and video content delivered over a network based on Internet protocols (an “IP network”). Streaming is not technically accurate. As Chapter 2 shows, streaming is only one strategy for delivering audio and video over IP networks. One accurate definition was formulated by IBM, who defined “digital media” as “unstructured content—audio, video, and images—that cannot be stored in a traditional database.”¹ IBM goes on to define two major segments of digital media, one in which the media has “intrinsic value” or value that is inherent to the media itself (e.g., movies, music), and the other in which the media has “business process value,” where the media becomes valuable due to the context in which it is used (e.g., training, corporate communications). Rather than continue with the streaming misnomer, this book will use “digital and streaming media” or simply “online video” when talking about digitized audio and video on the Internet or a private intra- or extranet.

When Technology Becomes a Business

Today’s digital media discussions focus less on the technologies required to make digital and streaming media work, and more on the business models required to make it successful. Debates rage about the size of the song collection required to meet the needs of a mass audience and the meaning of “fair use” as applied to digital music. Entertainment companies recognized that “inventory leakage” on an Internet scale would prevent profitability of any digital media business. In response, they attacked the degrading ethical standards of consumers with a “Be Good and Lawful” campaign around file-sharing systems. In corporations, digital media conversations focus on “cost avoidance,” “cost containment,” “per-user communication costs,” and other business-oriented justifications.

This perspective is distinctly different from pre-2003, when the discussion was on what could be done at some point in the future, and what technical features and functions would be required to meet the demand for potential services someday. Before 1995, digital and streaming media did not exist on the Internet. The earliest content delivery network (CDN) was launched in 1996, and at that time it only delivered images and other static web objects. Early streaming companies such as FastForward Networks and Sandpiper Networks launched in 1997 or later were either acquired by larger companies in 1999 (by Inktomi and Digital Island, respectively) or closed their doors when costs far outstripped revenue quarter after quarter.

The heyday of streaming and digital media occurred in 2000 and 2001, when new start-ups, trade periodicals, and conferences were funded by the dozen with investments from venture capital firms paranoid about missing the next big thing. Suppliers focused on small technology segments such as “on-the-fly content trans-coding” and “micro-payment processing engines.” Media properties such as CNN strove to provide a pervasive and consistent viewer experience. The premiere cable news network built online properties to complement, augment, and expand on its broadcast channels. The goal for CNN’s online content was to equal its broadcast programming in quality, but with a diversity and interactivity possible with new media formats.

The interest in digital and streaming media followed the same curve as other technology segments. Back in 1995, in the early days of the business-oriented Internet, corporations had no choice about their Internet investments. The mantra from boardroom to back office was “Get Online—NOW!” Financial and personnel resources were thrown at the problem with abandon, because everyone was convinced that to be a winner in the Internet land grab, investments must be made fast and furious.

The boom economy encouraged liberal spending with minimal financial justification. Internet equipment companies such as Cisco Systems, Sun Microsystems, and Nortel Networks grew at a phenomenal pace, and Microsoft overtook General Electric as the company with the largest stock market capitalization in the world. Cisco’s market cap even briefly made it the most valuable company in the world in the last week of March 2000: With a $555 billion market cap, Cisco bested Microsoft and General Electric. A whole flock of specialized professional services companies focused on “Internet enablement services,” which flew high and proud with names like Razorfish, Scient, Viant, and Zephyr.

Of course, it couldn’t last. By 2002, digital and streaming media had lost its sheen because those companies selling the services were too focused on trying to have the newest and greatest technology instead of showing clients a return on their investment. Burned by the over-promising vendors and underperforming technologies, media companies and enterprises knocked digital and streaming projects to the bottom of the priority list. It didn’t help that most customers of streaming and digital media technologies were struggling to remain in business themselves after a downturn in the economy and a bubonic plague of corporate malfeasance. Telecoms, service providers, and enterprises all slowed or stopped their spending on Internet infrastructure equipment and services, which bankrupted equipment providers. In mid-2003, Cisco was a much smaller fish. While General Electric had long since regained the number one spot, Cisco had shrunk down to one-quarter of its heyday size, and only one-fifth the size of an also smaller General Electric. Even Microsoft had stopped giving employees stock options as incentive, mainly because the options were no longer worth anything. The professional services firms foundered, with Razorfish, Scient, and dozens of others closing their doors or acquired for pennies on the dollar within a one-year period.

