Can video streaming become the next killer app?

But as companies look to turn this nifty gadget into a money-making business opportunity, they face a wide array of problems, some of which might not be solved any time soon. That was the tone of an opening discussion at Streaming Media '98, a San Francisco conference that began Monday.

Providing some fodder for argument was a new survey from Forrester Research, which found that companies providing streaming media don't face a single major obstacle to expanding their media offerings. Instead, several equally important limitations have cropped up.

Low bandwidth a major issue
Among the 42 companies Forrester surveyed, 17 percent said user bandwidth was the biggest limitation they face. The need for a user plug-in was a stumbling block for 12 percent of the companies, and a lack of resourceses hampered another 12 percent. The remainder of the companies were divided among other problems.

"What we're seeing here is, there isn't one big roadblock keeping streaming media from moving forward," said Forrester analyst Seema Williams. "There's no silver bullet, no one big issue we can aim for and make it disappear."

One potential issue is that there is no established way to make money with streaming media. Nearly 80 percent of the companies offering streaming video or audio sell advertising to help pay for their media costs, according to Forrester. But so far, only the sex-video market is making any real money.

Adult video a $2.2 billion industry
"In adult entertainment, we found some pretty healthy numbers -- about $2.2 billion in revenues," Williams said. "But whether that will work outside of the adult world remains to be seen."

John Ryan, principal of Ryan Hankin Kent, estimated that the non-adult market for streaming media is bringing in somewhere in the low six-figures in annual revenues.

Most of the panel's analysts agreed that more companies will begin to require subscriptions for access to popular or hard-to-find media content. Currently, only seven percent do, according to Forrester figures.

"Video can be a premium service," said Ryan. "That's what will make people go to CBS SportsLine or Bloomberg and pay."

High-speed Internet access may not be a silver bullet, but it will be a major driver of streaming media's proliferation, according to Gary Schultz, principal analyst of Multimedia Research Group. "The cable companies are really pushing to go digital, and there's a lot of investment going on there," Schultz said. He also sees improvements in advertising insertions and the growth of subscription models bringing in more media revenues.

Streaming servers expected to double
Because of these factors, Schultz said the present quarter-million streaming-media Web servers will double in the next year.

Don't expect to see Internet-based interactive TV any time soon, though.

Analyst Ryan said that partly because of the legal flap over the Internet audio MP3 format, the movie industry has "circled the wagons" to protect against any similar format for distributing video.

MP3 is a high-quality audio format used for trading songs over the Net, often illegally. "We're not particularly bullish about broad, long-form entertainment [such as movies] hitting the Web any time soon," Ryan said.