Once transit costs drop below $1/mbit @95th percentile (circa 2014 [1]), it's costing you $1 to transfer approx 300 gigabytes/month. At that point, the management costs associated with all of those distributed CDNs becomes greater than your transit costs. This is somewhat offset by continuously dropping prices of CDNS [2] which is as low as $0.02/Gigabyte on a 500 TByte commit.
What this does tell me is that NetFlix thinks they have an opportunity to save money on CDNs and can beat that $0.02/Gigabyte.
Bandwidth Delay Product(BDP) - keeps CDNs relevant for _downloads_ (iTunes, Software, etc..) - because everybody likes to max out their 100 mbit comcast connection, but you don't need much bandwidth to stream a show. Maybe some value for CDNs in HD or live event streaming.
[1] http://drpeering.net/AskDrPeering/blog/articles/Peering_vs_T...
[2] http://blog.streamingmedia.com/the_business_of_online_vi/201...
By your math they are saving a minimum of $5k per month per deployed device.
Any network not meeting these minimum requirements will be served under existing Level 3/Limelight/Akamai contracts.
Even for Netflix or another DIY delivery case a CDN will continue to have value. A couple cases immediately come to mind: Lower first byte latency on first video blocks, then a hinted handoff to the openconnect device. Resiliency/recovery of network events, in a similar manner. "long tail" content that doesn't fit in the open onnect cache width.
A key point of these devices is IIRC they're only available to peered ISPs in one those NA IXs. Netflix is essentially converting 5-8gbs of CDN/transit expense in to $50,000 (WAG) of capital. That's what's really brilliant to me.
We will see how this plays into the me neutrality battle...
If Netflix wanted to get clever, they could calculate the cost an ISP would likely pay for the bandwidth their users consume, and charge the ISP say 40% of this amount to host the appliance. Netflix saves 100% of its third party CDN bandwidth costs for that ISP and the ISP saves 60% of their peering bandwidth costs.
If the ISP wanted to get clever, they could calculate the bandwidth that Netflix is paying a third party CDN for the traffic consumed, and offer to host the appliance for 40% of this amount. The ISP saves 100% of its peering bandwidth costs for Netflix traffic and Netflix saves 60% of their CDN cost.
What's likely to happen is a bit of cat and mouse over the costs. The ISP peering is likely a lot cheaper than Netflix's CDN costs, so this could work out as:
Netflix CDN cost
- ISP peering cost
----------------
= Cost to Netflix
a) Cable companies put the squeeze on content owners to give them exclusive rights
b) Netflix religiously clings on to both commercial-free and buffet-style pricing
It's tricky. You have a movie studio that pumps out AAA features that cost upwards of $200 Million to make, then Netflix comes along and says "hey, you mind taking this really low price for your content, hopefully in perpetuity?" What would your response be? So, it may be awhile before Netflix gets the big-budget blockbusters quickly. That is, unless, their subscriber base goes over 50 Million, then by ALL means game on.
I think that, in the interim, a dynamite move for Netflix would be to acquire a music streaming company like Pandora or Spotify, then a streaming game company like Galkai or OnLive. Push it out on a set top box, a la the OnLive console, charge $19.99/month with the opportunity to rent premium newly-released blockbuster movies, hot records, and AAA games on the day of release for the same prices that redbox or gamefly charges to rent them per day.
Operating System
For the operating system, we use FreeBSD version 9.0. This was selected for its balance of stability and features, a strong development community and staff expertise. We will contribute changes we make as part of our project to the community through the FreeBSD committers on our team.
Web server
We use the nginx web server for its proven scalability and performance. Netflix audio and video is served via HTTP.
Routing intelligence proxy
We use the BIRD Internet routing daemon to enable the transfer of network topology from ISP networks to the Netflix control system that directs clients to sources of content.
You'd have to wonder if enough people would want to use Netflix's technology stack in a way that didn't include distribution on Netflix.
The old SGI/TimeWarner Video-on-demand nightmare seems so quaint now. That had a full cabinet (42U) of storage and servers and it poorly served about 50 streams of a couple of thousand 'titles' and cost > $2M each if my aging brain remembers all the specs. Hmm these guys [1] peg the cost for the "Full Service Network at $100M which sounds about right.
[1] http://www.vizworld.com/2009/04/what-led-to-the-fall-of-sgi-...
[1] Ways that come to mind are; multiple boxes with a diversity of the content amongst them so that another box can 'pick up' the stream, keeping a stream to the home office open but not pulling data until you lose the local source, or even doing a 'buffer' to disk and stream from the buffer then switch disk targets when your disk fails.
http://blog.netflix.com/2012/06/announcing-netflix-open-conn...