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Stream This!: Online Video Delivery Pricing Demystified

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Pricing. It remains one of the topics our readers ask us about most, largely due to the fact that service providers change their pricing from deal to deal and rarely stick to their own rate card. This can leave the customer very confused while comparison-shopping for the best combination of price and service, as it can be difficult to make an apples-to-apples comparison. With this in mind, let’s examine the two biggest factors that affect the price of service—bandwidth commit and storage—and discuss strategies for getting the best price. I’ll also pin down some real numbers for going pricing rates today.

For the majority of service providers, your commit—the volume of GB of bandwidth or transfer you pay for per month, whether you use it or not—is the single biggest factor that determines pricing. The larger the monthly commitment you are willing to make at the start of the contract, the more the provider will be willing to discount the pricing per GB. If you have already been delivering content online, chances are you know your monthly volume and the growth patterns you are seeing. You have to forecast what your growth will be and if you want to commit to a higher delivery volume upfront in order to get a better price. The downside is that you may pay for something you don’t end up using.

If you are new to delivering content online and have no traffic data, it’s a bit of a guessing game. Service providers typically won’t cut you any discount upfront, since they have no idea if you’ll be a "$500 a month" customer or a "$5,000 a month" customer who should get discounted pricing. To a new customer, I suggest not committing to anything. Sign a three-month deal, test the waters, see what type of traffic you do, and then decide if you should sign a long-term deal that gives you a break on pricing. This also offers an opportunity to test the service provider and rate their customer service and products, such as the reporting data they provide.

When pushed, most providers will allow you to commit to bandwidth on a quarterly rather than monthly basis. This will help level your quarterly commit rate if you have one low month and one high month in the same quarter. If you are doing more than 10TB a month, the service provider will probably be willing to do a quarterly commit contract and, if they want your business badly enough, you can get this type of arrangement for even smaller deals.

While pricing varies, the average going rate for a 12-month commit of 10TB per month is between $0.80–$0.95 per GB. 25TB per month is typically in the $0.70 per GB range. At 50TB, you should expect to pay roughly $0.55 per GB. At 100TB, the average is about $0.29 per GB. Deals for more than 100TB can be as low as $0.19 per GB. Shop around.

Another major factor that service providers use to determine pricing is your storage commit. Over the past 12 months, the cost for storage has dropped so dramatically that the average price paid for storage for a 500GB monthly commit is about $2 per GB. At levels of 1TB and above, pricing is less than $1 per GB. Deployment of storage hardware has become so efficient and cheap that service providers tend to have an excess of space. Also, for the most part, storage is now a absolute commodity. If you’re only using 25GB a month or some other small volume, expect to pay $10–$20 per GB. If you use more than 500GB and are paying anything above $4, you’re being ripped off. If the service provider uses RAID storage and is replicating it in more than one location, then it’s the same service offered by all the providers, unless your storage requirements are completely customized.

Other factors providers take into account are things like the length of the contract, geographic area and reach of the content delivery, and, of course, anything unique to your business. Shop around, get references, ask about customer service, and, most importantly, don’t buy on price alone. The service provider space is so consolidated these days that you can easily get four or five quotes from providers all in the same day.

It is also important to make sure the provider educates you and answers any questions you may have. If you don’t understand any aspect of content delivery—calculating bandwidth and storage volumes, how to link to your video files, etc.—and the provider does not seem inclined to help, then move on, no matter how good the pricing may be.

Service providers are getting a lot better at educating customers, but they still need to remember that not everyone knows how services are priced or what is required to increase online video consumption. With a little education, the process of buying delivery and storage for online video can be very straightforward. Still have questions about what you should pay? Contact us for assistance. No charge.

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