The Case Against Consumption Based Pricing
06/12/2021
The media and entertainment industry was slow to embrace the Software as a Service approach introduced by companies like Salesforce over two decades ago. The last few years has, though, seen a massive uptick in the adoption of cloud services and many media operators are now enjoying the benefits of easy access, instant scalability and the financial flexibility that make SaaS applications so appealing to many other business sectors. However, with this new way of working comes a whole new approach to cost and, for the media industry in particular, this aspect of cloud adoption has not been without its headaches.
Specifically, anecdotes of bill-shock' abound as content producers struggle with the apparently contrived complexity of costs associated with downloading or exporting their content from the cloud and many articles have been written (including some of our own) on the infamous egress fees. But, perhaps the media industry's preoccupation with egregious egress costs has distracted us from other issues with some cloud-based pricing models which may not be as beneficial as they first appear.
Fees for transcode services and content egress are based on a consumption pricing model which Amazon Web Services (AWS) are credited with pioneering. It's not really a new concept of course, we've been paying for consumables such as gas and electricity in this way for decades. In that context, the consumption model for media services is very clear, and inherently fair.
What is more difficult to reconcile, is the application of the consumption model to management systems that simply orchestrate 3rd party services. For example, some cloud media management providers charge a standing fee for access to their platform and, on top of this, add a variable charge based on the volume of content under management or the 3rd party services utilised. These management costs are in addition to the cost of the actual consumable service and are categorised as throughput overhead. Some providers bundle' a storage or a throughput allowance and charge an overage' rate if it's exceeded, a shameful oxymoron in context of cloud.
This model works for smaller operators - in fact it's seen as the perfect pricing structure for SMEs because it affords access to enterprise class management software, on a pay per use basis, with a very low cost of entry. Yes, the base costs are a little elevated over the underlying services and each transaction is a little more expensive, but this orchestration tax is worth paying for the operational benefit and convenience.
But, for anything but the smallest operators with only a few TB of content, this orchestration tax becomes noticeable, if not burdensome. Providers are quick to justify the model by pegging cost to success - the more content a producer has under management, the more work they are doing, the more successful they must be and, ergo, the more revenue there is to spend on services. This creates a very linear relationship between busyness and cost which is just about justifiable for video processing services were work is proportional, but that is not the case with management systems.
Like online accounting software tools, media operators expect to pay for management systems based on features, or even user seats' but will balk if pricing is per transaction. Moving production operations to the cloud affords limitless scale but that should not limit the economy of scale and media operators should see the cost per transaction flatten out and fall at higher throughput volumes.
In recent years there have been many published comparisons between taking a CAPEX (hardware and perpetual licences) and an OPEX (cloud service) approach to production technology procurement. In most cases authors tend to present a clear winner one way or the other but the reality is more nuanced and comes down to the business's operating model. The significant variations between the different types of SaaS model on offer, and specifically how these suit different business requirements, play an important role here and deserve more scrutiny.
We are great proponents of cloud and SaaS and, in our own procurement of business systems and infrastructure, the model has allowed our business to grow rapidly without taking on burdensome debt or suffering the distraction of equity investment. But our success has been based on careful assessment of the different SaaS pricing models on offer and how these align with our specific business requirements. Our advice is that medium and larger scale businesses, in particular, should engage directly with underlying service providers and factor in future growth to identify which model is right for your business.
The acid test here is that operational costs should fall with, not track, your business growth and if the model on offer looks complicated, look out for the devil in that detail.
This article first appeared in the IABM Journal (119 Page 4) https://theiabm.org/journal-119/
By Blue Lucy - December 6, 2021
Share this Twitter Consumption based pricing models sound attractive but are they cost effective?
&source=BlueLucyMedia rel=noopener noreferrer target=_blank class=social-share-btn btn-linkedin mr-15 mb-15>Linkedin
LINK: | https://bluelucy.com/the-case-against-consumption-based-pricing-models... |
See more stories from bluelucy |
Most recent headlines
04/08/2024
Dalet Appoints Santiago Solanas as CEO to Lead Next Era of Growth and Innovation
Dalet, a leading technology and service provider for media-rich organizations, is excited to announce Santiago Solanas as its new Chief Executive Officer (CEO)....
03/06/2024
Dalet and Veritone Reach Agreement to Distribute, Transact and Monetize Media Archives
Dalet, a leading technology and service provider for media-rich organizations, a...
29/04/2024
Filming begins and further cast confirmed in Mark Gatiss drama Bookish for Alibi
(L-R) Mark Gatiss and Polly Walker on set Monday 29 April 2024 Further casting is now confirmed for Bookish (6x70), a brand-new drama created by Emmy Award-wi...
29/04/2024
She Speaks Sudan': Thomson launches programme to empower women journalists and civil society actors in exile
A groundbreaking initiative offering training and mentoring to 30 women journali...
29/04/2024
Meet the 2024 Sundance Institute Directors, Screenwriters, and Native Lab Fellows
Even though we've been doing this for over 40 years, a spark of excitement r...
