Comment by robnagler | Hacker News Reader

Comment by robnagler | Hacker News Reader

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I would think it would be a significant shareholder event to save 64% of their total computing budget. Their 2016 10K

https://ir.netflix.com/secfiling.cfm?filingID=1628280-17-496...

says their 3rd party cloud computing costs increased by $23M in 2015 and increased a further $27M in 2016. More importantly, their total technology and development cost increased from $650M in 2015 to $850M in 2016. That includes engineers so it's a bit tricky to figure out what their costs really are, but they didn't go down appreciably in 2016 so this effect had to be in 2017. Looking at their first three 10Q's shows their Technology and Development budget keeps going up. I don't see how a streaming service could save 64% of its total computing needs, and it not show up on any of its SEC filings.

In 2016 they completed a seven year move of all their computing infrastructure to AWS. When they sized the system, they bought reserved instances (probably at a significant discount). From the math in this article, they bought 64% more than they needed if they just discovered they could save 64% of their EC2 budget. That seems like a big math error.

I was a former insider so I can't get into details, but if you look you'll see that almost the entirety of their cost is content acquisition. The next biggest cost is salary.

Servers barely even register as far as costs go, and also, it's a 92% savings over what the cost would have been without the system, not an absolute 92%. The farm keeps growing all the time as movies become higher resolution and more encodings are supported.

Technology and Development (T&D) is directly related to computing, not content acquisition or sales. Computing costs are significant in this category, since they point them out explicitly in the notes. 64% savings would show up, since we know that 3rd party cloud costs increased by $50M over the last two years. For the number of instances they must be using, the costs must be running well over $100M.

1. Keep in mind "potential savings" is different from "actual savings".

If the EC2 hosts have already been reserved then Netflix "cloud costs" would be relatively stable. What you might see is a reduced rate of increase y/y.

2. Keep in mind Amdhal's Law (or rather a slight variant). The absolute reduction has to be weighted against the percentage of resource usage that has been reduced.

(All numbers are made up) If previously Netflix was paying 3MM for encoding, and now they are paying 0MM; Compared to an annual 30MM on streaming with a ~25% y/y growth, you wouldn't notice the missing 3MM unless it was pointed out.

The number you don't know is how much the encoding workload grew in the time it took them to develop the system.

Let's use your numbers. Say that two years ago computing costs were $50M, and encoding was $46M of that. Now say that their costs are currently $100M, but the encoding workload grew 6X. Under the old system, that would have cost $276M, but under the new system it is on $22M. That would be a 92% savings, and would totally be in line given that in the last few years they have drastically increased their machine learning output, which would have overtaken encoding work.

Their capacity keeps growing so the savings would be over the same amount of computing, but overall the total amount of computing they do keeps going up as shows move from being shot in 4K to 8K, and they acquire more and more shows to broadcast.

It’s 64% they didn’t need most of the time, but would need during peak usage. The “spot market” uses this buffer capacity only when it isn’t serving customers, preventing slowdowns and outages.

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