That's part of it, but I think you'd be astonished at how much IP transit can end up costing when you're distributing high-quality video. It's pretty staggering

That's part of it, but I think you'd be astonished at how much IP transit can end up costing when you're distributing high-quality video. It's pretty staggering how much bandwidth can cost. I would not be surprised in the slightest if at least 1/4 of Netflix's total engineering spend is on network transit, so any savings that are per-video can have a huge impact. Source: I work at a company that distributes a lot of high-quality video :)