29/04/2024
The AN/PRC-158: A Resilient Communications Bridge Between Air and Ground
L3Harris is delivering manpack radios to U.S. Army CH-47 Chinooks as part of the Air-to-Ground Networking Radio program, providing seamless, resilient communica...
29/04/2024
CS President Sam Mehta: Resilient Communications are Critical to Realizing JADC2
He writes in Defense One: Despite the near-universal acknowledgement throughout the U.S. government and defense industrial base of the criticality of resilient ...
29/04/2024
Clear-Com Enhances The Kennedy Center with Seamless Communication Solutions
eds3_5_jq(document).ready(function($) { $(#eds_sliderM519).chameleonSlider_2_1({ content_source:......
29/04/2024
Optimising audio loudness & normalisation across the Media Supply Chain
Codemill aims to revolutionize media workflow efficiency at this years NAB Show by introducing Just-In-Time (JIT) playback technology in Accurate.Video Validate...
29/04/2024
TF1 Chooses Broadpeak to Power Targeted Advertising for New Video Streaming Service
April 29, 2024 -- TF1 Chooses Broadpeak to Power Targeted Advertising for New...
29/04/2024
LG Adds Allen Media Group's Local Now FAST Channel in 223 Markets
LOS ANGELES Allen Media Group (AMG) has partnered with LG Electronics to bring 223 Local Now FAST channels to LG's free streaming service, LG Channels, avai...
29/04/2024
Ross Video Unveils Raiden Weather Graphics System
OTTAWA Ross Video has announced the introduction of Raiden, a data-driven weather graphics software that combines data gathering, processing, and visualization ...
29/04/2024
Melanie Georgieva Joins Panalux as Long Form Sales Direct...
Panalux, a leading rental provider of lighting and power solutions for the motion-picture industry and part of Panavision's end-to-end service offerings for...
29/04/2024
Cobalt Iron Earns Patent on Analytics-Based Dynamic Autho...
Cobalt Iron Inc., a leading provider of SaaS-based enterprise data protection, today announced that it has received a patent on its technology for dynamic autho...
29/04/2024
SDVI Rally Access Workstation Earns Two Top Awards at 202...
SDVI, the leading platform provider for cloud-native media supply chains, today announced that Rally Access Workstation, a fully managed solution for editing in...
29/04/2024
Premier Sports selects QuickLink Remote Commentary soluti...
Premier Sports, a premium sports broadcaster, has selected QuickLink's Remote Commentary solution for introducing professional, high-quality remote commenta...
29/04/2024
Glookast picks Jigsaw24 Media as exclusive UK channel par...
Glookast has chosen Jigsaw24 Media as the only UK channel partner to represent their portfolio of ingest and workflow optimisation products. The agreement, sign...
29/04/2024
Clear-Coms Eclipse HX and Agent-IC Technology Illuminate...
Clear-Com played a pivotal role in the seamless coverage of the recent solar eclipse on April 8, 2024. Leveraging its cutting-edge Eclipse HX Digital Matrix i...
29/04/2024
PlayBox Neo to Promote Latest Smart Media Playout Innovat...
PlayBox Neo will promote its complete range of television channel management, graphic branding and playout solutions to EMEA region media content owners and bro...
29/04/2024
RuPaul Game Show Lingo' Returns to CBS May 24
Lingo, RuPaul's word-twisting game show, returns for season two on CBS Friday, May 24. Two episodes air that night, and stream on Paramount Plus, too....
29/04/2024
ESPN, Amazon Prime Video Reportedly Close To New Deals With the NBA
ESPN and Amazon Prime Video are reportedly close to scoring television rights to the National Basketball Association, according to published reports....
29/04/2024
Judge Judy,' Hot Bench' Renewed for 2 More Years
Judge Judy and Hot Bench, CBS Media Ventures' genre-leading court shows, have been renewed through the 2025-26 TV season in more than 95% of the country, Gr...
29/04/2024
Irish Sports Broadcaster Premier Sports Taps QuickLink for Remote Commentary
Premier Sports, an Irish-based premium sports broadcaster, has selected QuickLink's Remote Commentary solution for introducing professional, high-quality re...
29/04/2024
BAFTA Television Craft Awards winners announced
The awards celebrate the craft of behind-the-scenes TV talent and the best programmes of 2023 By Matthew Corrigan Published: April 29, 2024 The awards cel...
29/04/2024
Watch: How Milk VFX helped create 259 shots for Netflix's Scoop
The team at Milk had to create and deliver the VFX and environment work for the royal residences featured in the drama from scratch By Jenny Priestley Publis...
29/04/2024
What's going on at Paramount Global?
CEO Bob Bakish is expected to leave the company as early as today, with a new leadership committee likely to run the company on an interim basis By Jenny Pries...
29/04/2024
Meet the director of media and entertainment and strategic products
Albena Ivanova, director, media and entertainment and strategic products at CHAOS talks to TVBEurope about her route into the industry By TVBEurope Staff Pub...
