Sinking or swimming with streaming video: as picture clears, cable faces web challenges

Cable World, Dec 11, 2000 by Richard Cole

Yahoo! projects 20 million users by 2003, its target date for "critical mass" to attract advertisers to the business, sports and shopping channels the Internet portal is launching.

There is ample reason to believe more eyeballs will do the trick. Most broadband usage in the United States is still in the workplace, and Yahoo! is already making money with streaming video in its business services division, transmitting training sessions, stockholders' meetings, product launchings and other B-to-B activity.

HBO's Billock also has little doubt the revenue is out there, noting that with DSL, cable, wireless and overbuilders pushing broadband, commercial successes could develop almost immediately. One prime candidate he sees for early profitability is a music video streamed directly onto a 16-year-old's computer or TV screen.

Broadband will not just change the business model for streaming video companies, he adds. Within five to seven years, it will affect ISPs, cable companies and everyone else in the industry.

"When we move to a broadband world, when we do have a highly sophisticated set-top or television monitor, there's going to be a change in the dynamics between where the programming is coming from and what is going to be paid for by the user," Billock says. "It could be bits, it could be content, but I think there is going to be a fundamental shift in business models down the road."

Excite@Home's Bell agrees and raises a key issue for all broadband service providers, exemplified by sudden surges of usage for game playing his company experiences. "We are very concerned about it from the point of view of a business model. It sucks so much bandwidth," he says, then puts his finger on a dilemma for the entire industry. "There is no future for us in running a broadband network in which huge variable rates of traffic and bit flow are going unmeasured or unpaid for."

Cable's choices

Cable is already doing the most critical thing to survive and ultimately profit from streaming video: pushing high-speed connections into the home. The challenge is how to maintain profitability without driving broadband users away to other suppliers such as DSL or satellite.

The crudest and simplest way would simply be to charge for bit use, perhaps through a tiered system. If Bell is right, all broadband providers face the same dilemma, and cable won't risk alienating customers because DSL and satellite will eventually be forced to do the same.

Unless and until cable companies become the only broadband connection into the home, MSOs must accept that network programmers will need access to customers using other systems. Revenue sharing, perhaps through e-commerce, rather than thwarting that effort, would create the ultimate win-win situation.

"At their core, cable companies are all about carrying data from one place to another," analyst Vonder Haar says. "If you are successfully able to deliver the world of streaming media content options, chances are customers would be willing to pay more. Any form of content you can bring to the table just makes your pipe that much more valuable."