Streaming Media Is About to Become a Flood

You may want to get out of the hard-drive and home networked-storage businesses and fast — they’re on the way to buggy-whip status

With heartfelt apologies to John Donne, recent events compel me to ask not for whom the bell tolls, but to propose that it tolls, pretty loudly, for CD. And DVD. And HDD. Oh, and of course for Thee (this last a sop to all you literary traditionalists out there).

The news of the last couple of weeks suggests that a long-brewing shift in how we consume our movies, TV shows, music, books, magazines, newspapers and other media is about to speed up, a lot, thanks to several very big kicks in the keister.

What’s it all mean? To start, I’d sell off that optical-disc duping factory if I were you. And you may want to get out of the hard-drive and home networked-storage businesses, too. They’re on the way to buggy-whip status and fast.

All of a sudden, we’re moving a lot more quickly to a world where most of our media content will be sitting up in “the cloud,” on far-away online computers that send us a stream of whatever little slice of media we want, just when we need it, to play on whatever Internet-connected device we happen to be using at the time.

The resulting shifts likely will change the kinds of entertainment we consume (it will be a while before that shakes out, I think), but those shifts definitely are already beginning to change the way we consume them. For evidence of what’s happening, consider the following:

— Netflix CEO Reed Hastings told shareholders his company is now a streaming business that also delivers DVDs by mail, instead of the other way around, which is how it started. Netflix now accounts for 20 percent of Internet video streaming during prime-time hours, says an analysis by Canadian-based Sandvine.

— Apple has been a major force toward streaming and away from optical-disc drives and hard-disc drives. Recent announcements include:

o   The razor-thin new Air computer models have no optical- or hard-disc drives at all.  Even to re-install the system software, you would use an Apple-provided USB flash memory stick.

o   Apple was able to ditch the Air’s disc drives because it also announced the creation of an Apps store for its computers, similar to the hugely successful Apps store providing 300,000 small, cheap programs for its iPhone, iPod Touch and iPad devices. Now, Mac users wanting to add a program to their computer won’t need to go to a store to pick up a box full of optical discs.

o   Apple also revamped its iTV (née Apple TV) as a tiny box that can stream music and video off any Mac in the house, and pull down 99-cent TV shows from Fox and ABC as well as more expensive movies.  You won’t own, or download, any of the shows or movies; they’ll stream onto your TV from the cloud and then go away when you’re done.

o   When Apple bought (and killed) music-streaming site LaLa late last year, it took a big step toward creating a music-subscription service through iTunes. Such a service, now widely rumored as imminent, would be a huge shift in Apple’s music business model, which has been easily the world’s biggest seller of downloads. It’s already tripled the length of time people can listen to a sample of a song without buying.

o   Apple has built a billion-dollar, 500,000-sq.-ft. data center in North Carolina to handle all the bits it expects to push across the net to customers in coming years.

— Google’s long-awaited Google TV initiative is finally arriving in stand-alone set-top boxes from companies such as Logitech and built into televisions from Sony and others. Best Buy is even offering to set up Google TV for free in buyers’ homes. What is Google TV? It’s a set of services that connect users to a variety of big Internet brands, such as (Google-owned) YouTube, Napster, Twitter and more, to stream content onto TV screens. Yahoo! already has its own connected TV service, and is expanding it rapidly in Europe and Asia, where Google TV won’t be available for a while.

— Informa Research predicts that we’re going to be watching massive amounts of information and entertainment on our increasingly common smart phones. Mobile data use will jump from 85 megabytes to a whopping gigabyte a month over the next five years, Informa predicts. That’s likely to mostly be video.

— Research analysts DisplaySearch now predict that 40 million “connected TVs,” such as the Google TVs and other configurations from other consumer-electronics companies, will be sold this year. Again, these devices are mostly streaming content that you won’t own or keep, rather than downloading it for you to own.

— Redbox, the cut-rate DVD kiosk company, is about to announce a major streaming partnership. It’s a sensible next step; even at $1 to rent a DVD, it’s hard to see Redbox’s long-term growth opportunities in the physical delivery side.

— At the Digital Hollywood panel on Connected TVs that I moderated a couple of weeks ago, Cisco’s Josette Bonte quoted research showing a third of broadband consumers already are watching TV shows through the Internet, and 11 percent watch video on their mobile phone.

This big change in media distribution is not only coming, it’s kinda already here. Yes, most of us will still have computers that have big hard drives, and DVD/CD drives, to store and play lots of music and movies and stuff that we’ve downloaded.

Given the replacement cycles for these machines, and the habits we’ve built up, we’ll still have them for years to come. But the iOS App Store and Google’s equivalent Android Market (which just broke the 100,000 offerings level) are harbingers of where even mainstream computing is headed.

And don’t forget, Hollywood has been watching its DVD goldmine slowly tap out for years, while CD sales have been battered for a decade. Valve’s Steam and Microsoft’s Xbox Live Arcade services are useful new venues for distributing videogames online to millions of ardent players.

Comcast swears its declining subscriber counts aren’t caused by folks “cutting the cord” and getting their content through Netflix, Apple and other online sources. Even if they are cutting the cord, some argue cable companies will be laughing all the way to the bank, providing broadband instead of TV services over their wires.

But now we’re seeing significant changes in distribution through mainstream devices, for mainstream audiences, involving low-cost content that people won’t own, and won’t store on their own machines, but can access nearly anywhere, on a wide variety of devices, from cell phones to TVs to computers.

Of course, just because it’s cheaper to do all this stuff in the cloud, with centralized storage, doesn’t mean it’s free, or there aren’t going to be shakeout problems for lots of people and companies in the next few years.

Netflix alone will spend $2 billion shoving bits around after a key content deal expires in several months, analysts say.  At the same time, Netflix’s net revenue per subscriber is dropping as users convert to cheaper plans (streaming means never having to have 3 DVDs out at a time).

Some customers are understandably pretty grumpy about slow download times with Apple’s iTV. And Google TV has been hobbled by its complexity and the content that it can’t get from the broadcast networks and others that are banning their shows from the platform.

But all of this is evolving quickly. As it does, we won’t need many of the technological accoutrements of media consumption that we’ve used for the past couple of decades. They’re going away, and faster than many in Hollywood yet realize.

Oh, and here’s another thing we won’t need: Shelves to hold all the books, CDs, DVDs and other physical bits of media we’ve long collected. However will we be able to convey our cultural good taste at our next house party?