In the early days of streaming media online, bandwidth costs could be crushing. For the most part, each individual listener represented another strain on a small company's budget. By early 2002, long-distance bandwidth prices had fallen to as little as 10 percent to 15 percent of 2000 prices, according to research firm TeleGeography. Prices have stabilised in 2002, however, and the cost of buying network space between New York and Los Angeles has even climbed by more than 25 percent over the past few months, the research company said in a recent report. Some of bandwidth's burden has been lessened simply by oversupply. The telecommunication industry's frantic network construction in the late 1990s left the market with a bandwidth surplus, and prices have fallen dramatically as a result, often dropping by half or even more. The rise of content distribution networks such as Akamai Technologies and Speedera Networks has also dramatically lessened the load on companies with large bandwidth needs. These companies' services distribute streaming content through networks scattered around the world, easing the burden on a Webcaster's central servers and reducing the chances of network traffic jams snarling the demand for popular content. In the last several years, newer services have sprung up that expand on the idea of distributing content around the Web, making it cheaper still. Radio Free Virgin, one of the most popular free Webcasters, was one of the first large companies to take advantage of peer-to-peer Webcasting technology created by Blue Falcon Networks. That company's technology uses individual listeners' computers as relay points, so that one listener can draw a stream of music from another listener's PC, instead of from central servers. The technology doesn't wholly replace the content delivery networks. But it can replace up to 80 percent of the traffic that would ordinarily go through a company like Akamai or Speedera, for a substantially lower price. Blue Falcon chief executive Josh Goldman says companies can typically save between 50 percent and 60 percent on their bandwidth costs. Radio Free Virgin's Zalon says his results have varied with different audiences and content, but that the savings have been substantial. Smaller files, better quality
Webcasting companies have also benefited substantially from simple progress in the audio compression technologies. RealNetworks and Microsoft each have made substantial strides in providing the same quality sound in smaller packages. Microsoft's test version of Windows Media 9, released just last month, has reduced file sizes by 20 percent while keeping the same sound quality. RealNetworks' newest technology offers a 30 percent gain over its previous versions. Those smaller file sizes translate directly into lower costs, because the Webcasters are paying to send less bits over the networks. None of these technological advances guarantee a business. Few if any Webcasters will admit to having an unambiguously profitable business. Advertising revenue remains paltry, and subscription fees are still too new to be deemed a success story. Few of the companies break out actual expenses. A look at defunct NetRadio's balance sheets shows the scale of the industry's potential problems, however. In its last full reporting quarter, closing in September 2001, the company made about $58,000 in advertising revenue, while paying nearly $1.3m in operations costs, the bulk of which were for communications costs and technical personnel. Nevertheless, surviving companies say, the future is looking positive, for at least a small number of players. "We think this is going to be a very lucrative business for a few people to be in," Zalon said.
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