The cost of delivery of over-the-top services will force OTT players to build or acquire their own delivery infrastructure as they scale up to accommodate large numbers of users, which could in turn eliminate their advantages over existing pay TV operators, according to a survey by IHS Screen Digest.
According to IHS, the cost per hour of providing standard definition OTT services over a CDN currently exceeds the cost +of satellite distribution when the audience is greater than 8,000. At this point, the researchers say, the cost of delivering over a CDN is €29.58 compared with the fixed cost of €28.62 for satellite. At 10,000 users the CDN cost rises to €36.98, IHS found.
If OTT providers build their own infrastructure to overcome the limitations of one-to-one delivery, IHS argues that the price advantage of OTT over existing pay TV offerings is likely to disappear, citing the example of Google Fiber, the internet giant’s fibre-based network in Kansas City.
“To serve the viewing needs of a mass-market audience, the content delivery network costs for OTT streaming services would have to fall by a factor of as much as 25,000 just to reach parity with the most efficient broadcast technologies,” said Guy Bisson, research director for television at IHS. “At current prices, it would cost €1.2 billion in CDN costs alone for OTT unicast streaming to serve the population of the UK with the kind of high-definition viewing they are accustomed to. For the same price, 5,000 linear channels could be broadcast, nearly 10 times the number actually serving the UK today. When OTT unicast streaming services like Netflix are scaled up to suit the mass-audience television market, their advantages in cost, flexibility and technology turn into disadvantages.”
IHS’s findings can be contrasted with a similar exercise by interactive TV solutions provider Nagra, which found that broadcasters would soon reach a tipping point when CDN delivery would be cheaper than satellite.
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