5 ms·

Netflix's moat is their CDN, which is fabulously expensive and complex hardware scattered across the entire planet. AI isn't gonna help you magic a CDN into ex

Netflix's moat is their CDN, which is fabulously expensive and complex hardware scattered across the entire planet. AI isn't gonna help you magic a CDN into existence

otterley 1mo ago
How is that a moat? All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources. Sure, some choices make the cost of CDN higher or lower, but it's not material enough of an impact on competitors to matter. The actual moat for streamers has been, and always will be, the breadth and popularity of their exclusive content. Netflix will die if they don't continue to produce exclusive content that audiences will subscribe for.
- simtel20 1mo ago
  Everything about a cdn is cost per MB, and Netflix has that priced at I don't know, I imagine almost zero, and maybe negative because they host with ISPs, which other cdns can't do. Which means their competitors must spend infinitely more money until they hit a scale where they can start to follow in Netflix's parh. Also, I imagine that buying hardware now, especially DRAM is four or more times as expensive as it was when Netflix paid for a lot of their hardware, so yeah, that.
  - otterley 1mo ago
    Do you seriously believe Apple and Disney are going to lose to Netflix over CDN costs? If so, let's place counterwagers.
    - simtel20 1mo ago
      That is not what I said. I am challenging your dismissal of the cost of bandwidth is material to the success of a cdn > All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources My personal experience is that e.g. if your cdn can serve ads, but not video, then you lose subscribers. Extrapolating from that, if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business. Netflix and Amazon can afford their cdn. Maybe Disney can stay in business because they have the scale to get to the right COGS to meet their forecast, but for sure in the past they are accused of misleading investors as to their costs and revenue and their future revenue forecasts[1]. Since that's still underway, we may even know what part of their break-even calculations CDN costs are in the future. 1. https://www.ktmc.com/new-cases/the-walt-disney-company/?hl=en-US#:~:text=Specifically%2C%20Defendants%20repeatedly%20misled%20investors%20about%20the,Plaintiffs%20filed%20the%20Motion%20for%20Class%20Certification. https://www.ktmc.com/new-cases/the-walt-disney-company/?hl=e...
      - otterley 1mo ago
        > My personal experience is that e.g. if your cdn can serve ads, but not video, then you lose subscribers. Of course. But none of the major providers is suffering from that problem on a regular basis. > if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business These are public companies, and they have to report material risks (as CDN costs would be, if your claim is accurate) on their SEC filings by law. They're not reporting these as a material risk. They could be lying, I guess, but that seems rather unlikely as they'd be at risk of shareholder lawsuits and government prosecution. Speaking of which, the Disney suit you referenced doesn't mention CDN costs at all. It mentions the "staggering" cost of content creation, which makes sense to me; content production easily dwarfs CDN costs. (https://storage.courtlistener.com/recap/gov.uscourts.cacd.884443/gov.uscourts.cacd.884443.1.0_3.pdf https://storage.courtlistener.com/recap/gov.uscourts.cacd.88...) (Also, as a side note, no large customer like these is paying retail DTO costs. Large or strategic customers get significant discounts on public pricing.)
        simtel20 1mo ago
        All your points are valid, but they all assume a fait accompli of all cdns have already built out to Netflix scale with similar contracts for bandwidth at the edge. If they have done so, then that is not a moat or even a difference at all. However these things take time, and amortize over years, and I don't think the big.playets are all there yet, and so it's a moving target. Also you are saying that the lawsuit speaks to context cost, which is the headline, but that is unlikely to be the full story at the end of the day since it is a fishing expedition at the moment.
        otterley 1mo ago
        > that is unlikely to be the full story at the end of the day since it is a fishing expedition at the moment. This suit, assuming it's like most shareholder derivative "failure to disclose material information which led to a stock price drop" suits, was filed to wet lawyers' beaks and get the company to settle by compensating shareholders. It's not really intended to get at the whole story, and neither party has any interest in disclosing CDN costs to the public.

