Flood of spending due for streaming video

Prosperity may be just around the corner for the badly battered streaming media industry, but not where most investors had placed their bets.

According to a new study by Jupiter Media Metrix, corporations will spend dramatically higher amounts on streaming video technology in the next four years. Spending will reach $2.8 billion in 2005, up from a relatively meager $140 million last year, the study predicts.

Consumer-oriented streaming of entertainment content is expected to continue to lag behind.

"This study is focused on the enterprise, and there is a whole other market out there called entertainment," said David Rader, senior analyst in Jupiter's custom research and consulting group. "The entertainment market isn't growing right now because they haven't developed successful business models for putting streaming media online."

Streaming audio and video were at the heart of many investors' highest hopes for the Internet, promising an explosive convergence between the Net and traditional broadcast media.

Instead, the technology produced a long list of failures, including CMGI-owned iCast, Time Warner's Entertaindom, Steven Spielberg- and Ron Howard-funded Pop.com, the Digital Entertainment Network, Pseudo Programs and Icebox.

Streaming media have played just as crucial a role in the high-tech downturn, deflating both expectations and investment portfolios as everyone from technology providers like RealNetworks to consumer-oriented Web sites have seen their prospects dim or even vanish altogether.

But the downturn has also affected companies catering to the same corporate market Jupiter expects to take off. Intel recently said it would shutter its streaming media distribution network geared toward corporate use.

Rader said Intel's misstep had more to do with timing than with the prospects of corporate streaming overall.

"Intel probably was too late to the party in terms of the content-distribution network part of this market," Rader said. "They had to compete with Akamai, Yahoo Broadcast, Activate and I-Beam, which provide Webcasting services. Intel didn't see that they were going to get enough market share for a decent return. But that's not to say that there isn't going to be growth there."

Jupiter's optimism for corporate streaming comes as companies find themselves legally obligated to disseminate more information to shareholders. The Securities and Exchange Commission recently started requiring broader disclosure of quarterly earnings calls, and Jupiter reports that the lion's share of external corporate streaming now comes from quarterly earnings Webcasts.

One advantage internal corporate streaming has over consumer-oriented streaming is that large businesses typically stream under generous bandwidth constraints. Consumer-oriented sites have to cater to a large audience of dial-up users.

The study, titled "Streaming Video Adoption in the Enterprise Market," reports that companies now spend the most streaming money on internal video announcements, accounting for $80 million dollars in 2001. But Jupiter predicts that product launches and marketing applications will take up the biggest slice of the streaming budget pie by 2005, accounting for $567 million.