Content Delivery Pricing Goes Crazy: Commentary
Stab my eyes out and THEN ask me to sign the contract...
So I have seen the sector play the zero sum game with content delivery pricing for over a decade now. Pricing falls and falls. The drop off may now be more like the tail of a logarithm, but there's still fierce competition out there... or so one would think...
I still gasp in astonishment when I see contracts where clients are paying Akamai 50 pence per GB (that's U.K. pence, so around $0.75 US). Even with Amazon posting pricing of $0.10 on its public rate card, I am astounded that some players are still getting away with these 1998 pricing schemes and more astounded that clients are so lax about renegotiation.
So today, when a provider I know mentioned a price that they were bidding, I nearly shot myself in the head when I found out what that pricing was...
£8 PER GB. That's $12.80 PER GB.
For real...
In its own right that is simply INCREDIBLE...
I was astonished. Naturally I stepped up and said I'd be happy to sell them the service if they want it at that price, even though it's over a year since I shuttered my own CDN. My logic was that if they wanted me to deliver this at even £7.99 per GB, I could build a CDN and still make the money back in a few GB of traffic.
I'm still astonished by this pricing...
I was sitting on the train home today reflecting on this.
If the going rate is $0.15 per GB and this provider wins this £8 per GB deal, then think of it this way: the price of petrol today in the U.K. is about £1.30/litre. It costs about £70 to fill a car.
If the petrol pump was to do an overpricing deal of the same magnitude as this provider is doing, then we would see a price of around £69/litre for the petrol. This would then result in a tank of fuel costing around £3,770. Expensive, eh?
I'll update you if they win the deal, but perhaps there is hope yet for margin increases in the sector.
Then again, it could result in costs of around $25 to $50 to deliver a film online. I'm not sure if that's exactly a sustainable model now, is it?
I'd be keen to hear of other ridiculous prices -- more for the sheer amusement than any other reason...