Re-Writing Streaming Video Economics


The majority of Americans – make that the vast majority of American Millennials – stream video. Every day, in every way. From Netflix to Hulu, YouTube to Twitch, CBS to HBO, there is no TV experience that isn’t being accessed on a mobile phone, a tablet, a PC, or some kind of streaming device attached to a genuine, honest-to-goodness television.

The trouble is, we aren’t really paying for it: just 9% of a household’s video budget goes to streaming services, while the rest goes to all the usual suspects: cable companies, satellite providers, DVD distributors, and so forth. This can make breaking a profit a tricky proposition – Netflix just started to churn out ‘material profits’, Hlu is suspected to be losing money, and Amazon is unlikely ever to break out profitability of its Prime video service from the other benefits of the program.

The challenge is there are really only so many levers that can be pulled to make streaming video profitable:

  1. Charge (more) for subscriptions: except that when the cost goes up, adoption goes down, and decelerating growth is anathema to a start-up business
  2. Spend less on (licensing/making/acquiring) content: except that if the content quality misses, audience growth will follow it
  3. Spend less on delivering the content: except that if the quality goes down, audiences will depart, never to be seen again

One and two are tricky, and rely upon the subjective skills of pricing and content acquisition experts. Number three though…maybe there’s something there that is available to everyone.

And indeed, there is. Most video traffic these days travels across Content Delivery Networks (CDNs), who do yeoman work caching popular traffic around the globe, and doing much of the heavy lifting in working out the quickest way to get content from publisher to consumer. Over the years, these vital members of the infrastructure have gradually improved and refined their craft, to the point where they about as reliable as they can be.

That said, no Ops team ever likes to have a single point of failure, which is why almost all large-scale internet outfits contract with at least two – if not more – CDNs. And that’s where the opportunity arises: it’s almost a guarantee that with two contracts, there will be differences in pricing for particular circumstances. Perhaps there is a pre-commit with one, or a time-of-day discount on the other; perhaps they simply offer different per-Gb pricing in return for varying feature sets.

With Openmix, you can actually build an algorithm that doesn’t just eliminate outages; and doesn’t just ensure consistent quality; you can make decisions on where to send the traffic based on financial parameters, once you ensure that the quality isn’t going to drop.

All of a sudden you have access to pull one of the three levers – without triggering the nasty side effects that make each one a mixed blessing. You can reduce your cost, without putting your quality at risk – it’s a win/win.

We’d love to show you more about this, so if you’re at NAB this week, do stop by.