Streaming Costs May Price Out OTT Services

by , Sep 24, 2012, 3:27 PM
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Oops.

Turns out streaming might be kind of pricey.

A recent report from IHS Screen Digest said the cost to deliver popular streaming services such as Netflix would become unreasonable if the services grow to mass usage levels. The costs incurred by a content delivery network to manage the traffic, and route the correct stream to the correct viewer at the correct time, could eventually price these services out of the market, the firm has said.

To serve the viewing needs of a mass-market audience, the content delivery network (CDN) costs for OTT streaming services would have to fall by a factor of as much as 25,000 just to reach parity with the most efficient broadcast technologies, the report said.

As a comparison, the cost for broadcast delivery of a program remains constant regardless of the number of viewers because of the nature of the delivery mechanism — one to many. However, the price of streaming delivery is tightly woven into the number of viewers because the technology is essentially “unicast.” That’s a business model that becomes less effective than broadcast at a mere 8,000 simultaneous views, the report said. 

The best option may be for over-the-top providers to consider building out their own infrastructure, IHS posited. Netflix has already begun to do this. Earlier this summer, the company said it had started to deliver some of the 1 billion hours that it streams each month through its own proprietary content delivery network, Open Connect, in addition to commercial content delivery networks. Netflix said that in a few years most of its video data will be delivered by Open Connect. YouTube also owns its own content delivery network.

So basically, online service providers may have to invest in their own pipes to move data.

Like cablers have done. Like satellite firms have done. Like telcos have done.

Eventually, the tolls kick in.

 

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