CDN Pricing at Penny A Gig

Google as CDNContent Delivery Network (CDN) industry watchers recently reported seeing pricing of $.01 per GB of data transferred.  What does this mean? Let’s translate into plain language.  A DVD holds about 4GB (Gigabytes) of data. So you can imagine a DVD with a very long movie, all kinds of extra scenes and goodies, would be require about  4GB of data.

To download this DVD via the internet at $.01/GB, the cost will be $.04 for the DVD. So for a cost of $10,000 per month, a content provider can deliver 250,000 DVDs to consumers.

To get a sense of the media industry scale of this, let’s consider a recent movie: Sherlock Holmes, that grossed $62,390,000 in its first week. Assuming a ticket price of $7.50, this means 8,318,666 people saw the film in the first week.

If that entire first week  gross was spent on delivery of a fully loaded DVD of Sherlock Holmes, that first week could see delivery of 1,559,750,000 DVDs.  Be careful – I’m not comparing revenue to cost here. I’m simply giving a sense of scale of what $.01/GB means to the industry. I can remember when, while working at leading CDN provider Speedera Networks, we were afraid that pricing would fall to $1.00/GB. This was in about 2002.

One penny per GB may be the true tipping point for allowing mass availability of content via the internet.

But beware – the bandwidth cost is only a small part of total cost required for content delivery. Operations, testing, content management, web performance services, application acceleration, and many other costs come into play with large scale content delivery.
And $.01/GB will not be available to everyone. I’m sure many of the small content providers are salivating over this number – but for now you’ll still have to deal with the higher prices for lower commits. For now… in the end, today’s $.10 at quantity is tomorrow’s $.01 at quantity but we still have to wade through today. But smaller content providers have many great free options like YouTube and MetaCafe to tide them over till $.01 is available to all.

So before you craft your business plan for the new internet Goldfish Romance channel, make sure you do your research to understand the full spectrum of costs involved.

Steve Lerner is a Practice Leader at RampRate and works with media companies on digital distribution technology sourcing and operations analysis.

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