When last we looked at the economics of live video, we concluded it is one tough business. Our case? The costs are high and the revenue possibilities largely theoretical.
Since then, we’ve been told that we were wrong on one front: streaming costs aren’t as high as we estimated. One streamer, Justin.tv, claims to have reduced bandwidth costs to 1/4 of a cent per user per hour, compared to an industry average of $0.20 to $0.30 per hour.
But that turns out that’s not the only way Justin.tv is different. CEO Michael Seibel told us he isn’t interested in pursuing the survival strategies chased by his competitors: namely, advertising, services, or positioning for an acquisition. Those are fine for a standard tech startup, but, as he says, “a revolutionary company has to think bigger.”
So what does Justin.tv have planned? He described a top-secret “transaction system” that would allow Justin.tv users to pass money to one another, as well as to Justin.tv. “The environment we’re building is a combination of pay-per-view, Craigslist and eBay (EBAY) wrapped into one,” Seibel says.
It’s vague, and Seibel didn’t want to give too many details. He did say, however, that the system would enable media companies to sell access to live sports like European soccer, Japanese baseball or a closed-circuit music concert, and that it would be ready by the fall. “There is content not online right now that, if it were live, people would pay for — much of it live,” he says.
As for Justin.tv’s costs, the company built the equivalent of its own content delivery network by writing its own version of Adobe’s Flash video server and running the system on their own servers while buying excess bandwidth from Amazon S3. The company streamed a total of 250.82 years of video in March (up from 90 years of video in January and 33 years last August). Assuming Justin.tv got to its 1/4 of a cent cost on streaming, that’s a mere $5,492.84 in bandwidth costs for the month of March.
But even if they just came close, Justin.tv’s streaming costs are incredibly low, given it had 1.78 million unique visitors in March and 24.6 million page views. Justin.tv has raised $2.2 million so far, and Siebel says they’re planning to raise more funding this year.
Justin.tv did earn a little revenue in its first year. While Seibel doesn’t think much of traditional display and video advertising, he does like the the marketing potential of live video. Justin.tv has done a number of movie promotions, including a mock Justin.tv page for Paramount’s “The Ruins,” as well as promos for Axe Body Spray and the movie “Disturbia.”
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