It seems to me there are five areas to play in streaming media. Most companies are strongest in one but may play in one or more of the others. I would be interested in others' perspectives on advantages and disadvantages of each, as well as companies to look at in each.
The five areas are:
1. Delivery (server and/or network infrastructure for broadcasting, multicasting and unicasting; also related software) - examples BCST, RNWK, ITVU, MSFT, AXC
2. Eyeballs (control of the end user) - examples YHOO/BCST, XCIT, AOL, MSFT/NBC/MSNBC, CBS, ABC, DIS, CNN, ESPN, TWX, ATHM, AHWY.
3. Content production - roughly subdivided into informational (news, weather, education, sports, public service, etc.), commercial (marketing, advertising, PR, IR), and entertainment - examples include many of the eyeball companies in information; some of them in entertainment; VDAT/PRNewswire and AXC/TVontheWeb in commercial.
4. Content aggregation - examples BCST, AHWY.
5. Pure infrastructure - companies providing services that support one or more of the above. Telecoms, cablecos, some software companies, production-related equipment and transmission, etc. Also companies working on new compression algorithms e.g. wavelet-based, or new optical transmission technologies.
Up until now it seems the focus and market frenzy have been on eyeballs and content aggregation. These have been great plays, and has probably created some of the players that may dominate the next generation of communication (pure interactive video/audio). Long term, however, the dominant players may face huge challenges in adapting their business models to interactive TV. The current browser paradigm assumes that the user controls what single portal he/she uses at any one time (ok, with frames it might be 2 at once with the user controlling one, the portal the other). Will this same model exist in the future when we have all of the real estate and resolution of HDTV as the delivery mechanism? I doubt it; if there's one thing I've learned about the technology revolution, it's that paradigms are guaranteed to shift. If I'm right then how will AOL, YHOO and other portals control the eyeballs in the future environment? I see this as a significant long-term risk that some players will figure out how to deal with and others won't.
Within the past few weeks the focus has shifted to delivery companies. BCST caused the focus on this, and the market to start looking at other delivery companies like RNWK and ITVU in a new light. I'm not convinced that as multimedia net capabilities continue to grow that this sector will maintain high barriers to entry. ITVU's multi-player support, for example, threatens RNWK's dominance on player standards. Yet ITVU's infrastructure could easily be replicated by any major telco or cableco.
Bill Gates said content is king, yet the content companies aren't yet in the limelight - which is why they may present the best long-term opportunity. While many existing forms of content can adapt easily to VOD, many new ones will need to be developed, and existing ones modified (the current codecs put some significant limitations on viewability of content not produced specifically for compressability, but over time that will relax). New applications are emerging in a number of fields, including advertising and PR/IR, where old-format content simply doesn't fit the bill. Video advertising has historically assumed a captive audience (e.g. TV commercial) whereas in the new world the user will ultimately control what he/she sees, so the message has to be geared to working a "prospect" vs. building a brand image. There should be huge opportunities in this area, and much less risk that technology evolution will threaten the model.
Is this a good way to think about the market? Are there other segments we should be thinking about? What other companies fit into each category? Where are the best investment opportunities? Interested in all opinions here.
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