Netflix's moat is their CDN, which is fabulously expensive and complex hardware scattered across the entire planet. AI isn't gonna help you magic a CDN into existence

otterley 1mo ago

How is that a moat? All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources. Sure, some choices make the cost of CDN higher or lower, but it's not material enough of an impact on competitors to matter. The actual moat for streamers has been, and always will be, the breadth and popularity of their exclusive content. Netflix will die if they don't continue to produce exclusive content that audiences will subscribe for.

simtel20 1mo ago
Everything about a cdn is cost per MB, and Netflix has that priced at I don't know, I imagine almost zero, and maybe negative because they host with ISPs, which other cdns can't do. Which means their competitors must spend infinitely more money until they hit a scale where they can start to follow in Netflix's parh. Also, I imagine that buying hardware now, especially DRAM is four or more times as expensive as it was when Netflix paid for a lot of their hardware, so yeah, that.
- otterley 1mo ago
  Do you seriously believe Apple and Disney are going to lose to Netflix over CDN costs? If so, let's place counterwagers.
  - simtel20 1mo ago
    That is not what I said. I am challenging your dismissal of the cost of bandwidth is material to the success of a cdn > All that matters is that the CDN is good enough to serve viewer traffic. If your CDN isn't up to snuff, the outcome is that the viewer can't play the video they want. AFAIK, no Netflix competitor is suffering from insufficient CDN resources My personal experience is that e.g. if your cdn can serve ads, but not video, then you lose subscribers. Extrapolating from that, if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business. Netflix and Amazon can afford their cdn. Maybe Disney can stay in business because they have the scale to get to the right COGS to meet their forecast, but for sure in the past they are accused of misleading investors as to their costs and revenue and their future revenue forecasts[1]. Since that's still underway, we may even know what part of their break-even calculations CDN costs are in the future. 1. https://www.ktmc.com/new-cases/the-walt-disney-company/?hl=en-US#:~:text=Specifically%2C%20Defendants%20repeatedly%20misled%20investors%20about%20the,Plaintiffs%20filed%20the%20Motion%20for%20Class%20Certification. https://www.ktmc.com/new-cases/the-walt-disney-company/?hl=e...
    - otterley 1mo ago
      > My personal experience is that e.g. if your cdn can serve ads, but not video, then you lose subscribers. Of course. But none of the major providers is suffering from that problem on a regular basis. > if you lose money on every video a subscriber plays because of DTO costs, then you can't stay in business These are public companies, and they have to report material risks (as CDN costs would be, if your claim is accurate) on their SEC filings by law. They're not reporting these as a material risk. They could be lying, I guess, but that seems rather unlikely as they'd be at risk of shareholder lawsuits and government prosecution. Speaking of which, the Disney suit you referenced doesn't mention CDN costs at all. It mentions the "staggering" cost of content creation, which makes sense to me; content production easily dwarfs CDN costs. (https://storage.courtlistener.com/recap/gov.uscourts.cacd.884443/gov.uscourts.cacd.884443.1.0_3.pdf https://storage.courtlistener.com/recap/gov.uscourts.cacd.88...) (Also, as a side note, no large customer like these is paying retail DTO costs. Large or strategic customers get significant discounts on public pricing.)
      - simtel20 1mo ago
        All your points are valid, but they all assume a fait accompli of all cdns have already built out to Netflix scale with similar contracts for bandwidth at the edge. If they have done so, then that is not a moat or even a difference at all. However these things take time, and amortize over years, and I don't think the big.playets are all there yet, and so it's a moving target. Also you are saying that the lawsuit speaks to context cost, which is the headline, but that is unlikely to be the full story at the end of the day since it is a fishing expedition at the moment.
        otterley 1mo ago
        > that is unlikely to be the full story at the end of the day since it is a fishing expedition at the moment. This suit, assuming it's like most shareholder derivative "failure to disclose material information which led to a stock price drop" suits, was filed to wet lawyers' beaks and get the company to settle by compensating shareholders. It's not really intended to get at the whole story, and neither party has any interest in disclosing CDN costs to the public.