In 1998 it cost $270 to stream a 2 hour movie over the internet, today it costs $0.05 (see here for the analysis).
It’s interesting to think about how that plays out in the context of YouTube, YouTube is often called out as being a money pit for Google, with an estimated $470 million loss last year from Credit Suisse. However, much of that loss was bandwith costs which are falling exponentially (see above) and revenue is growing c. 20%.
Therefore, as with much of the internet today the business model is dynamic. Online video may not be economic today, but with falling costs and growing revenues, entering today and establishing market leadership may be a smart move to establish a credible position for when the economics of the industry turn.