The business of streaming media hosting

Tom Keller had a problem. His Bluegrass on Broad Street program had just reached a milestone, streaming the last night of a summer music series on the Web with both audio and video, and the audience response—both physical and virtual—had been better than expected.

But his plans to expand beyond the local area and its crowds of thousands to introduce his hometown of Kingsport, Tennessee—and his hot dog shop where the whole series started—came to an abrupt halt when faced with the minimum costs presented by the streaming service providers contacted in the wake of his initial success.

“The minimum dollar amount I could find was around $1,000 per month,” Keller says, “and I only make about $2,600 during that same period of time on the show, after paying the bands and factoring in food costs in the hot dog shop. I’d love to do this, but the minimums don’t make business sense for me.”
Keller’s story is typical of the catch-22 faced by small businesses and startups that want to use the Web to get the word out, often in unique ways, but cannot afford the price of entry. They also often cannot afford the price of success: should their marketing content catch the interest of even a small percentage of the Internet audience, the costs associated with meeting the audio and video hosting demand can be staggering. As demand for a particular piece of video content spikes, small businesses may find themselves faced with a Hobson’s choice of shutting down their own servers and risking a customer backlash or paying a Tier 1 or 2 CDN a significant amount of money to handle the spike.

During interviews conducted for this article, Content Delivery Network representatives acknowledged the issues facing small customers, and at the same time offered potential workarounds that meet the needs of both the small business owner and the Content Delivery Network.

We’ll explore the suggestions provided by CDN representatives later in the article, but first let’s look at the hurdles.

Crossing the Chasm

Small businesses hoping to use streaming as an effective marketing and sales tool face six hurdles, each of which must be addressed in order to understand the total cost of small-scale streaming. The hurdles are listed in logical order and include the following:

Format choice (for production and streaming)
– Production value
– Conversion process
– Compliance (508, closed captioning, etc.)
– Distribution
– Tracking

Format Choice

The advent of digital video was supposed to lessen the confusion about formats; instead, small business owners find themselves facing a wide variety of digital audio and video formats, some of which are good for acquisition or production and some of which are best used for streaming. As a rule of thumb, video captured in the MiniDV format (also known as DV25) on a three-chip camera is often more than adequate for editing and conversion purposes. In fact, in good light, many single-chip DV consumer cameras provide acceptable video quality, although the audio quality on these cameras can be somewhat lacking.

For streaming media hosting formats, four primary options are available: QuickTime (led by the new high-quality codec called H.264 or AVC), Real, Microsoft Windows Media, and newcomer Flash 8 (or VP6, as it is referred to by its license holder, On2 Technologies). Each of these options provides acceptable or exceptional video at various data rates and can be used for either streaming or progressive downloads. DivX is another up-and-coming codec that can be used for progressive downloads as well as select DVD playback.


While many small businesses choose to have a professional graphics designer create their logo, letterhead, and business cards—the general “look and feel” of their business—these same business owners often resort to in-house creation of brochures, flyers, and other printed materials that use the same professionally-designed logo in a less-than-professional appearance. This is often done because the perceived value of a professionally designed brochure, flyer, or poster is outweighed by the cost.

This same cost issue is exacerbated when it comes to video hosting projects; too often “Uncle Joe” is called in to create an inexpensive and, inadvertently, unprofessional marketing or advertising tool. The content may look acceptable to the business owner when it is viewed on its own but completely unacceptable to the same business owner when viewed side by side with other commercials or advertising.

This side-by-side comparison is not merely an act of aestheticism: the early computer truism garbage in, garbage out also applies in streaming. For every 3 dB of noise (or snow in layperson’s video terms), the size of the streaming video file is increased twofold. So, for small businesses, it really pays to invest in proper production values up front.


Once production is complete, most videos are still in an editable format, such as MiniDV or MPEG-2; unfortunately, these formats are often 10–50 times larger than the average viewer’s available streaming media bandwidth. Until recently, the cost of programs that compress the videos down to manageable levels for streaming was prohibitive for small businesses that did only a few videos per month or quarter. While professional-level conversion programs such as Sorenson’s Squeeze, Autodesk’s Cleaner, or Popwire’s CompressionMaster are still the best choice for conversion, a recent spate of free or open-source applications have changed the playing field, offering acceptable conversions from MiniDV. Additionally, many open-source programs marketed as DVD- or movie-ripping tools work equally well for converting MPEG-2 to streaming media formats.


