What Could Apple’s iCloud Service Be Worth To Akamai? Here’s Some Numbers

Over the past few days I've been getting a lot of emails from individual Akamai shareholders as well as some Wall Street money managers, asking me what Apple's iCloud service might be worth to Akamai, if Akamai is doing the delivery for the new streaming music service. While I don't know if Akamai will be supporting the new iCloud service, my initial guess is that they will be. They are already the exclusive CDN for all of the iTunes content and back in January, I reported that Apple had renewed their contract with Akamai for additional volume for new services.

If Akamai is doing the delivery of content for the iCloud service that's good for the company, but the value of the delivery business won't be big since as far as we know, iCloud will only be for music and not for video. Trying to estimate the exact value of this new service to Akamai or any other CDN is hard, since we don't have any historical traffic data to go off of. Also, Apple's contract with Akamai is priced based on per Mbps sustained, not per GB delivered and all of Apple's other traffic determines the final price per Mbps paid. But if we run some calculations using per GB delivered pricing, we can get a rough estimate of what the contract could be worth.

Apple sells on average about 250M songs per month and that rate is only growing. If we estimate that users will stream 100% of the number of songs Apple sells per month, a three and a half minute song transfers about 1MB which would be 250,000 GB of transfer a month. If Apple was paying a penny per GB delivered, the cost to Apple would only be $2,500 a month.

On the flip side, if users stream more music with iCloud than they buy, which is highly possible, and did 4x what Apple sells each month, then the delivery value for iCloud content would be worth $10,000 a month to Akamai. Of course, these numbers don't take into account additional services Akamai might be providing to Apple to support iCloud, for instance security services or other solutions termed "value add" by the company, and the 250M stream numbers per month to start could be low. We just don't know since we don't have historical data to go from.

But the bottom line is that the delivery of audio content from iCloud is not worth that much to Akamai or any other CDN. The other services around iCloud could be worth more and if iCloud ends up supporting video content down the road, then the value of the delivery business would be much higher.

  • Mike D

    “If Apple was paying a penny per GB delivered”, what is this assumption based on. 1 penny seems not very reasonable.

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

    They would be paying much less than a penny. You can see the going rate for pricing at http://www.cdnpricing.com, but that’s pricing for the average customer. Someone like Apple, Netflix, etc… would be getting much lower pricing due to their volume.

  • R

    Dan, any updates to your thoughts following the announcement yesterday? No music streaming, but syncing and backups should generate some decent traffic, no?

  • http://www.ramprate.com Steve Lerner

    shhhhh don’t reveal the dark secret of CDN (and the music business) which is that there is nothing there!