SpectatorBytes

While ownership of digital content in recent years has been en vogue thanks to the likes of iTunes and Amazon, the increasing ubiquity of full or “quasi-broadband” wireless access is likely to make streaming content more dominant over time.

The recent aggressive push by cable and wireless operators to provide fast Internet access to the Web is finally paying off. Similarly, the rapid growth in the number of hotspots has contributed to the sense (or reality?) that Internet access is all around us. In my view, the icing on the cake has been the deployment of Wi-Fi experiences in airplanes. Go-Go wireless now makes flying from New York to Los Angeles, San Francisco or Miami a unique experience.  So, it seems that  ever-ready access to the Web is all around (albeit with some connectivity hiccups which I expect to decline over the next few years if not sooner).

One of the implications of persistent access to the Web is the fact that we can now stream digital content instead of downloading it. This is relevant because streaming content tends to offer a more compelling value proposition for consumers relative to downloads. In many cases, streaming-based products are ad-supported products and thus free to consumers.  In this category, I include music services such as Pandora, CBS Radio/Last.Fm and MySpace Music, and video services such as Hulu, TV.com, and most TV network sites. In other cases, streaming-based products offer compelling premium experiences for which consumers are willing to pay for the bundle. This segment is much more nascent, so these products have yet to prove their mass appeal but show promise. In this category I would include music service such Spotify and Netflix’s video offering on the Web. These premium offerings are particularly compelling to high-consumption users who value access to “comprehensive” libraries of content, “all-you-can-eat” pricing models, and accessibility across multiple devices. As access to the Web increases around us, the number of streaming-based offerings will expand.

This emerging trend will not result in the death of pay-per-download or pay-per use models. This revenue model will likely endure as a segment of consumers will continue to demand “full control and ownership” over their digital assets. However, the increasing availability of connectivity is chipping away at “portability,” which is one of the key elements of the value proposition of “paid downloads.” As a result, we may see a change in the consumption mix relative to the current analog model where retail sales account for a larger portion of revenues in music and movies rather than rental/subscription-based businesses. In television, consumers already prefer a model that can be replicated on a streaming basis. All of this suggests that we may see consumers of digital content preferring streaming-based models rather than ownership-based ones on the Web.

Hence, content owners may want to start experimenting with models, both premium and free, that are streaming-based rather than continue to emphasize “retail ownership”-centric models. This will allow them to understand how to ultimately maximize the value of their content. My sense is that the behavior of media consumers on the Web will become increasingly much more segmented than it is in the analog world. Therefore, identifying how to extract the most value possible from different user segments will be critical to succeed long-term. The set of offerings to consumers will likely need to be more diverse than it is today. Music has certainly proven that now with the myriad of models that have emerged from online radio to limited streaming to streaming with no portability, etc.

Personally, I find myself buying less downloads from iTunes and streaming more from legal and free Websites. I have to confess that the main reason for this has to do with my coast-to-coast travel and ensuing fascination with Go Go wireless.

This does not mean that I will not pay for streaming services, on the contrary, I think that overtime I will pay for them if the product experience, bundle offering, and price point are right. Delivering a compelling premium streaming solution is not easy but I believe it will happen over the next few years. I simply think that these offerings may prove more compelling than paid downloads.