Little is mentioned, outside of high-end Web development firms or government institutions, about 508 compliance or other aids for the visually impaired. Yet a growing number of businesses, including small businesses, would benefit a portion of their customer base by adding closed captioning and other visual aids to their streaming and Web presence. Don’t be surprised if mandatory 508 compliance spreads beyond government Web sites, the only U.S. group currently required to provide these visual aids.


Some small businesses will distribute their audio and video content through the mail (or FedEx or UPS) on videotape or DVD. But this trend is decreasing as potential customers come to rely on the Web to get their information about products and services. In fact, an article by this author in the 2005 Streaming Media Industry Sourcebook that noted nascent industries that would soon use video streaming to drive an uptick in customer purchases—such as the travel industry—is already outdated; almost every major travel Web site has shifted to online accessibility to its previously mailed video content.

As noted at the beginning of this article, however, streaming distribution is a “great unknown” for small businesses. Each CDN interviewed for this article mentioned that their customer base spans from mid-size to large companies but that they are actively pursuing business models that would suit small businesses. They do so with hopes of growing the business opportunity from today’s startup businesses.

Nine Systems’ Helen Tse sums up the forward-thinking CDN’s approach to small-business clients. Sounding more like a savvy small business banker than a CDN exec, Tse notes that her company benefits from the “fresh set of eyes” and excitement small business customers bring to the Content Delivery Network.

“After many years of being jaded by the companies that believe they know it all and change streaming providers like clothes—always chasing the lowest price per GB—we are able to see from newbies’ eyes how incredibly beneficial and useful streaming media has become and the value our company offers in enabling these clients to leverage streaming media easily to add value to their daily business,” says Tse. “These small businesses appreciate this value and customer service we provide and they remember it when they have become above-average streaming opportunities where every streaming company in the country is trying to get their business.”


For all the benefits of streaming media and Web delivery of rich media audio and video content, very few businesses—large or small—successfully use tracking tools to monitor the effectiveness of their distributed content. Hit rates and viewership on the Web will typically be significantly lower than for traditional mediums, but targeted responses and demographic tracking will conversely be significantly higher. The Web can provide an effective marketing bargain for small businesses only if used with granular visit-and-response measurement tools that are not available for traditional marketing or advertising mediums such as television, radio, or newspapers.

Roll Your Own

For the adventurous (or frugal, as the case may be), low- or no-cost streaming servers now have the capability to handle select or even multiple file formats. Three of the better-known projects are Real’s HelixServer, VideoLAN’s VLC, and Unreal Streaming Technologies’ Media Server.

HelixServer is an open-source project based on the Helix DNA architecture, although a commercial license is also available (and required for Real Audio, Real Video, and Helix DRM—digital rights management—modules). Up until the most recent branch (version 11.0), Helix could be hosted on a non-server Windows machine, as well as FreeBSD and AIX. Under version 11.0, the server now requires Linux 2.6, Solaris 9/10, Red Hat Enterprise, or—for Windows users—Windows Server 2003, which may put Helix’s total cost of ownership out of reach for the average small business.

VideoLAN’s VLC (the acronym comes from its early player-only incarnation, the VideoLAN Client) is also available under an open-source license and takes a unique approach. VLC is primarily used as a video player but also has transcoding capabilities, which, in essence, allow users to change both formats or codecs as well as the data rate at which a video file can be delivered and serve them up to other viewers (albeit at a lower quality for lower data rates). VideoLAN provides an overview on their Web site of how to turn any VLC-equipped machine (with the exception of the PDA version) into a video server.

Unreal Streaming Technologies has taken a balanced approach with its Media Server. The company notes that “existing media servers, such as Microsoft and RealNetworks servers, are expensive and difficult to install and operate.” To counteract that approach, UST notes that Media Server “is the result of our work aimed to provide a powerful, reliable, secure, and completely free multimedia delivery system.” The popularity of the Unreal Media Server for commercial uses, though, has led Unreal, upon release of its version 4.0 Media Server, to modify its licensing agreement to strike a balance that benefits small businesses.

“While we want to keep Unreal Media Server available and free for home users and small businesses, we require larger companies that heavily use our product to purchase a license for unlimited version,” the company’s Web site notes. “The free version of Unreal Media Server has a limitation of 15 concurrent connections. This is more than enough for home and small business networks, therefore most of the users are not affected by this limitation.”