Out of the Technology Ashes and into the Fiscal Fire

The business model is definitely where a discussion should focus, particularly if you are trying to build a profitable business. Unlike the late 1990s, budgets are no longer limitless, and each business or project must provide a rational, justified return on investment (ROI), cost savings, or revenue model within a reasonable time frame. The discussion now is not whether a digital media service can be built, but in what business context should it be built.

While a difficult climate for vendors, the post-boom environment is actually a boon to clients and customers. The Darwinian struggle that caused the death of many fledgling technology segments has pushed the surviving vendors to develop and market products that solve real customer problems. The unjustified have had to turn around their business plans, be acquired by healthier competitors, or go out of business entirely. The result is a garage full of rapidly maturing tools just aching to be put to productive use. Content delivery networks, caching appliances, webcasting software, encoding servers, and digital rights management tools are all here, many in their third or fourth generation. Moore’s Innovators and Early Adopters have served their purpose by working through the difficult early period to bring technologies to maturity. Vendors who have survived through the early years may have suffered many bumps, bruises, and broken bones but now offer products that are useful to many companies. They have adopted a new means of selling and showing the value of their services and have taken the appropriate steps to use technology to help solve business problems. Digital media vendors are hearing the same message from prospective clients—that technology has no value unless it solves a business problem. It’s not about the newest and greatest technology but rather whatever technology moves their business forward.

The opportunity to leverage the technology for real business solutions is here. The challenge is to learn from the experience of the past four years. This book will help you to learn how to use the mistakes made by industry vendors and early adopters to your advantage. Frank Lloyd Wright knew intimately the capabilities of the construction equipment, laborers, and materials that were available for use before he sat down to design a new structure. Philip Glass understood the range, timber, and sonic quality of musical instruments and human voices before he started composing his avant-garde symphonies. Jack Welch spent twenty years in the bowels of General Electric learning the full range of GE’s many business units before repeatedly redesigning the company’s mission after becoming CEO in 1981.

Using Digital Media for Revenue Generation: the Value in Managing Your Own Content, Channels, and Customers

“Everybody else is doing it” should never be the justification for moving to a digital media system. Instead, the emphasis should be on increasing revenue or expense management. If revenue is the objective, there are three areas in which many companies use digital media: content monetization, channel control, and customer conversion. These are all concerned with building top-line sales, either through the sale of the digital media itself or by using the digital media to increase the sale of cars, dishwashers, detergent, or other products.

Content Monetization

Any company with digital audio or video that has intrinsic value should be building a digital media strategy to sell, or “monetize,” that content over the Internet. The nature of digital media is that it does not degrade over time and that an infinite number of copies can be made from an original without affecting the quality of the original. The nature of the Internet is that any point can be accessed by another point, that it is pervasive and redundant, and that it is quickly becoming more akin to a utility resource like natural gas and electricity than a jumble of technologies. When combined, digital media plus the Internet means that an audio or video file with intrinsic value could be sold and delivered directly to anyone in the world with an Internet connection—more potential customers than could ever fit into even the largest of retail stores.

Aside from selling popular content to millions of people, the Internet’s reach also makes it feasible to begin selling niche content to small, specific groups. NASCAR racing has a large enough following to merit cable television broadcasts, but locomotive enthusiasts may be just as willing to pay to see footage of a Garratt locomotive crossing the North Fork Trestle outside of North Conway, New Hampshire. The potential is for anyone with content that is valuable to any group should be able to generate revenue from that content via the Internet. Keep in mind that monetizating content is not always about selling the content itself. Monitization can occur from selling advertising around the content, syndicating the content, licensing the content, selling sponsorships around the content and other outlets.

There are many technical issues to understand when designing a content monetization business model, and it is a key objective of almost e...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• About the Author
• Introduction
• 1. Why Get into Streaming and Digital Media?
• 2. Technology Primer: The Basics of Streaming and Digital Media
• 3. The Four Keys to a Profitable Streaming or Digital Media Business
• 4. It’s Not Child’s Play: Learning From the Pitfalls of the Past Three Years
• 5. Quality and Content Are King and Queen of the Digital Media Realm
• 6. Streaming or Digital Media Project Management: How to Implement and Manage a Profitable Business
• 7. Beyond Streaming Media: What Streaming and Digital Media Means to Other Areas of a Media Business
• A. The Costs of CDN and Streaming Services 3rd Edition: Vendor Pricing and Customer Expectations
• B. Enterprise Streaming: Return on Investment Report
• C. Uses of Streaming and Digital Media Report
• Glossary
• Index