They'll get funding, but the models will change and adapt. Ie. Spotify and Netflix are early carnations of what what could come.
Yet both of these companies you mention are reviled by the content producers. What the content producers want is their own walled garden. You want their content, you come to their app or website.
It's pathetic. I would pay a reasonable fee for TV and movies (and often do, btw). There are some movies you can't get in any format but DVD. Ghostbusters, for example. The owners of that particular title refuse to let it be licensed for streaming of any kind. So, I downloaded it (in a completely safe way, of course).
Much has been written about the licensing nightmare for content, though. It's going to be the undoing of Netflix, unless they can get enough of their own content to keep them alive. I'm not sure they can. Whenever I look, it's very hard to find stuff that I want to watch. All the newly added stuff is really 2nd and 3rd tier stuff.
And that is, exactly, what they cannot have. There are plenty of ways to make money from digital content, but there is no way to control it. All you do is teach people how to find the stuff illegally, such as on the pirate bay, on youtube, on grooveshark or on watch series.
Or, perhaps even more dangerous, find some other content - that was what I did when I couldn't find some particular bands on Spotify. Turned out the bands I found instead were better.
I have a decently-sized collection of DVDs. But my indexing and search system sucks, in that it heavily relies on physical discs being replaced in exactly the right spot, which is often hard to reach. Now, a decent HTPC with networked storage would solve that problem handily. But I would still have to read the video files off all the discs and put them into a media catalog.
Netflix has already done all that work for the videos they are licensed to distribute. So if I know that a movie I want to watch is buried behind two rows of DVD cases, certainly no longer in the genre+alphabetical order that I try in vain to enforce, and possibly not even in its case, I'll definitely check to see if it's on Netflix before I get off the couch.
And if I know I don't own the DVD, and it's not on Netflix, I'm certainly not going to go check a dozen walled gardens that will probably still want me to pay $2.99 to view each TV episode one time, or $4.99 to see one movie one time, and maybe they also want me to log in using credentials from a cable or satellite provider.
It only takes a few instances of being annoyed and frustrated like that, and a few instances of finding exactly what you desire from friendly pirates, before skipping the former. I have already demonstrated my willingness to pay for content that I like. But that willingness has limits.
I bought the Ghostbusters DVD, because I knew that I'd want to see it again, at multiple times of my choosing in the future. And I also know how to use certain programs to take the video off the physical medium and transcode it to a file viewable on my kids' Android tablets. That's still not as convenient as Netflix, because I have to do that extra work, and there's still no central entertainment nexus, where I can search in just one place for the video I want to watch.
That's the thing that will kill the walled gardens. People don't want to have to flip through 57 channels and still not find anything they want to watch. They want to open up the program guide, maybe search, maybe look at recommendations and reviews, and then press play. If consuming your entertainment becomes too much like work, your audience shrinks. As long as Netflix has the infrastructure to make consuming entertainment convenient it doesn't need to carry exactly the content people want. All they need is a reasonable alternative.
For example, if people search for "Indiana Jones" on Netflix, they might see a "not found" result. Instead, Netflix could have said "not found, but..." and made suggestions.
Features like "Indiana Jones and the Raiders of the Lost Ark": "The Librarian and the Spear of Destiny", "Allan Quatermain and the Kingdom of Skulls", "The Da Vinci Code", "The Mummy", (>> more >>) ...
Features starring Harrison Ford: "Star Wars", "The Frisco Kid", "Witness", "Cowboys and Aliens", (>> more >>) ...
Features directed by Steven Spielberg: etc ...
Features set between 1917 and 1945: etc ...
Something like that would kick those distributors who refused to license content at a reasonable price right in the wallet, because Netflix would be forcing them into direct competition with all the other features that include the same old tropes and plots. Likewise, anyone who could seize the initiative from Netflix as the first place that people check for the features they want to watch could kill them, too.
All it would take is a better search engine, with support for alternative recommendations.
Lets not forget that they started out with video rental. I think video (and music[1]) rental already demonstrated that "pay2own" is overpriced, and has been since the early days. I mean, you could run a store (rent space, pay employees) and afford to pay "enough" in license fees for content that people paid, what, 25% of the price of purchasing a copy. Sure, I could lend a VHS I'd bought to a friend -- but does anyone really think that lending led to less profit, rather than more? (See: libraries aren't killing the publishing industry).
> with the assurance of consistent quality and convenience.
What? The files I've downloaded - they're consistent and convenient. They play back off line. They play back on the OS I use. I'll have them in 20 years, no matter what kind of licence bullshit happens, or if Netflix goes bankrupt or not. I do accept that it might be convenient to a lot of people -- but it's not convenient for me.
Spotify is a little better (off-line support) -- but you only get access as long as you pay rent. Their Linux support has been spotty (no pun intended). And while they are better now, I grew tired of feeling like I was playing the lottery every time I opened a playlist: How many songs would be left? How many would have disappeared due to distribution rights?
I used to buy CDs, buy some LPs. I buy some music direct from artists (eg: bandcamp etc). But I refuse to buy stuff that's "protected" with DRM[2]. I've grown up borrowing books, comics, music from people I love and respect. I want to lend out the stuff I've found that's good. I want to be able to do that in 10, 20, 30, 40 years. That doesn't work if the only copy of a song is on youtube, and I don't download it.
[1] In Japan, along with recordable mini-disks (with their one-digital-copy-drm-limit), music rentals on CDs was pretty big in the late 90s.
[2] I do love to go to the cinema. I think it's sad that the industry has pretty much doubled the price of projection equipment, just to enable DRM. But at least they've cut back on the cost of making prints, and the cost of distribution.
While your general point remains valid, Ghostbusters was a poor example. It was available for streaming on Netflix earlier this year. (http://www.ibtimes.com/netflix-movies-disappearing-2014-over...)
Minor nitpick: "carnation" is a flower; I think you mean "incarnation".