29/04/2024
Anna Valley brand name acquired by AV company Grand Technix
The acquisition gives Grand Technix the opportunity to expand its footprint in the audio visual and broadcast technology sectors By Jenny Priestley Published...
29/04/2024
Screen Australia announces James J. Robinson's debut feature First Light
29 04 2024 - Media release Screen Australia announces James J. Robinson's debut feature First Light First Light Principal Photography is underway on Firs...
29/04/2024
Capitol Broadcasting Becomes First Company Inducted into NC Media and Journalism Hall of Fame
Capitol Broadcasting recently became the inaugural company honored with inductio...
29/04/2024
Uninterrupted and Tribeca Enterprises Partner for Second-Annual Uninterrupted Film Festival Powered by Tribeca Festival July 9-10 in Los Angeles
April 29th, 2024 UNINTERRUPTED AND TRIBECA ENTERPRISES PARTNER FOR SECOND-ANNUA...
29/04/2024
Rebrand and Refresh: SailGP Talks Bringing its Graphics Operations Inhouse for a Bright New Look to Keep Viewers Illuminated
Rebrand and refresh: SailGP talks bringing its graphics operations inhouse for a...
29/04/2024
Reflecting on a Storied Career: Sean McManus Looks Back While Keeping an Eye on the Future
Reflecting on a Storied Career: Sean McManus Looks Back While Keeping an Eye on ...
29/04/2024
Drones Take Flight Inside MSG: How Sky Candy Studios is Upping the Excitement for Knicks, Rangers Playoff Series
Drones Take Flight Inside MSG: How Sky Candy Studios is Upping the Excitement fo...
29/04/2024
Netflix Announces a Diverse Lineup of Polish Titles to Debut in 2024 With Established Creators Returning With New Series and Films
Back to All News Netflix Announces a Diverse Lineup of Polish Titles to Debut i...
29/04/2024
Tonight on Smoke and Mirrors: Fanyana feels embarrassed about his sexual mishap
Tonight on Smoke and Mirrors: Fanyana feels embarrassed about his sexual mishapDon't miss Monday, 29 April's riveting episode of South African soapie Sm...
29/04/2024
SEA.AI Navigates the Future With AI at the Helm
Talk about commitment. When startup SEA.AI, an NVIDIA Metropolis partner, set out to create a system that would use AI to scan the seas to enhance maritime safe...
28/04/2024
Mediahaus delivers the first SRT live-streaming sports production over 5G with URSA Broadcast G2
Mediahaus delivers the first SRT live-streaming sports production over 5G with U...
27/04/2024
L3Harris Chair and CEO Christopher E. Kubasik Discusses 1Q24 On CNBC's "Closing Bell: Overtime"
On April 26, L3Harris Chair and CEO Christopher E. Kubasik joined CNBC's Mor...
27/04/2024
Audinate Adds Major New Features to Dante Connect
PORTLAND, Oregon Audinate Group Limited, the developer of the Dante AV-over-IP solution, announced significant new additions to Dante Connect, its cloud-based D...
27/04/2024
Bell Media Launches New Portfolio of FAST Channels
TORONTO Bell Media has launched 10 English and French-language FAST channels featuring entertainment, factual, news, and sports programming. The new free stream...
27/04/2024
Study: Broadcast TV Evening News Avoids Serious Economic Issues
An extensive new analysis of the news segments in the broadcast evening news programs of ABC, CBS, NBC and PBS has found that broadcasters devoted most of their...
27/04/2024
Hughes Opens Manufacturing Facility and Private 5G Incubation Center in Maryland
GERMANTOWN, Md. EchoStar's Hughes Network Systems has opened a new manufacturing facility and private 5G incubation center in Germantown, Maryland....
27/04/2024
Broadcasting Legend Harry Pappas Dead At 78
Harry Pappas, one of three brothers who founded Pappas Telecasting Companies in 1971, died April 24. He was 78 years old....
27/04/2024
Televisa Selects Synamedia For Broadcast Distribution Overhaul
ATLANTA and LONDON Mexican telecommunications and broadcast company Televisa has selected Synamedia for an overhaul of its broadcast distribution....
27/04/2024
Participate in the Survey - The Impact of AI on Media and the Creative Industry
Participate in the Survey - The Impact of AI on Media and the Creative Industry Pascal Wagner April 26, 2024 0 Comments By participating in this surve...
27/04/2024
SDVI Rally Access Workstation Earns Two Top Awards at 2024 NAB Show
SDVI Rally Access Workstation Earns Two Top Awards at 2024 NAB Show Brie Clayton April 26, 2024 0 Comments SDVI, the leading platform provider for clo...
27/04/2024
Berklee's Music and Health Institute Launches Community Health Musician Certificate
Berklee's Music and Health Institute Launches Community Health Musician Cert...
27/04/2024
Charter Reports Higher Q1 Profits Despite Broadband, Video Losses
Charter Communications reported higher first-quarter profits despite continued cord-cutting and competition for broadband customers....