True Cloud Hosting Is An Expensive Proposition

The 'cloud' is said to be the future, but it's an expensive prospect if our experiences are anything to go by.

At TVE we use providers in the UK, US and Germany and the average cost, all inclusive for 1Gbps, 56GB RAM, hex core and no bandwidth cap is £370 per month. We can scale using caching using our CDN provider, who provide bandwidth at rates we cannot disclose, but at large scale can easily undermine any of the companies mentioned below. This price includes all software from Microsoft.

I've just costed a similar setup on Microsoft's Azure and the cost, based on our current usage, came to £794.46. Rackspace quote £730 a month for their nearest equivalent, but without any software such as VMWare, Windows Server and SQL Server. Amazon pricing is, in my opinion, impossible to estimate, but comes in at around £7,000 without the database licence, according to http://tco.2ndwatch.com.

None of the above offer managed services, so with all of them you will need to also employ staff or consultants who have experience of deploying into the cloud.

Services offering sub £500 a month core functions in the cloud therefore provide huge cost savings, especially if that sum includes storage and bandwidth.

I encounter a lot of startups who select the cloud for their services, which makes sense if you have no traffic, but as soon as you have volume, the cloud makes no sense for hosting unless you are building your own cloud environment.

The 'cloud' has a long way to go to become a cost effective proposition, notwithstanding issues with security and reliability.

Delivery v Reception

When you transmit a channel on traditional platforms you have reasonably predictable costs. These involve MUX costing, satellite transmission costs and carriage costs. For example, if you want to get your channel onto Sky you will need to pay that company around £100k to appear on their EPG and then pay a satellite company around £400k to beam your signal. Then come the costs of scheduling, playout, ad insertion, etc.. But once you've done this there are no inceremental costs per viewer.

On broadband you can buy a package that will get you into every properly broadband enabled home in the UK for next to nothing. My own company will do this from £300 a month. But the flip side is that you have a cost per viewer, based on the bandwidth they use, ie how much of your programming they are watching and at what data rate.

These are now the two models for TV delivery.

If you're generating, or are likely to attract under 100,000 regular viewers the former model is madness. You'll quickly go bust.

But if you can generate 2,000 viewers for your online channel at any one time, you may well have a viable business model.

This is the difference between delivery charging and reception charging.

For example, every movie a viewer watches in rasonably lo res will cost around 1p to an online broadcaster such as Netflix. but a HD version may cost 7p. If you pay Netflix £10 a month and watch 90 hours a month the cost is around a pound in HD.