Streaming Media - August/September 2008 - (Page 40)

but not all CDNs still lead their marketing messages with, “We’re cheaper than Akamai.” If all it took to drive up business was for a CDN to say it is cheaper than Akamai, then Akamai would be losing a lot of CDN business right now, which it isn’t. And by now, everyone should know that CDN customers do not buy on price alone. If a customer cares about only price and thinks customer service, reporting, geographic reach, number of formats supported, and other features of the CDN offering have no value, then no CDN would want him or her as a customer anyway. The problem is that while many CDNs know this, they are still not conveying the value their services hold to the market. Many CDNs use the same marketing terms and buzzwords and are simply falling in with the crowd, getting lost in bad marketing speak. An example of this would be CDNs that say they are helping customers monetize content. You are not helping customers monetize content simply by operating a CDN. The services that truly enable the monetization of content—including transcoding, authentication, metadata management, syndication tools, custom APIs, analytics tied into advertising, etc.—are not offered by most CDNs yet. Simply delivering bits is not enabling monetization. Anyone can deliver bits. It’s all of the other pieces of the content ecosystem that really drive the monetization of content. Some CDNs have a few of those pieces, such as Akamai with its Stream OS product or a few CDNs that have a stand-alone transcoding service, but the vast majority of them don’t. with HD having a small impact this year, it still adds to the growth that CDNs are going to see in the next few quarters. Content owners are putting up more content in more platforms and at higher bitrates, and much of that content is longer in length. This all amounts to a huge increase in the number of bits being delivered via the CDNs. That being said, the real question is, "Will the CDNs be able to turn the additional traffic into additional revenue, or will more traffic simply mean the CDNs will have to lower their prices?” As any content owner should know by now, the more traffic you do over time, the lower price you pay per gigabyte delivered. But for most content owners, it’s going to take a few quarters before they see that growth. Lower pricing is not going to come overnight, and for those who aren’t doing huge numbers to begin with, even doubling your traffic may result in only small savings. Looking at contracts and pricing in the market, a large content owner doing about 300TB a month is going to get only about a 15% reduction in price on average for doubling its traffic to 600TB a month. Commitment levels and contract lengths play a factor in that percentage, but doubling traffic does not mean pricing then gets cut in half. For really large customers who grow their traffic quickly, the price per gigabyte could be cut in half, but if CDNs are doing four to eight times more traffic, then, even with the 50% price cut, they will still be earning more money. Whether or not they can make money is the question, and it goes back to the earlier point of CDNs having to use the economics of scale to operate their networks more efficiently. the state of the content delivery market, 2008 Growing the Market While the CDN market for video delivery in the U.S. is still small today, it will no doubt become a real business down the road. In the next few years, the growth of the content delivery market and the success of CDNs rely heavily on the trend we see developing for increased bitrates. Five years ago, the average broadband video stream was encoded at 300Kbps. Last year, 300Kbps was still the norm, but we saw many moving to higher quality. Within the last 6 months, we’ve gotten to the point where the average broadband video is now encoded at least at 500Kbps. We have all seen bigger window sizes and better frame rates, and all of that comes from increasing the bitrate. Gone are the 300Kbps streams and small window sizes. Many content owners are now doing 750Kbps streams, and this year, they will be delivering many more bits than last year. With most content owners using some form of a CDN to deliver their content, the CDNs are poised for some explosive traffic growth this year. The average content owners I speak with say they expect to grow traffic two to four times this year even without the increased bitrate. Factor in moving from 300Kbps to 750Kbps and content owners could push four to eight times more bits this year than last. Some say HD is going to be the biggest factor for CDN growth, but HD viewing adoption in large numbers is years off. HD will have some impact this year, but most content owners are not encoding content in this format and are focusing on a bitrate around 700Kbps. But even Looking Ahead So what are the long- and short-term opportunities that lie ahead for the CDN market? In the short term, more providers will enter the market, more money will be raised, and more telcos will slowly begin to creep into the market with their own offerings. While acquisitions are possible, I don’t see many taking place in the next 12 months. Most CDNs don’t yet have enough revenue to be an acquisition target, and most don’t have any apps or IP that make them really stand out. While there always seem to be rumors on Wall Street that Akamai will be purchased by AT&T or Cisco, it’s pretty unlikely at this time—but anything is possible. Earlier this year, we did see VeriSign sell the Kontiki business unit back to some of the folks originally involved in Kontiki, but otherwise, the market for acquisitions has been pretty quiet. The only real acquisition I see that has a really good chance of happening in the market this year is someone acquiring Limelight Networks. At the time of this writing, Limelight and Akamai were still dueling it out in court. But I expect that, when this article is in print, the judge will have already issued an injunction against Limelight, and that it will then get a stay on its appeal. If that plays out as expected, it means it’s back to court for at least another year. While some analysts think no one will buy Limelight because it is being sued by Akamai and Level 3, I still think a telco will take it out of the market before too long, especially since there is a good chance that 40 STREAMING MEDIA August/September 2008

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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