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DIGITALVIDEOCOMPRESSIONSTANDARDS 549work item to the whole international standards organi-
zation. Once the work item has been approved, working
groups of experts define the scope, then proceed to nego-
tiate the technical details of the specification. In the final
phase, the voting members put the standard specification
to a vote. If successful, the specification is published as a
new standard. The standards are revised periodically. The
simplest approach to verification of the implementation
of standards is through test models and compliance bit
streams.Intellectual Property Issues
Although a standard may be defined and published, prac-
ticing that standard may require licensing a number of
patents essential to performance of the standard. The
MPEG LA organization (which grew out of the MPEG
Intellectual Property Rights Group) maintains a list of
about 20 patent holders who have decided to pool their
patents for common licensing, a practice which has raised
questions of antitrust law violation. Although the licensor
MPEG LA did not collect royalties on MPEG-1, it didTable 6Hypothetical iModeTMLive Customer Service Business ModelDigital Video Business ModeliMode Live Customer Service Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Avg Subs 27,000,000 41,600,000 56,200,000 70,800,000 85,400,000 100,000,000
% who use customer service 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Avg users per day 270,000 416,000 562,000 708,000 854,000 1,000,000
Conversion Rate (daily) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
purchases/day 2,700 4,160 5,620 7,080 8,540 10,000
Average Purchase $20.00 $20.00 $20.00 $20.00 $20.00 $20.00
Monthly Subscription per Sub $10 $10 $10 $10 $10 $10
Gross purchase revenue per day $54,000.00 $83,200.00 $112,400.00 $141,600.00 $170,800.00 $200,000.00
Gross subscription revenue per day $90,000.00 $138,666.67 $187,333.33 $236,000.00 $284,666.67 $333,333.33
Gross revenue per day $144,000.00 $221,866.67 $299,733.33 $377,600.00 $455,466.67 $533,333.33
days in year 365 365 365 365 365 365
Annual Gross Revenue $52,560,000 $80,981,333 $109,402,667 $137,824,000 $166,245,333 $ 194,666,667
Content Partner Revenue Share 90% 90% 90% 90% 90% 90%
Content Partner Net Revenue $47,304,000 $72,883,200 $98,462,400 $124,041,600 $149,620,800 $175,200,000
Carrier Revenue Share 10% 10% 10% 10% 10% 10%
Carrier Net Revenue $4,730,400 $7,288,320 $9,846,240 $12,404,160 $ 14,962,080 $17,520,000
Capital Costs
Maximum Concurrent Usage 10% 10% 10% 10% 10% 10%
New Streams Required 27000 41600 56200 70800 85400 100000.00
Server Capacity (bps) 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000
Bandwidth per stream (kbps) 2 22222
Number of New Servers 1 00000
Cost per Server $10,000.00 $4,996.17 $2,496.17 $1,247.13 $623.09 $311.31
Cost per Stream $50.00 $50.00 $50.00 $50.00 $50.00 $50.00
New Server Costs $10,000.00 $0.00 $0.00 $0.00 $0.00 $0.00
New Stream Costs $1,350,000.00 $2,080,000.00 $2,810,000.00 $3,540,000.00 $4,270,000.00 $5,000,000.00
Total Server Cost $1,360,000.00 $2,080,000.00 $2,810,000.00 $3,540,000.00 $4,270,000.00 $5,000,000.00
Amortized Server Costs $452,000.00 $1,145,333.33 $2,082,000.00 $2,812,000.00 $3,542,000.00 $4,270,000.00
Operating Costs
Bandwidth Costs
Sessions per year 985,500 1,518,400 2,051,300 2,584,200 3,117,100 3,650,000
Average 5 min call (128-byte packets) 600 600 600 600 600 4176
Total Usage (packets) 591,300,000 911,040,000 1,230,780,000 1,550,520,000 1,870,260,000 15,242,400,000
Bandwidth costs ($ per packet) 3.E-02 4.E-03 6.E-04 9.E-05 1.E-05 2.E-06
Total Bandwidth Costs $15,373,800 $3,613,811 $744,840 $143,158 $26,345 $32,757
Cost per Rack Unit $900 $900 $900 $900 $900 $900
Rack Units (2RU servers) 1 00000
Racking Costs $450 $0 $0 $0 $0 $0
Total Network Costs $15,374,250 $3,613,811 $744,840 $143,158 $26,345 $32,757
Number of CSRs 135 208 281 354 427 500
Vod Staffing Costs per CSR $16,000 $16,544 $17,106 $17,688 $18,289 $18,910.00
Total Staffing Costs $2,160,000 $3,441,152 $4,806,786 $6,261,552 $7,809,403 $9,455,000
Equipment Maintenance $1,000 $0 $0 $0 $0 $0
BadDebt (@ 2% of Revenue) $1,051,200.00 $1,619,626.67 $2,188,053.33 $2,756,480.00 $3,324,906.67 $3,893,333.33
Marketing/Promotion $525,600.00 $809,813.33 $1,094,026.67 $1,378,240.00 $1,662,453.33 $9,733,333.33
Total Operating Costs $19,564,050.00 $10,629,736.69 $10,915,706.27 $13,351,429.72 $16,365,107.75 $27,384,423.37
P&L
Balance Sheet $27,739,950 $62,253,463 $87,546,694 $110,690,170 $133,255,692 $147,815,577