DSL Prime: $0.25 to Stream a DVD Quality Movie

Telcos are trying to solve a problem that is a crisis only for them, not their customers, and are ignoring the crisis that streaming content will cause on their oversubscribed infrastructure.

by Dave Burstein of DSL Prime and Future of TV [September 13, 2006]

$0.25 to Stream a DVD Quality Movie
$0.80 for HD, $.05 for iPod or AOL TV shows
Video on the net is exploding because Moore's Law has brought the costs down enough to make it practical. Streaming media died with the dot-com bust around 2001 because servers, bandwidth, etc. cost $0.50 to $1.00 per hour for a full screen video, and almost nothing justified that cost. Delivering the video now costs a tenth of that, so we're moving into:

the third internet—fast enough to watch.

Broadcast over the air video costs a few pennies per hour to distribute, considering the costs of getting it to stations, what they charge, etc. That's a proven ad supported model, allowing most TV to be free. Some niches in video on the net are profitable with today's costs, while others will need a few more years of Moore's Law (and no provider toll booths) to make sense. ABC streamed Desperate Housewives and Lost at partial screen sizes; if they had to pay for full screen data rates, the costs today would probably have been too high to make a profit just on advertising.

These estimates are from Korea, a small country with relatively few networks but a highly competitive content distribution industry. The rates are for fairly large customers, with most of the video going in a limited geographical area.

The UK should be similar when competition heats up, because of the economy provided by exchanging traffic at LINX, a very efficient system that connects all the UK ISPs.

Google's cost, with their own backbone and servers at incredible volume, are one quarter to one half these figures, I'd guess. Someone distributing less than a thousand hours of video a day would probably pay much more, although I don't have enough data.

Service across North America probably adds 10 percent to 30 percent, but again I don't have hard data. So use these figures only as a very general guideline, and negotiate hard for exactly what you need. The specifics of the deal, with peaks, unders, overs, and different service levels, make an enormous difference. No company shares their price lists with a reporter, and nearly every large deal is negotiated off the price list anyway.

For providing managed servers and internet bandwidth, several content delivery networks are bidding $10,000 to $12,000 per continuous gigabit per month. That's enough for 700 1.5 megabit streams, almost DVD quality if pre-encoded in the latest MPEG-4, Flash, or Windows Media. Amazon's choice of 2.5 megabit encoding may be raising the bar. It's also enough for over 3,000 300 Kbps streams, appropriate for iPods or the quarter screen video AOL and ABC are distributing supported by ads.

While network usage is usually quoted as a continuous flow, video distributors prefer to know how much it will cost for each movie or hour of TV programming they can sell. To make the translation, you have to make some assumptions about traffic distribution across the day and month. These calculations are based on six hours of use a day at half the peak bandwidth purchased, an arbitrary figure that I think slightly overestimates the actual costs. The CDNs are starting to give quotes for HD delivery as well.

As they say about cars, your mileage may vary. Let me repeat: these numbers have been researched, but the actual costs for any given network will be different.

Don't forget: Streaming, as Odlyzko notes, may be only a small fraction. Off-peak downloading and peer to peer BBC style is much cheaper. Looking forward to meeting Bram Cohen of Bit Torrent at VON.

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

"The power of the printing press belongs solely to those who own the presses"
—A.J. Leibling

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