Data From Q1 Shows Video CDN Pricing Stabilizing, Down 25% In 2010

Last month, at the Content Delivery Summit, I presented my latest pricing data from Q1 for video delivery services amongst the major content delivery networks and had the chance to meet with dozens of large content owners in the M&E space. (You can see the video of my presentation here.)Overall, pricing remained pretty stable and from everything I have seen so far in Q2, 2010 should be a pretty stable year for pricing when compared to 2009. Now halfway through the year I am willing to bet that the average pricing decline for video delivery will be between 20%-25% for 2010 compared to a average decline of 40%-45% for last year. (note: you can always find my latest pricing post at www.cdnpricing.com – Previous Quarters: Q4 09, Q1 09, Q4 08, Q3 08, Q2 08, Q1 08.)

At the same time, content owners I spoke to have some realistic expectations of growing traffic 40%-50% this year which means for the first time in five to six quarters, the CDN vendors in this space have a real good shot at improving their margins. While we have seen Akamai reducing pricing for video delivery services in the M&E vertical over the past two quarters, most of their re-pricing appears to have been completed. On new deals, Akamai is still being aggressive and coming close to Limelight and Level 3’s pricing or tend to be just a little higher. Without a doubt, they have made their competitors jobs much harder when it comes to competing on price.

While it is impossible to know just how much market share the vendors have and who’s taken the most share from one another, in the first half of this year I have seen Level 3 have more momentum in the market than Limelight. While Level 3 does not do as many press releases and is not as vocal as some of their competitors, I continue to see them growing quietly in the market. Akamai’s been able to retain their market share only due to their re-pricing strategy and while Limelight hasn’t gone anywhere, we have yet to see them really ramp their revenue and take the business to the next level. For Limelight, 2010 is going to be a make or break year for the company and I’ll have more thoughts on that is a separate post shortly.

Pricing
While I know some vendors don’t like it when I always talk about Akamai, Limelight and Level 3, one can’t argue with the fact that these three CDNs account for probably 70% of the entire market, specific to video delivery. Smaller guys like EdgeCast are still going strong, CDNetworks is rolling out new app services and guys like Amazon and others are making good traction in the SMB size of the business. But that fact remains that for all of the CDNs that have raised money and come to the market saying they will challenge the big boys, none of them have yet been able to even put a dent in the big three.

Part of that is simply due to the economics of scale. It’s hard for a smaller CDN to compete with someone like Akamai on volume or with a Level 3 who owns the network. Of course this also makes many ask when the telcos and carriers are going to enter the space with their own CDN offering, but those days are long off. At the Content Delivery Summit, we had over a dozen carriers and telcos who all said the same thing on stage, that being that the market for video delivery service simply is not big enough. They didn’t see the need to have to own the CDN product for another 2+ years. While some want to always disagree with me when I say the carriers won’t be competitors anytime soon, you don’t need to believe me, the carriers were very open and vocal about this on stage at the conference.


So much went on during the Content Delivery Summit that there is now way for me to recap it all but we now have all of the session online and available for viewing at www.streamingmedia.com/videos

I’ve been getting a lot of questions since the summit about traffic growth, pricing trends, value add services, app acceleration, device penetration, dual-vendor sourcing etc. and I still have not had the time to write up all the posts I wanted to. So in the mean time, while I try and get to all of these, please feel free to put any questions you have in the comments section and I’ll try to answer them the same day.

In the second half of this year Frost & Sullivan will be releasing our annual report on the size of the content delivery market for video and I’ll have more data and details to share about that shortly.

  • http://www.atanar.com Damien Wetzel

    hello Dan,
    You should precise if the above pricing is for yearly commit or
    monthly commit. I believe it’s yearly but i’m not sure.
    Thank you,

  • http://profile.typepad.com/kindmartinwordpresscom Kindmartin.wordpress.com

    Hi Dan, Martin from Argentina here just updating US/global CDN pricing and I found that now the CDN world is flat!!! ;-)
    I mean if you commit i.e. 50TB/month you will pay something like USD 20k but if you commit 500TB you will pay the same USD 20k !!! (taking a .4 avg figure for 50TB and a .04 avg one for 500TB )
    So I thing from a CDN point of view, all we are very welcome to forget about the prices, just bring us all the traffic you can make people eat!!

  • Daniel Chapman

    Hi Dan
    Are the costs and trends you provide specifically for the US market? We’re a media company in New Zealand distributing vieeo content online. I’m wondering how relevant this information is for us.
    Thanks
    Dan

  • http://www.cdnxite.net cdnXite

    Daniel, The information is very relevant, as there are non Australian and New Zealand CDN providers, so you need to buy from an US provider. A few US CDN providers have offices in Australia.

  • Tom Farq

    Hello Dan,
    As others have asked, and more specifically, is this for a data transfer usage per month or per year or indefinite (allowing usage of bucket over the course of the billing contract, and then what is the avg billing contract, 1 year?)
    If the answer is, “it varies”, then can you shed any more detail on what type of contract/duration was necessary to get these numbers with Akamai and Limelight specifically?
    For example, must 500TB be used per month or per year to get $.02/GB -> $.06/GB pricing ?
    Can we assume Akamai, Limelight and Level 3 are averaging on the high end of each bracket (closer to $.06/GB in this case) ?
    Thanks!

  • http://www.BusinessOfVideo.com Dan Rayburn

    Yes, this is for 12 month contracts, U.S. based pricing.

  • Download Content

    I was talking to a former employee at one of the CDN companies. The price per GB is apparently a bit misleading – CDN’s are starting to make money through “value added services”….He pointed out that overall, price per GB after all the value adds could be more than double the base price. Can anybody expand on this? Would love to learn more.

  • http://www.BusinessOfVideo.com Dan Rayburn

    These prices are for video delivery. This pricing is not for services like DSA, app acceleration, commerce services etc….. “value add services” are priced very differently. Those services and pricing can’t be compared to video delivery pricing. One has nothing to do with the other.

  • Download Content

    Interesting. Thanks. Any insights on Value Added Services are priced – I presume it’s not per GB.

  • CI

    Most people talk about the high usage customers of CDN (50TB or more). How about those small and medium size websites who also needs CDN? I am sure most of the small and medium size websites’ owners doesn’t wish to maintain a 1TB or even more contract.

  • Lee

    Hi Dan,
    Any update on the pricing for Q3 or latest trends for Q4 2010?
    Thanks,
    Lee

  • http://www.businessofvideo.com Dan Rayburn

    Hi Lee, I will be presenting the latest pricing in-person on November 3rd at the Streaming Media West show in LA. The week after that the info will appear on my blog.
    Thanks
    –Dan

  • Anthony

    Hi Dan,
    Is storage on the edge included in this price? If not, is there a separate per monthly GB storage fee?
    Also, is there a price premium on live content vs. pre-produced content?
    Thanks,
    Anthony