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 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?”