Report: Net Set for Streaming Media

Streaming media -- including audio, video, text, animation and multimedia content -- will drive the next wave of Internet growth, according to a new report by U.S. Bancorp Piper Jaffray. The report predicts that total spending on Web streaming media will grow from $9.7 million (US$) in 1999 to $21.6 million in 2004.

In two to five years, the audio and video quality available online will resemble the television of today, according to the report. The Internet of the future will also give viewers more control over their media viewing experience.

"We believe that streaming media is the next macro-growth driver on the Internet," said the author of the report, Gene Munster, a senior technology research analyst at the Minneapolis, Minnesota-based firm.

Munster added, "We expect significant growth drivers in the streaming media sector, including the availability of broadband, simplified ease of use, the availability of content and the convergence of the television and the PC."

New Digital Distribution Channels

The delivery of information has changed over time from a static, analog channel to a more dynamic and robust digital channel, according to the survey. This shift has led to the creation of many new digital distribution channels, including digital television, cable, satellite and the Internet.

The adaptation of these new distribution paths is occurring at a much faster pace than the adaptation of past technological breakthroughs. For example, while it took 38 years for the telephone to reach 10 million households, the Internet needed only 4 years to achieve the same penetration.

The broad appeal of the Internet is continuing at a phenomenal pace, according to Munster, who projects that household Internet penetration rates will reach 20 to 25 percent over the next several years.

Increased Demand

The growth of streaming media will be driven by several factors, according to the report, the first of which is a strong demand among customers for interactivity. Consumers who have grown accustomed to interactive video games and similar products seek something more than a traditional viewing experience. Net content providers will utilize streaming media technology to convey the interactive content that the new generation of Net users craves.

The report also says that streaming media technology will allow content providers to inexpensively distribute digital content. New and innovative applications, which will refine the relationship between users and Internet commerce, content, and advertising, will drive the future of streaming media.

Business Applications

Consumers are not the only ones who will benefit from the streaming media revolution, the report states, as e-tailers will find that streaming media allows them to target ads more effectively than previous methods.

Munster said, "We believe that consumers will be more likely to transact commerce due to the improved convenience and timing of being one click away."

In addition, streaming media will benefit from an increase in business-to-business (B2B) broadcasting of events such as earnings reports, meetings and conventions, seminars, product and service announcements, and distance learning.

Banking on Streaming Media

The stakes are high for streaming media, as several big name players are banking on the new technology. In June, Microsoft (Nasdaq: MSFT), Compaq, and Intel (Nasdaq: INTC) announced that they were teaming up with San Francisco, California-based Digital Island to build a streaming media network. Targeted at business customers, the network will transmit broadcast-quality media over the Internet.

Last month, AT&T and IBM (NYSE: IBM) signed a deal to provide, bundle and market Web hosting solutions, including streaming media, to Web sites owned by small and mid-sized businesses.