What It Costs Netflix to Deliver Streaming Titles

Dan Rayburn at the BusinessofVideo has put together an interesting analysis of what it costs Netflix to deliver a streaming movie.

Based on the three cents per GB assumption, that means it would cost Netflix about $0.06 to deliver one SD movie and $0.09 to deliver one HD movie. Those numbers would be about 25% lower if the length of the movie were ninety minutes instead of two hours. It would also be a little lower or higher depending on the exact bitrate since some movies are streamed higher and some lower and Netflix only has about 400 movies available in HD. Taking all that into consideration the average cost to Netflix to stream to the XBOX 360 is about five cents per movie. Streaming to the PC is a lot cheaper, about half that cost, as the bitrates are much lower.

Based on those numbers, their streaming offering looks like it would save them tons of money and make them a lot more profitable since Netflix spends about 78 cents out and back for standard pre-sort first class mailing of their DVDs. But the one problem is that these streaming costs do not yet include the licensing costs from the content owners. It's the costs associated with licensing the content that really makes or breaks their streaming service, not the cost of bandwidth.

Comments

[wayno]

Until Netflix and other dis-continue it's practice of dis-enfranchising the deaf/hard-of-hearing community by stripping captioning information, we really don't care how much it costs.

We can't utilise it.

Wayno

[Baff]

"Based on those numbers, their streaming offering looks like it would save them tons of money"

That makes the bizarre assumption that when people download movies, they don't watch the dvds mailed to them.

[Brian]

Wow... that is probably the worst analysis I have ever seen. He is basically making up a number and using it to say that online is less expensive. He is probably right, but not by as much as he says.

Not including licensing, he is discounting the cost of multiple data centers across the US (servers, cooling, buildings, software licenses, redundancy), the added IT staff, added support requests, etc. It is basically like saying that driving your car and riding the bus are the same because you only look at gas costs.

Terrible.

[Gob]

@Baff - My guess would be that the average customer has a limited amount of time per week to watch movies, so there probably is something to that assumption. In any case, I think the analysis is comparing the costs of streaming a movie vs. sending a disc, not claiming Netflix is currently saving money by offering streaming.

@Brian - I think the $.03/GB cost is based on paying someone else's data center to deliver the content.

[Craig]

Why not a bittorent type protocol for netflix watch instantly? Say you sign up for the program, and offer to allocate 5 GB of your hard drive space to portions of the last 5-10 watched instantly movies. When someone else begins watching one of those movies, chunks of the data are uploaded from your computer, and many other computers and is combined to create a streaming movie. This lessens the load from Netflix central servers, and you could even utilization location based awareness to give preference to people located closer to you.

[Jake]

@Craig - Bittorrent wouldn't work for streaming. What happens if you're watching a movie and halfway through the person providing the chunk you're currently watching decides to turn off his machine? Bittorrent is great for grabbing an entire movie and THEN watching it, but it's not suitable for an instant-gratification experience.

[air max 90]

Never too old to learn.*