Streaming Media - 2008 Industry Sourcebook - (Page 51) The real question is, how big will the CDN market for video delivery grow in 2008? Based on what I am seeing in contract terms, increased bit volume, higher bitrates, and other factors, I expect to see the U.S. video delivery market grow to about $800 million in 2008. If you factor in the revenue for P2P delivery networks in the new year, that number could go up another $20 million on the low end or $40 million on the high end. I talk to a lot of content owners large and small, and no matter what subject we are discussing, I always ask them for their predictions on their traffic growth for 2008. While many of them share their numbers with me but don’t allow me to make them public, the vast majority of content owners are telling me that they expect to deliver two to four timesmore bits this year than they did in 2007. For most of them, that does not take into account the fact that this year, many content owners are bumping up their encoding bitrates from 300Kbps to 500–750Kbps. Taking those increased bitrates into consideration, they could see their traffic growing from four to eight timesover last year. In most cases, nearly 100% of this content is being delivered via content delivery networks, so it’s the CDNs who really make out from this growth. But the real question is whether or not as the number of bits goes up, the price per GB delivered comes down to the point of where the volume really does not make up for the reduced price. From what I can tell, even if a content owner increases its traffic by four times over last year, the typical price break it is going to receive is somewhere around 35%. On a 200TB/month commit, a customer who now is paying say 20 centsper GB delivered will be paying on average around 13 cents per GB delivered for 1,000TB/month. Now that’s not what every content owner is paying—some pay more, some less—but if we use that as an average, CDNs should still see higher overall revenue based on increased volume. The whole idea that the CDN space is about to implode because there is a “pricing war” going on is inaccurate and backed by no data. For larger deals, that may not be the case. For content owners who do 500TB/month today and grow to 2,000TB/month this year, I expect they will see close to a 50% reduction in price based on the additional volume. So for some of the really large customers, more bits delivered may not equate to more revenue for CDNs. The bottom line is that content owners are expecting to deliver a lot more bits this year and don’t see the recession cutting back on their growth or spending. WWW.STREAMINGMEDIA.COM 51 industry update Predictions for 2008 http://www.abacast.com http://WWW.STREAMINGMEDIA.COM
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