Streaming Media - August/September 2008 - (Page 38)

we’re back to 50, but for how long? At some point, investors are going to want to see some return on their money, and with fewer video delivery networks focusing on doing more than just delivering bits, it’s going to be hard to get acquired unless they can show a lot of revenue, which most don’t have. While all this is going on inside the industry, on the outside, customers who are trying to choose the right video delivery network for their needs are more confused than ever. Thirteen years on, there are still no standards for online video and no agreed-upon way to fairly compare one vendor against another for the many different levels of services. In addition, while video delivery pricing continues to drop each year (see www.cdnpricing.com), it’s no longer falling at the rates we have seen in years past. All the while, consumers are watching more online video content more frequently, at higher bitrates, for longer periods of time, and on more devices. More than ever, CDNs are a crucial piece of the puzzle in helping this industry grow to the next level. When it comes right down to it, the entire CDN market hinges on the ability of all CDNs to be able to use the economics of scale to operate their networks more efficiently. They need to spend less money to deliver more content with fewer resources and less infrastructure so they can reduce pricing to drive more consumption while still trying to earn a profit. Today, most CDNs are still losing money and spending a lot on capital expenditures, all while trying to stand out in a very crowded market. Today, it is harder than ever to distinguish CDN providers from one another and to get a clear picture of exactly what they offer, what their market focus is, and what sweet spot they are going after. While many of the new entrants in the market over the past 12 months have taken aim at Akamai and Limelight, which are the No. 1 and No. 2 companies in the industry based on video delivery revenue, few have managed to take away any real market share from them. But that’s not to say competitors aren’t trying and that things aren’t getting interesting, especially with telcos such as AT&T and Level 3 now eyeing and entering the market. That’s not to say, however, that AT&T or any other telco can’t make an impact in this market. For the past year, Level 3 has been hard at work building out capacity for its CDN and adding many of the ecosystem pieces that content owners are struggling with in the workflow. When Level 3 ties its Vyvx service and the applications it has from the Servecast acquisition into its CDN offering, the company will have a unique product on the market that allows it to control content from creation to distribution. While many don’t give telcos a shot at being real competitors in the CDN market, most are underestimating Level 3. I expect that by the end of this year, the company will be the No. 3 provider in the U.S., based on CDN revenue, and it will quickly become the No. 2 provider behind Akamai next year. While AT&T and Level 3 are the only telcos in the market today, additional telcos have confirmed that they will be entering the market shortly. The real question is whether they will have the mentality of wanting to build everything themselves, like most telcos do, or of acquiring smaller players in the industry to get to market faster. Either way, one thing is for sure: The CDN market has yet to peak, and new providers will continue to enter the market in the second half of this year. the state of the content delivery market, 2008 P2P and Hybrid CDNs In addition to the venture capital (VC) money that CDNs have raised, we’ve also seen quite a bit in the market about new P2P or hybrid CDN offerings. While P2P has been around for many years now, it has begun to get a lot of mainstream attention in the media in only the past 12 months or so. As new CDNs enter the market, many are solely focusing on trying to reduce the cost to deliver video and/or increase the quality of the video being delivered. Many P2P-based solutions are attempting to challenge the CDNs for the same video delivery business, but with little luck. In order for P2P to make it, it has to be combined with a service-based offering. It can’t try to fight against the traditional means of CDN distribution or it will lose. It has to be combined with all other forms of delivery and be thought of as just another means of video distribution. In my eyes, the biggest point people are missing is that P2P is a complement to a CDN, not a replacement for it. Some CDNs, such as Velocix, use a hybrid model that combines a traditional edge CDN with P2P for delivery, but most CDNs today are using one form or the other. The Telcos Cometh Back in December, AT&T announced that it would spend $70 million to $80 million this year to build out its CDN offering and focus on the video delivery business. But while financial analysts have been quick to downgrade Akamai every time a telco says it is going to enter the CDN market, even AT&T won’t make a big dent any time soon. You can’t build a CDN overnight, even if you are a telco and own the pipes, and while placing servers and turning up capacity is not hard, it’s all the other pieces around the CDN offering you need to have in place that make it difficult. Without reporting, content management, transcoding, etc., no CDN offering can get very big, and AT&T is aiming to have only 400Gbps of capacity for all of its CDN services by year’s end, which is only 20% or less of the capacity that some larger players have in the market. 38 STREAMING MEDIA August/September 2008 Marketing Mishaps While the technology surrounding the different CDN offerings will always be debated, the fact remains that today, customers have a very hard time comparing one CDN offering to another. Two big reasons for this are that the CDNs are still not doing a good job of marketing their services and they aren’t listening to their customers. Based on a CDN survey that StreamingMedia.com conducted this year, more than 75% of the more than 1,000 respondents said that poor reporting and analytics was their No. 1 complaint about their CDN. Even with that data, most http://www.cdnpricing.com http://StreamingMedia.com

Table of Contents Feed for the Digital Edition of Streaming Media - August/September 2008

Streaming Media - August/September 2008 Table of Contents No Doubt - Editor's Note Mo’ Videos, Mo’ Money: Solving the Problem of Network Cost Why Good Design Matters More Than Ever: Just. Press. Play. Technology and Business Trends by the Numbers High-Touch Encoding With Microsoft Expression Encoder 2 The State of the Content Delivery Market, 2008 Get a Life: New Tools Put Lifecasting Within Anyone’s Reach So Many Codecs, So Little Time: Comparing H.264 Files Using Codecs From Apple, Dicas, and MainConcept Writing an RFP for Maximum ROI: Things to Consider and Questions to Ask When Writing a Request for Proposal for a Corporate Webcasting System The Patent Wars Producing Screencams in Camtasia Studio Analyze That Using Video to Communicate Change for Business Success Intellectuals’ Property Rights

Streaming Media - August/September 2008

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