|Both Netflix and HBO are currently expanding to new markets.|
The costs of distributing on demand television via the internet are higher than via broadcasting as soon as you pass only 8,000 viewers, according to IHS Screen Digest.
To distribute one hour of web tv to 8,000 people will cost 29.58 Euro, or 0.003698 Euro per user hour. The price of an hour of broadcasting is 28.62 Euro, again according to IHS Screen Digest. The difference is that broadcasting can reach an infinite number of people bringing the cost per user hour to virually zero.
That means that a programme that is watched by, say 8 million people (as the highest freefall jump last week), will cost 29,580 Euro per hour to distribute via the internet. That is over a 1000 times more than the 28.62 Euro it will cost if it was broadcast.
But is 8 million viewers a lot? Not necessarily. Several events have reportedly had around one billion viewers. The cost then, if it were to be distributed via the internet (this is very hypotethically, as the infrastructure wouldn't at all be able to cope) would then be 3,697,500 Euro per hour, against 28.62 if broadcast. 129,000 times more expensive (given that all the viewers are in one country), in other words.
How does this translate to current television figures? IHS has made an estimation for the UK, given that all current TV viewing were to be distributed via the internet (again, very hypothetically). The CDN costs alone would exceed 1.2 billion Euro per year.
In the US, videos from Netflix alone is to "blame" for 33% of all internet traffic! And Netflix only provides on demand video, which in the US accounts for 2% of viewing times (98% is on traditional television, live or time shifted). Add YouTube traffic, and the figure increases to 44%. What if you add all live television viewing? You do the maths. And remember that Netflix and YouTube are not alone. HBO, Hulu, The BBC and others also provide online video services or are planning to do so.
The internet will not be able to distribute all sorts of radio and television content. It is already struggling with on demand videos. The figures shown above may illustrate why we need both broadcasting and the internet even clearer than other examples. I have provided a range of them in various blog posts the last few years, included posts such as Why the Internet Won't Solve Everything.
Maybe broadcasting isn't so stupid and old fashioned after all.