The Streaming Revolution

By | Updated Oct 23, 2016 11:35 PM UTC

Get on a train or airplane these days and you're likely to be surrounded by people watching movies, TV shows or 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. For some who make music or TV shows, it's a way to expand audiences. Others consider it a rip-off scheme.

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 saw significant revenue growth in 2015 for the first time in almost two decades, even as sales of physical formats like CDs fell. Revenue from music streaming has multiplied fourfold in five years to $2.9 billion globally. Popular services include Pandora, Apple Music and Spotify, which aims to sell shares in an initial public offering in 2017 and has been valued at more than $8 billion. Revenue from video on demand, meanwhile, rose almost 9 percent in 2015 to $49 billion, by one estimate. In a 2015 Nielsen survey conducted in 61 countries, about two-thirds of respondents said they streamed video. Netflix, Amazon and Hulu are among the major providers. 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. Live video streaming from users of Facebook and Twitter is the most recent innovation to challenge the way news is received.

Source: Recording Industry Association of America

The Background

On-demand services took off in the mid- and late-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 

Music streaming services pay record companies a fraction of a cent per play for songs and say they spend heavily on royalties. Yet some musicians, notably Taylor Swift, complain that they are insufficiently compensated. Some industry analysts say artists should renegotiate their cut with the record companies instead of lambasting streamers. Streaming can make it easier for new artists to gain a following, by eliminating the need to fund album distribution. 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 channel package. The long term is cloudier for subscription TV, given that many young people are so-called cord-nevers.

The Reference Shelf

  • The New Yorker asks whether Spotify will help or hurt the music business.
  • The New York Times Magazine looks at the world of Netflix.
  • Vulture examines the ramifications of too much TV.
  • Media critic James Poniewozik argues that streaming influences how TV programs are made.
  • Bloomberg Businessweek explains how Viacom failed to anticipate the streaming revolution and has suffered for it

Kate Garber contributed to this article.

First published Oct. 23, 2016

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

To contact the editor responsible for this QuickTake:
Lisa Beyer at lbeyer3@bloomberg.net