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I am not a tech person, and I am researching a company as an investor. This company does live streaming / webcasting. Not surprisingly they have really high bandwidth costs, but I was surprised to see they have very little computer equipment (they own their own servers but co-locate them).

I compared the ratio of their computer equipment to their bandwidth expense to about 10 publicly traded interactive web companies, and I noticed that they are pretty much the only one that pays higher bandwidth costs than the total value of their equipment. That is, every other company needs more computer equipment as their bandwidth expense increases, and generally their computer equipment is worth 2 to 5 times as much as their bandwidth.

My question is - does the fact that they are a live broadcasting / streaming company make their need for bandwidth increase more than their need for computer equipment (unlike social networks, instant messaging, video game platforms, etc)?

Or another way to look at it - do video streaming companies have less of a need for processing power relative to their bandwidth needs than other web companies?

Thanks in advance for your response

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    If you saw YouTube's bandwidth bills, you would understand why Google spent billions building their own network.
    – Michael Hampton
    Dec 21, 2014 at 1:05
  • I know video is bandwidth intensive. The question is whether Youtube also requires a lot of equipment to show those videos.
    – TechInvestor
    Dec 21, 2014 at 2:55
  • Of interest may be Netflix's open connect program and appliances and the length they go to to avoid paying for bandwidth in the first place by placing caching servers on premises at their customers ISP's. The the hardware specs are relatively modest to drive multiple 10G network connections.
    – HBruijn
    Dec 21, 2014 at 5:21
  • Videos are a chain of static content. There's no processing at all needed to 'send' them. Metaphorically speaking - it's sticking a DVD in a packet, and posting it. The DVD has taken work and processing to create, but delivering it requires no further effort.
    – Sobrique
    Dec 21, 2014 at 11:39

1 Answer 1

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Video is very bandwidth intensive. It's almost a worst case scenario for bandwidth to servers.

1080p high definition video requires a data rate of about 20Mb/sec, but is otherwise static content. It doesn't require much processing power, nor does it require a particularly fast hard disk. Storage capacicity might be an issue, but you can fit a useful amount of video content in a 'standard' storage array.

Home user broadband is contended, usually - ASDL certainly is - so whilst a home user might have a 50Mb connection, that's really only their peak - their average is quite a bit lower. (This isn't a problem for most users).

However for a streaming video company, that's not an option - they need the end to end capacity to stream to all their end users concurrently. I'm sure you could price up the cost of bandwidth, and consider how that scales in terms of customers.

But bear in mind that because it's real time delivered, it's quite sensitive to contention - you customers will notice if their video stops because there's not enough throughput. So yes, I'd say it's entirely plausible that bandwidth costs exceed cost of server estate.

Looking at a UK carrier (BT): http://business.bt.com/broadband-and-internet/leased-lines/

100MB of dedicated capacity is ~£1000/month. That's around enough to supply 5 concurrent 1080p HD video streams. Your company is presumably going to have more than 5 customers.

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  • Thanks for answering. So you would say that video (it's not HD) is 4 to 5 times as bandwidth intensive as a multi-player video game, while requiring no additional equipment?
    – TechInvestor
    Dec 21, 2014 at 2:54
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    @TechInvestor Probably more than that. It doesn't take much CPU to stuff lots of bits down the wire.
    – Michael Hampton
    Dec 21, 2014 at 3:08
  • The only CPU you need to 'deliver' video is the metaphorical postage stamp. Multiplayer gaming you need to keep track what's going on in game, so there may be a lot of state information (what each player is doing, where they are, what 'stuff' they've got, etc.) and arbitration of events (if player A fires a rocket at player B, is player B in range when it hits). Video is basically a (large) sequence of static photos sent rapidly (24-50 per second). The only thing the server needs to do is stuff the envelopes.
    – Sobrique
    Dec 21, 2014 at 11:34

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