The Future of Internet Video Streaming

Over the past five years, online video streaming of movies and television shows has skyrocketed. Estimates now indicate that at least 20 percent of all Internet traffic comes from Netflix “Watch Instantly” streaming, an astonishing number considering it is only one website.

Netflix has been extremely successful streaming movies and TV shows, transforming traditional video stores, such as Blockbuster, into relics of the past. Its streaming service has been so prolific that the company has now switched its primary focus from mail-in DVDs to Watch Instantly.

Furthermore, there are plenty of online streaming competitors for Netflix, including Apple’s iTunes, Amazon’s Video On Demand, VUDU, Hulu, and even Google’s YouTube. Despite the success stories, many movie studios and television networks have been reluctant to give these online companies all of their content and access to the full breadth of their video libraries.

They also still believe DVDs provide the best profit model and have been hesitant to release online streaming movies at the same time as DVD releases. Even Hulu, which is owned by the TV networks, has not been given full access to all of the networks’ shows.

This reluctance on the part of studios and networks demonstrates that there is still a tremendous disconnect between the content providers and the consumers. While the statistics show that consumers are ready and willing to pay for online content or watch content online that contains ads, the studios and networks seem to believe they will lose traditional cable and TV ad revenue if this occurs.

A third and perhaps more sinister group of players in this game are the cable companies (now including phone companies that offer paid TV service). Comcast and AT&T have even instituted bandwidth caps that are clearly aimed at users who would like to ditch cable and watch all of their video content over the Internet. Those users threaten to undermine the cash cow that cable service has been, requiring consumers to pay for bulk packages of channels they may never watch.

Comcast has further complicated the issue by complaining to the FCC about Level 3, the content delivery network for Netflix and Apple, demanding a portion of its revenue. According to dedicated hosting provider 34SP.com, Level 3 believes Comcast is violating FCC regulations, which prevent an Internet Service Provider (ISP) from favoring certain Internet traffic.

These companies are not opposed to online streaming, but they would prefer that the content still comes from them, forcing users to pay cable subscription fees to watch TV shows and movies on the Internet.

As it currently stands, the issues has not caused an uproar with consumers, who are still able to watch a good number of movies and shows online. But the issue of the day is more about customers wanting access to the movies they like, many of which may or may not be available for online streaming.

Netflix may have found a way around this dilemma, and that is to offer their own original content. It recently signed a deal to bring its first original TV show, House of Cards, to its online streaming, bypassing TV networks completely. It is conceivable that more shows and even full-length movies could follow. Similarly, Google has set aside money to purchase the rights to original full-length content for YouTube.

While these bold moves are a definitive way to gain independence from cable companies and studios, they also put the online streaming companies in the line of fire, making them direct competitors with networks and studios. That could have one of two effects. It could persuade them to make their content more readily available to streaming companies, or it could push them to remove more of their content from the catalogs of perceived competitors.

The future of online Internet streaming will be one that will see more content and more competitors to Netflix and the other current streaming media companies. As the demand for Internet streaming video grows, the only real question is whether the cable companies, TV networks, and movie studios will embrace it or fight against it. For the sake of their PR and ultimately their stock values, they should aim for the former. If they insist on the latter, they will eventually butt heads with one group they do not want to fight: the consumers.