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Netflix CEO Reed Hastings shed a little light on the actual costs of streaming, speaking at the NewTeeVee Live conference today in San Francisco, and put to lie the idea that ISPs are suffering from higher costs to deliver video to end users. When asked about […]

Reed HastingsNetflix CEO Reed Hastings shed a little light on the actual costs of streaming, speaking at the NewTeeVee Live conference today in San Francisco, and put to lie the idea that ISPs are suffering from higher costs to deliver video to end users. When asked about his bandwidth costs and the price of delivering steaming media, he didn’t disclose the costs, but said they were falling thanks to the effect of Moore’s law. He pointed out that Amazon charges about 5 cents a gigabyte for bandwidth — or about a nickel a movie — as proof of the low costs.

“What we’ve seen is bandwidth costs falling exponentially in the last five years. What’s funding the whole system is the users paying $40 to $60 a month,” Hastings said. He was referring to the monthly subscription fees charged by broadband service providers.

Hastings also pointed out that Netflix may compete with cable and IPTV video providers on the video side, but that services like his streaming video offering are driving demand for cable’s high-speed Internet products. Calling it a halo effect, and comparing it to Apple’s ability to sell more Macs after folks snapped up iPods, Hastings said the primary reason for anyone to subscribe to 20Mbps service is to watch video, not send emails faster. This prompted Om to ask, “So, is Netflix the iPod of broadband?”

  1. [...] November 2009 Netflix is the ipod of broadband AP CEO to staff: layoffs will continue Palm Pre sales in substantial decline analyst That USD 1.25 [...]

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  2. Netflix is the iTunes of Broadband. While there are several boxes out there that do Netflix, a box with the halo effect of iPod is yet to hit the shelves. And let’s not forget that while iPod came with the halo effect, it was iTunes that made Apple sing all the way to the bank.

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    1. Yes you are right. but well the analogy is *almost* similar. I think netflix is a demand driver for the broadband at least in the near term. one of the reasons why i stream my movies and don’t rent DVDs anymore.

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      1. Om,
        Excellent question !!!! ,
        No wonder I visit Giga
        Yesterday I used the PS3 streaming disk for the first time ,
        I wouldn’t watch any site for streaming anymore.

        The interface is simple yet elegant.
        The quality is great.
        Its built to last and have provisions to improvise.
        Best of all , it is idiot proof ( The reason why iPod and iPhones were a hit).

        Manage your ques from the netflix website.
        Put the DVD in PS3 , the rest is taken care.

        It works.
        I am sure Netflix will start live streaming of mainstream TV channels soon.

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  3. I’d like to see Netflix anywhere else in the world beyond the US before we start calling it the iPod of anything. The universal availablility and appeal is not yet proven. The iPod was a fast-follower on the MP3 market, Netflix doesn’t pick up on the current MKVs so misses out on the international downloadable “market” driven by piracy. Apple managed to pickup the value of an MP3 player that supported pirated MP3s and then transition people over to iTunes for legal purchasing – I don’t know if I see that with Netflix. Great start (for Americans), but I’ll believe it when I see it working in France and Korea.

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  4. [...] Speaking at the NewTeeVee Live conference, Netflix’s Reed Hastings said that the company’s expenses in delivering streaming media were falling thanks to the effect of Moore’s law. “What’s funding the whole system,” he said, is “users paying $40 to $60 a month” for broadband service. By GigaOm [...]

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  5. [...] in 2010. But the cost of streaming a video title is much cheaper than shipping by mail — about 5 cents a gig for bandwidth — or about a nickel per movie — according to [...]

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  6. [...] business costs the company $600-$700 million annually, ‘Watch Instantly’ only costs about a nickel per movie. Which is quite a [...]

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  7. [...] per title for the company to stream a single film online. On the other hand, Netflix spends about $600 million a year in postage fees delivering DVDs and Blu-ray discs by mail. In addition, the 28-day window, while limiting the [...]

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  8. [...] business, but the cost of streaming a video title is much cheaper than delivering a DVD by mail — about 5 cents a gig for bandwidth — or about a nickel per [...]

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  9. [...] I think of all the points made by Greeson, No. 1 and No. 4 are the primary drivers of Netflix’s streaming strategy. The service is embedded in most popular game machines, including Sony Playstation and Xbox, and more than a dozen televisions and DVD players. Several dozen TVs and other devices are going to follow soon. And that is what is going to help prevent Netflix from becoming the next Blockbuster, Redbox or whatever and in the process become the iPod of Streaming Video. [...]

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  10. [...] $1 million versus the prior-year period. Netflix is benefiting from bandwidth costs continuing to fall exponentially as it grows its streaming [...]

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  11. [...] “There’s no new media. It’s all new consumption”.) In 2009, I compared Netflix to the iPod of broadband. When talking about the future of video, Netflix CEO Reed Hastings (speaking at our 2008 NTV Live [...]

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