Chalk it up to a bad economy if you will, but more and more consumers are foregoing movie theatres and DVD rentals for online streaming. In fact, a recent survey by Allot Communications notes that HTTP streaming is the fastest-growing application globally, with a usage increase of 58 percent.
That’s good news for companies like Netflix, whose 2nd quarter earnings surged 22 percent. True, subscribers are flocking to the cheapest price plans just so they could stream movies, but the cost of getting and keeping them on board is also less expensive than traditional mail-order subscriptions, so Netflix still nets a profit.
The bad news? Competition is fierce, with broadcast networks, cable networks, Internet-only channels and even companies like Amazon and Apple all vying for online viewership. Piracy is also a problem, with illegal copies of movies and TV shows regularly appearing online, albeit often in lesser quality.
If Netflix is any indication, however, consumers seem to be willing to pay to watch on the Web, so long as it doesn’t cost them an arm and a leg. Hulu, the popular streaming site — a joint venture of NBC Universal (GE), Fox Entertainment Group (News Corp), ABC Inc. (The Walt Disney Company) and Providence Equity Partners — is in fact banking on this, and is considering charging for content in the future.
The bad news? Content is still king. As Forrester Research analyst James McQuivey said in an interview with the New York Times, “Consumers are under the impression that everything they want to watch should be easily streamable.” Which means the cost to license and provide as many titles as possible can minimize profit. This is the reason why Netflix shares fell, after it announced that operating margins would likely remain stagnant for the next several years as they invest in their streaming library.
Good or bad then, when it comes to online viewing, the real issue for content providers and media companies is how best to maximize profit — and that’s something that’s likely to change as technology improves and partnerships are made in the industry.
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