Streaming video isn’t just some tech fad like 3D televisions … it’s a fundamental shift in the way people are consuming video content.
Amazon’s (AMZN) Amazon Prime alone has more than 14,000 movies and 2,000 TV shows available for instant streaming. Hulu Plus has enough content to stream continuously for seven years. Meanwhile, Netflix (NFLX) continues to add to its monstrous stable of content, inking a deal with Scholastic (SCHL) just last week. And that’s to say nothing of free streaming content available for network TV shows and on sites like Google’s (GOOG) YouTube.
So I recently talked to Bill Rinehart, the CEO of Unicorn Media — a company that specializes in monetizing streaming content — to discuss some of the trends he sees in the industry and how he expects things to evolve in the near-future.
His response? “I think we’re going to see a massive shift towards free, ad-supported content.”
Before we could get to where we are, content providers had to overcome major fears about streaming content. “For a long time, people were afraid that they’d get ripped off the way music did,” Rinehart said. It’s easy to imagine executives at Time Warner Cable (TWC) looking at what happened with Napster and being very skeptical of people who can get video content straight from the Internet for free.
What changed to push past that skepticism? Says Rinehart, “Streaming content became more secure, it became higher-quality, and it became mobile.” The move to mobile devices, in particular, made streaming attractive to advertisers because it allowed them to target users closely. Sure, networks know the broad demographics of people watching each TV show, but that’s nothing compared to what advertisers can learn about an individual smartphone user.
So who’s going to make the most of this new world of streaming? According to Rinehart, “It really comes down to a question of inventory. These trends (toward more streaming content) are good for big media, because they have scale.” Companies like Time Warner (TWX) and Viacom (VIAB) are going to make the most of that.
Viacom, for example, has years of programming from networks like MTV, Nickelodeon and Comedy Central to draw on. With the ability to target teens, kids or college students stuck to their smartphones, big media companies stand to benefit more than competitors with smaller content archives.
When I asked if any other companies stood to benefit from the trends, Rinehart pointed out “new media” companies like Machinima. The company shares its name with an entertainment subgenre. As a genre, machinima uses video games to create animated “performances,” and dubs voices to create a cinematic experience. The company features machinima videos in addition to a broader range of video game commentary and news.
Rinehart says companies like Machinima are a product of an age with free, ad-supported content, but have the potential to build themselves into profitable businesses. “You build that business on the back of YouTube, but it only makes sense for those guys to go direct (to consumers).” Which could eventually mean a wave of IPOs from new media companies in the wake of Facebook (FB), Zynga (ZNGA) and other companies that carved out places in the new, digital world.
Until then, it should pay off nicely for big media.
Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.