During a get together of IPTV industry techies last night the conversation turned to the quality of video delivery and a couple of people speculated that Netflix was losing money on just delivering its streams, before factoring in the cost of the content, storage and overheads.
It’s clear that the company has successfully bought market share, and has recently put up its subscription prices. But Disney this week announced that its forthcoming OTT service, featuring Pixar, Marvel and Stark Trek content will be significantly cheaper.
So, what does it cost Netflix to deliver content ?
Well, if you’re watching five hours a day, every day at a reasonable data rate, the cost to Netflix is under $1 (based on the wholesale CDN pricing published by Streaming Media).Of course, the vast majority of subscribers won’t use Netflix every day - it’s still very much an ‘on top’ service.
So, Netflix is not going to be pulled under by the cost of delivering its streams (and these costs continue to fall year on year). Storage costs are also likely to be tremendous, but spread over 100 million users globally is likely to negligible on a per user basis. The cost of content production, however, is another matter...