The research suggests that high OTT delivery costswill force service provides to build or acquire their own delivery infrastructure as they scale up to accommodate large numbers of users. According to the IHS report, the per-hour cost of delivering OTT over a CDN is 29.58 euros ($38.4) compared with the fixed cost of 28.62 euros ($37.2) for satellite. The CDN costs would then rise again once the viewing audience reached 10,000 in size.

   IHS Research Director for Television Guy Bisson said this trend could eliminate OTT providers’ advantages over existing pay-TV operators.

   “To serve the viewing needs of a mass-market audience, the content delivery network costs for OTT streaming services would have to fall by a factor of as much as 25,000 just to reach parity with the most efficient broadcast technologies,” Bisson said in the report. “At current prices, it would cost 1.2 billion euros ($1.56 billion) in CDN costs alone for OTT unicast streaming to serve the population of the United Kingdom with the kind of high-definition viewing they are accustomed to. For the same price, 5,000 linear channels could be broadcast, nearly 10 times the number actually serving the United Kingdom today.”

   IHS predicted that the price advantage of OTT over existing pay-TV offerings is likely to disappear of OTT providers build their own infrastructure to overcome the limitations of one-to-one delivery. Bisson cited Google Fiber and other services as an example of this trend.

   “When OTT unicast streaming services like Netflix are scaled up to suit the mass-audience television market, their advantages in cost, flexibility and technology turn into disadvantages,” said Bisson. “Even at just 8,000 simultaneous views, unicast streaming becomes less cost effective than broadcast—and this is a tiny amount compared to a typical primetime audience for linear TV. IHS suggests that OTT providers use edge servers for localized content storage rather than build out a full CDN.”