At least one media investment analyst was surprised earlier this month during Dish Network’s third-quarter earnings call, when Dish Chairman and CEO Charlie Ergen dismissed content delivery network costs for the IP-based Sling TV platform.
“In terms of CDN costs, this is—in my career, I've been buying bandwidth for 17 years or 18 years, and every year the cost of bandwidth drops and drops and drops significantly,” Ergen said. “And that's been the case also with CDN costs. So to the point where four years, five years ago, it would have been a material cost in the operation of a business like Sling, and today, it's not immaterial but it is not a cost that we worry about because those costs have continued to come down so significantly. And I think we get—because of the volume that we stream, we stream a—because our customers watch a lot of television, I think we get quite good pricing on CDN.
Indeed, according to analyst Dan Rayburn, five years ago, it would have cost around 3 to 4 cents to deliver one stream at 3 Mbps through the average CDN. Today, that cost is only around half a cent per stream, he said.
Deployment of a Virtual CDN can reduce costs by up to 61% through increased elasticity and an on-demand pricing model.
“Pricing has really dropped—dropped really more at volume,” Rayburn noted. “Charlie’s right in the sense whether your Viacom or ESPN or the NFL, content delivery cost is no longer the biggest problem you have in your ecosystem.”
In addition to the discounts streaming video operators are getting with the massive volume of bits their transmitting, efficiencies are also coming with factors like virtualization.
“The research showed that virtualization of the CDN can not only improve efficiencies and service agility, but also help create new revenue streams and improve customer retention,” noted Ann Hatchell, head of network marketing at Amdocs.