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This sounds somewhat bizarre. For physical goods it made sense as you had to build big expensive distribution centres. This means big fixed costs and low varia

This sounds somewhat bizarre. For physical goods it made sense as you had to build big expensive distribution centres. This means big fixed costs and low variable costs. For streaming video delivery the fixed costs are almost zero while the variable costs are proportional to the amount of video watched. The article that the deals Netflix and Amazon do with the content providers are fixed cost deals - ie pay a certain amount of money no matter how many or how few customers watch the content. If they are variable costs deals (per view) then it would be mostly insane doing them for more revenue that you get from the viewers. Does anyone know how these content deals are structured in terms of fixed amounts versus per view amounts?

travem 14y ago
I imagine there are various fixed and variable parts to some of these deals (no inside knowledge). Imagine though that you are selling exclusive rights to your catalog for a fixed period of time (say 2 years). You would want to maximise revenue while managing risk. As a content provider you may not have sufficient information to figure out what the likely number of views will be in two years times as there are multiple factors you don't have much historical data on (viewer behavior, projected growth rate). Fixed bids are a lot easier to compare than comparing how you think Amazon Instant and Netflix growth rates and customer behavior will change over time.
- rogerbinns 14y ago
  If I was the content owner I would do the deal as per view, and with overall minimum payments. That way you get a minimum payment for your time and you share in the success of the content.
nickm12 14y ago
Building and staffing data centers is a non-trivial fixed cost required to run a streaming video service.
- rogerbinns 14y ago
  True, but you can buy the streaming service as you use it. There are numerous CDNs out there, and Amazon itself has the same. Amazon did not need to spend an additional billion dollars in order to serve the first 10,000 customers of video. If the expenses are coming from additional fixed infrastructure then the article is still misleading - the more viewers you have the lower the per viewer cost. The article in no way implies that infrastructure is relevant to their monetary claims.

travem 14y ago

I imagine there are various fixed and variable parts to some of these deals (no inside knowledge). Imagine though that you are selling exclusive rights to your catalog for a fixed period of time (say 2 years). You would want to maximise revenue while managing risk. As a content provider you may not have sufficient information to figure out what the likely number of views will be in two years times as there are multiple factors you don't have much historical data on (viewer behavior, projected growth rate). Fixed bids are a lot easier to compare than comparing how you think Amazon Instant and Netflix growth rates and customer behavior will change over time.

rogerbinns 14y ago
If I was the content owner I would do the deal as per view, and with overall minimum payments. That way you get a minimum payment for your time and you share in the success of the content.

nickm12 14y ago

Building and staffing data centers is a non-trivial fixed cost required to run a streaming video service.

rogerbinns 14y ago
True, but you can buy the streaming service as you use it. There are numerous CDNs out there, and Amazon itself has the same. Amazon did not need to spend an additional billion dollars in order to serve the first 10,000 customers of video. If the expenses are coming from additional fixed infrastructure then the article is still misleading - the more viewers you have the lower the per viewer cost. The article in no way implies that infrastructure is relevant to their monetary claims.