[reggieband]

You can't compare it to how much it costs YouTube. You have to compare it to how much it would take to build yourself.

Here is Fastly CDN pricing https://www.fastly.com/pricing which is a good enough indication of the market value of data transfer costs. Note that CDNs charge in $/GB (big B byte) and video is usually considered in Mbps (small b bit). Consider that the most costly tier of Amazon service ($0.17/hour) is based on a 8.5 Mbps 1080p stream. You should be able to use that to calculate if the service is competitive to bulk data transfer.

Quick math:

    8.5 Mbps / 8 = 1.0625 MB/s 
    * 60 * 60 = 3825 MB/h 
    / 1024 = 3.73 GB/h
    * 0.08 $/GB = $0.30/hour

So based on that math, not a bad deal. Of course, Amazon is assuming (rightly) that with adaptive bit rate most people won't be streaming 8.5 Mbps continuously. And since they own their own CDN (Cloudfront) they aren't paying $0.08/GB. In fact, anyone doing significant bandwidth would get a discount.

This is all very hand-wavy math but it should give you some insight as to why there are so few competitors in the consumer video space. Video delivery is just plain expensive from a data transfer perspective.

[notyourday]

It is worse than that.

In order to do streaming well (i.e. to prevent consumers from running away and coming back), one needs take an incoming stream and re-encode it in multiple bit rates - 1080p stream would have not only 8Mbit/sec but also 2Mbit/sec, and 128Kbit/sec qualities. In addition to that for a decent distribution there should also be a 4Mbit/sec and probably 64kbit/sec streams.

As players either hunt down or hunt up, one would be carrying a pretty big number of random cold chunks that are unlikely to be requested again at the edge, which has a negative impact on hit CDN hit rates.