Streaming media is one of the largest reasons why bandwidth demand is growing at an exponential rate. Large media corporations have been slow on the uptake to diversity their distribution model and embrace the Internet that was once seen as a pirating free for all. If there is one thing that the iTunes store has proven is that, if you make media easily accessible you will find an army of consumers who are eagerly willing to part with their monies for convenience. Instant gratification is an extremely powerful marketing vehicle in an age where brick and mortar stores are no longer the only way to get music and videos. Online distribution has opened the hearts and wallets of a large audience that can be sold to 24x7 and across borders with real time fulfillment. Walt Disney Co has recently purchased a 30 percent stake in Hulu and will start to load it up with their content. To sweeten the deal for potential users, Hulu will start to offer music videos, sports and news from their respective commercial content providers. This puts pressure on Google to figure out a revenue model for YouTube that can attract the big media to share content for a slice of advertising revenue or other mutually beneficial business agreement. Since Google’s acquisition of YouTube in 2006 for $1.6 billion they have been devising strategies on getting it to a profitable state. A recent Credit Suisse report estimates YouTube dominates domestic video streams with a 41% share but could be facing an operating loss of ~$470 million in 2009. Bandwidth alone accounts for 51% of their operating expenses with a running rate of ~$1 million per day. With Hulu getting directly beefed-up by big media with a built in ability to monetize their content the race for market share is heating up. YouTube is moving in the direction to provide more professional content with its recent deal with Disney-ABC Television and ESPN. Online media content availability still has a long way to go but, with large corporate interests involved, the market only continue to develop and bandwidth will always be in demand.
Danny Kim
WBS Connect
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