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DVD Movies: 25 cents to stream 2006
Thursday, 11 September 2008 14:36

$0.25 To Stream a DVD Quality Movie, $0.80 for HD. Those low costs in 2006 inspired the web video boom now transforming TV.

As I write in 2008, a price war between the content delivery networks has dropped the cost closer to 10 cents an SD movie and 30 cents a quality HD movie. Moore's Law will keep bringing this down, just as it has lowered the cost to the cable and telephone companies for the last part of the trip. In a few years, the cost of delivering video over the net will be insignificant.The only major difference since this 2006 article is prices are much further down. 

Video on the net is exploding because Moore’s Law has brought the cost down enough to make it practical. Streaming media died with the dot-com bust around 2001 because servers, bandwidth, et al. 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.

 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.

 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 on advertising alone.

Google’s with their it’s own backbone and servers and incredible volume, can keep costs to one quarter to one half these figures. So how does a small producer distributing less than a thousand hours of video a day negotiate a video distribution deal? Expect to pay more and negotiate hard for exactly what you need. Service across North America probably adds 10% to 30%.guideline, and The specifics of the deal, with peaks, unders, overs and different service levels, make an enormous difference. Companies are secretive about their price lists  and nearly every large deal is negotiated off the list price 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 300K 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 academic Andrew Odlyzko notes, may be only a small fraction. Off-peak downloading and peer to peer BBC style is much cheaper.

Recently, a small part of a very large media company shared  the actual bids they received for downloading a movie of about 1 gig in the U.S. “The lowest bid was $0.17. Most were in the twenty to thirty cent range.” That confirms my guess that U.S. rates are higher than the Korean data I have. I’d guess European rates are even higher, except where peering is very efficient such as the London Internet Exchange LINX.