Much has been made of the 'long tail' of the internet - the fact that on the web, niche, amateur producers of content, like YouTube film makers or unsigned MySpace bands, can collectively account for a significant proportion of the industry.
But in reality this presents no danger to existing professional producers - as disposable incomes rise, people will want more and better entertainment, and professionals will comprise the 'quality' end of a much bigger industry. There will always be demand for the Sopranos, or Beyonce, or even TV gameshows, and it's funny how those unsigned bands don't stay unsigned for long!
The real revolution will occur in content aggregation and distribution. The fundamental principle will be 'universal access' - anyone in the world using any internet connection will be able to access every piece of content ever created, whenever they want to. At home, on your phone, at any PC; films, music, live sports, chat shows, home videos & photos, the whole lot, using just a credit card!
It's happening already - witness the flurry of deals that YouTube is signing with media companies, or the success of iTunes, or TV companies rushing to post shows on their websites.
From a business perspective, this means creative destruction. It will turn the industry upside down, destroying many business models and bringing riches to those quick to change. There will be three main effects: globalisation of aggregation, pay-by-advert, and the fall of the conglomerates.
First, globalisation. National media companies will find themselves in competition - if, sitting in the UK, I can log on to a US website to watch sitcoms, why should I bother with ITV? If I can watch the Champions League on a French website, why should I view it on Sky? The only reason we currently have excusive geographical deals (like the rights to show "Friends" in Germany) is because TV distribution has always been split geographically too. But on the internet, companies can set up as global distributors, in competition with national operators, and reap massive economies of scale (including better negotiating leverage with the producers). ITV will have to decide whether it can compete with HBO in providing US sitcoms, or whether it should stick to national content like the XFactor.
The second effect is that the producers will be paid directly per advert. On the internet, it is possible to target adverts personally to each individual watching a show. Google pays advertisers per click, but TV is less interactive and not likely to generate many 'clicks'. But it could pay per view of each advert, and this revenue could be divvied up with the producers. In this model, episodes of 'Friends' would be posted to YouTube, advertisers would bid on a per-viewer basis, and the revenue would be shared among the parties. No exclusive deals, no geographical boundaries, just an open online marketplace.
The third effect is the fall of the conglomerates. There will still be large media companies, but they won't cover the whole value chain (production, aggregation, distribution). People purchase music from iTunes, that was produced by a band working for EMI, and the distributor is their local broadband provider. In the same way, people will view films on YouTube, that were produced by Universal Studios, and the distributor is the broadband provider. The aggregator (like YouTube) will be interested in maximising coverage fairly for the consumer, which is a conflict of interest from promoting the output of a single producer. And broadband providers have tried and failed to push their own media - once you've got someone on the internet, you can't force them to visit your website. So the industry will split into producer (BBC / HBO), aggregator (YouTube / iTunes), and distributor (ISP / telco).
The benefits for the consumer will be huge - the goal of 'universal access' is now achievable.
But is the business world ready?
It seems incredible that this enormous industry is being shaken to its foundation by the web - a technology dreamt up by a physicist only 17 years ago (http://www.w3.org/History/1989/proposal.html). The participants are still grasping the scale and direction of change, and there is plenty of active resistance by the media companies. But the world is changing around them - led by Silicon Valley.