Dan Rayburn of StreamingMedia has updated his report on Netflix streaming costs, and it appears that the company's direct costs fell by 50 percent since the end of 2009. In all, the company will pay just $50 million in 2011 to CDNs for delivery of the video.
As 2009 came to a close, Netflix was paying around 5 cents for every streamed movie, but that cost has fallen to 2.5 cents. The post explains:
While most video contracts with third party CDNs are typically priced on per GB delivered model, Netflix and other large content distributors usually pay the CDNs on a per Mbps sustained model. They pay not for the total number of bits they transfer each month, but rather the total amount of bandwidth they peak at each month, a pricing model also referred to in the industry as 95/5. This means that a customer can burst above their committed rate of Mbps less than 5% of the time with no penalty, but once they go over that, they pay for overages.
The average Netflix user streams at 2Mbps, in 480p or 720p quality.
Julie Berry Lori Heuring Nicole Scherzinger Jill Arrington Tami Donaldson
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