E-Media Tidbits

Here's a new term for your conversations about the future of media: "Internet bypass." I first came across it in a fascinating report, "Pipe Dreams: Media's Exploding Capacity," prepared for investors by Tom Wolzien of Bernstein Research (wolzientr@bernstein.com). His report focuses on the economics of video distribution, and his conclusion is a little startling: We are nearing the day when Internet-delivered video can be delivered at prices -- and video quality -- competitive with cable. Wolzien finds that a 300Kbps video stream (the quality of MLB.com's Web video service for baseball games) already can be delivered as economically to millions of viewers as cable services. Of course, the image quality is worse than "regular" TV and much worse than digital cable -- or HDTV. But bandwidth costs are dropping 40 percent per year, thanks to intense competition, and compression technologies are improving at 15 percent per year, Wolzien says. If those trends continue, he finds, (analog) broadcast-quality video can be delivered via the Internet for prices competitive to cable within five years.

I'd assumed that because each additional viewer of Internet-delivered video requires more bandwidth and server capacity (unlike broadcast/cable delivery, which incurs no incremental cost for an additional viewer), cable companies were likely to retain a stranglehold on video distribution to the home. But "Pipe Dreams" suggests that in a world of TiVos and Internet-connected TVs, it will be economically and technologically feasible for content providers to go around cable companies, direct to consumers. Which means, among other things, that companies (such as most newspapers) whose content is limited to text and still pictures should be developing their multimedia capabilities sooner rather than later.