Wednesday, July 26, 2006

Bandwidth Isn't Free

Remember how bandwidth was going to be free? Or as the subtitle of George Gilder's breathless Telecosm put it: "how infinite bandwidth will revolutionize our world." (I note that used copies of this particular work of fiction go for a penny on Amazon--but I digress.) Of course, bandwidth is neither free nor infinite. That reality carries with it implications that we see daily. Here are just a few recent examples.

Netflix. John Paczkowski over at Good Morning Silicon Valley turns his pen to Netflix' "vaporware video-on-demand service that's poised to become the Duke Nukem Forever of the industry." He quotes Netflix' CEO Reed Hastings' as saying "It would be all too easy to conclude that movie downloading was exploding in growth. The reality is the current Internet movie delivery services continue to show no growth in traffic. Nada. ... the whole industry is held back by the exclusive windows and the Internet to the TV issue. Movie downloading will evolve over the next decade, but it will do so slowly." I get the feeling from John's tone that he doesn't really buy Netflix' view on this, but I certainly don't get the sense that VoD has hit the big time anywhere.

Why? Well, I'd say it was because of Netflix, its competitors, and even the pricing changes it has forced on bricks-and-mortar rentals.As the old saying goes, you can't beat the bandwidth of a station wagon full of backup tapes and the same logic applies to sending DVDs through the mail. Plus you can easily play them on the DVD player that's already attached to your television (or on your computer if you prefer) without going through any lengthy downloads or dealing with expiring copies.

YouTube. To be sure, the issues around VoD aren't solely (or perhaps even primarily) related to bandwidth availability and cost. So let's consider the case of YouTube which is merrily enjoying its 15 minutes of Internet fame as the online repository of all sorts of videos that people upload--not all of which they actually own the rights to. The copyright issue is going to be one YouTube headache (as discussed here by John Battelle). A lot of the infringing may be nominally "harmless" to the copyright owners (such as footage from the World Cup and so forth)--either straight video snips or remixes based on them. (I briefly discussed "remix culture" earlier in this post.) But that's a topic for another day. What caught my eye more recently was this James Robertson post which mentions that YouTube's annual bandwidth cost is looking to be about $18 million.

And it's not a new issue. For example, AdCritic used to be a great site for checking out interesting television ads. Yes, that may seem a bit perverse, but the best ones are really pretty creative if you can watch only the good ones on your schedule. However, AdCritic had to go to a pay model--and a not inexpensive pay model ($100) that essentially takes it out of the casual-use realm. A major reason I suspect is that it's hard to support the costs of video streaming with ads.

Bandwidth may be more plentiful and available than it once was. But it's a long way from free. At the very least, it appears as if the ubiquitous Google ads-funded mode of supporting websites doesn't bring in enough money to cover the bandwidth costs of video streaming.

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