Tips and Tricks

When asked about the “why and wherefore” of small business streaming, each company interviewed gave several pointers.

Todd Loewenstein of Arcostream noted, first and foremost, that small business really doesn’t differ in its needs from its larger comrades. “Small companies have many of the same needs for streaming as larger companies—things like marketing, product info, and customer contact,” says Loewenstein. “But these small business don’t have the capital expenditure that larger companies do that build out their own server farms.”

Loewenstein noted that, while the average small business customer consumes approximately $1,000 of services per month just like other customers, the sales cycle with small customers is shorter “since they don’t need budgetary approval like a big company does.” This suggests that a small company might press for a lower price in return for a significantly shortened sales cycle; the decision, however, is completely up to the CDN, as all CDN representatives say they have to balance lower fees with equal or higher education and training for small customers versus their larger customers.

Martin Hayward of Mirror Image suggests another model that may help small businesses: the content aggregator.

“When we get inquiries from small companies and they ask about our services and what the cost is, we do mention that our minimum fee is $1,000 per month,” says Hayward. “If they can’t afford the cost, we never just turn those small companies away; we’ll do whatever we can to recommend someone else that can possibly help provide them with a solution, including content aggregators.”

An aggregator buys the minimum chunks of bandwidth or storage space from a CDN and then sells it in smaller chunks at a higher rate.

“Streaming media is still, in our opinion, in its infancy,” says Jerry Scheibeler, vice president of sales for Nine Systems, one of the leading content aggregators. “We’ve only scratched the surface of the number of clients that will be using streaming media as a primary form of communication, training, marketing, and media distribution in the future. Aggregation has worked well in the discount Web hosting market and we have no reason to expect that it will not be a part of the larger CDN picture for streaming media.”

To further address the needs of small businesses that are able to afford the $1,000 minimum, some CDNs are looking to pricing models from other industries. Mirror Image has created an innovative pricing plan based on the cell phone industry. Called the TotalValuePlan, this Mirror Image service allows for “rollover minutes” that reward long-term small business customers with the flexibility of moving minutes from month to month.

Another tip offered by at least two CDN representatives is leveraging innovative streaming content to appeal to the CDN’s desire for publicity. I faced a similar problem during a benefit concert held for Hurricane Katrina victims on Labor Day in 2005. When an article about the benefit concert appeared, listing the URL of the stream, the interest in the concert from around the world caused bandwidth usage to jump dramatically. Sonic Foundry, whose product was used to record the concert, heard about the concert and offered to host the content free of charge; Sonic Foundry even wrote a press release about the event and the use of their product, which further drove interest in the streaming content.

Mirror Image’s Hayward shares a similar story. Noting that CDNs need compelling content that they can tout to select markets they’re targeting, he noted that Mirror Image stepped up to host content that was about to receive enormous attention.

“Early in 2005, Mirror Image hosted a series of clips for a Norwegian company called the Active Child Aid Foundation,” says Hayward. “The company produced a film titled The Children of Leningrad, which was up for an Academy Award in February 2005. Mirror Image delivered the video for the company to offload the expected traffic their Web site was going to see as a result of the Academy Awards. We did this at no cost as a way to provide exposure to the plight of these children and the filmmakers who were chronicling their plight.” (It goes without saying that Mirror Image also received exposure from the arrangement.)

Dan Ushman, head of operations at midPhase—a discount Web hosting company—says his best advice for small businesses that want to stream is to start small. In many cases, the small organization will find that a Web hosting service is the right middle ground between hosting their own content and partnering with a CDN.

“People sometimes have really big eyes,” says Ushman, “and ask for dedicated servers and rates starting in the $1,000-plus monthly range. We can usually provide dedicated machines in the $150 per month range that would be more than adequate for the small business that wants to test the waters of streaming.”


Streaming video is growing in all sizes of business—multinational, mid-sized, and small. Options for small businesses to use streaming for advertising and marketing are also expanding, but a small business needs to know how to adequately address the growth potential and initial phases of its streaming endeavors. Streaming service providers understand that small business customers have the potential to turn into large business customers, so each provider offers a unique approach to meeting the demands of the growing segment of small businesses seeking rich media tools for marketing and advertising.