The Streaming Revolution

(Bloomberg) -- Get on a train or airplane these days and you’re likely to be surrounded by people watching videos or listening to music on their phones, tapping into vast digital libraries on the internet. It’s a sight we already take for granted, but the streaming revolution that’s made it possible is only just beginning. For consumers, the technologies that allow media to unspool in a steady, continuous flow of data over high-speed connections have provided a leap in convenience and choices. For traditional distributors of entertainment, though, it’s a challenge.

The Situation

Streaming is rapidly changing how media is bought, how it’s consumed, who profits from it and even how much is made. Thanks in part to streaming, the battered recorded-music industry has posted three years of growth, even as sales of physical formats like CDs have fallen. Revenue from music streaming has skyrocketed in recent years to $4.6 billion globally in 2016. Popular services include Pandora, Apple Music and Spotify, which aims to sell shares in an initial public offering in 2018 and has been valued at as much as $21 billion. Video on demand, meanwhile, was a $45 billion business in 2014, by one estimate. In a 2015 Nielsen survey conducted in 61 countries, about two-thirds of respondents said they streamed video. Netflix has signed up more than 115 million customers worldwide for its on-demand service, while YouTube is the most popular video destination in the world, reaching more than 1 billion people a month. Their success has inspired newspapers, phone companies and social networks to offer streaming video. Original programs offered by streamers almost doubled the number of scripted TV shows that aired in the U.S. from 2009 to 2015, to 417, prompting FX Networks CEO John Landgraf to predict that the country had reached “peak TV.” But the number grew further, to 487 in 2017.

 

The Streaming Revolution

The Background

On-demand services took off in the mid-2000s. Streaming frees audiences from the higher costs of owning discs and paying for subscription TV via cable, satellite or internet. It liberates TV viewers from network schedules, giving rise to binge watching — viewing multiple episodes of a show in a single sitting, one of the most popular aspects of video streaming. Streaming’s success has put pressure on sales of DVDs, subscription TV, CDs and music downloads. In doing so, it is the latest media format to threaten what came before it. The CD, which appeared in the 1980s, overtook both albums and cassette tapes as the preferred format within a decade in the U.S., the biggest music market. Then music downloads began to crush CD sales (and those of recordings in general) in the 2000s as consumers used the internet to capture mostly single songs instead of full albums to listen to on portable players like Apple’s iPod. Television broadcasters were challenged by cable networks, which in turn have been rivaled by satellite TV. Before being challenged by streaming, the DVD player, introduced in the 1990s, had made the video-cassette recorder obsolete.

The Argument 

Record labels, songwriters and technology companies are fighting over how to share the riches from the streaming windfall — and ensure it isn’t short-lived. Music companies say they aren’t getting paid enough and are pushing for legislation to increase songwriters’ share of revenue. They are also trying to force purveyors of free music (like YouTube) to convert more users into paying subscribers. Streaming services say they risk going bankrupt if they can’t reduce their payments to rights holders. Spotify already loses money, as does Pandora. In the video realm, meanwhile, there’s a debate over how seriously streaming threatens pay television. Certainly it has encouraged cord-cutting — the cancellation of subscription TV, especially in the U.S. Most consumers regard on-demand services as a supplement to rather than a replacement for subscription TV, according to the Nielsen survey. In that case, the more imminent threat is cord-shaving, choosing a slimmer cable package. The long term is cloudier for subscription TV, given that many young people are so-called cord-nevers.

The Reference Shelf

  • A New York Times Magazine article asks whether Netflix can be both huge and great.
  • Vulture examines the ramifications of so much TV.
  • Media critic James Poniewozik argues that streaming influences how TV programs are made.
  • Wired examines the power of the Spotify playlist.

Kate Garber contributed to this article.
An earlier version of this story corrected a typo in the date for music revenue streaming.

First published Oct.

To contact the writer of this QuickTake: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net.

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