Akamai Said To Be Guaranteeing AT&T $100M In CDN Reseller Deal

At the end of last week, and over the weekend, multiple people from the industry were sharing with me what they know about the negotiations between Akamai and Limelight, who are both competing for a CDN reseller contract with AT&T. Everyone I spoke with said they expect Akamai to win the contract and all of them also said that as part of their proposal, Akamai is guaranteeing AT&T at least $100M in revenue, over a multi-year deal. Some people told me the deal size was $100M and others said it was “more than” $100M, but either way, it sounds like Akamai has put forth the best revenue numbers.

While $100M may sound like a lot of sales, when it is spaced out over a couple of years, it’s really not that much revenue for AT&T. But I’m also hearing that Limelight was only willing to guarantee half as much revenue to AT&T, between $40-$50M, which if true, it’s probably one of the reasons why everyone I speak to keeps saying Akamai will win the deal. Of course, until a contract is signed, none of this is official and we still need to see AT&T execute on this new strategy. Companies put a lot of ideas and plans on paper, without following through with them, but from everything I am hearing, it sounds as if AT&T is looking to wrap this up pretty soon and sign a contract with Akamai or Limelight.

  • http://twitter.com/Rob_Powell Rob Powell

    Silly question perhaps, but if AT&T is the one doing the reselling of Akamai/Limelight CDN services, how can either ‘guarantee’ a certain level of revenue?

    • danrayburn

      Hey Rob, there are a lot of ways this can work, and I don’t know the details as of yet, but many times with deals like this, the vendor (Akamai) agrees to buy back a certain amount of services from the reseller (AT&T). Akamai is already buying transit, co-lo etc. so they might agree to buy it from AT&T, buy more from AT&T, get it for a lower price etc… in a reseller deal this size, usually the reseller wants something in return. And it would make sense Limelight could not match Akamai’s number as they simply don’t buy as much as Limelight does in the way of network services.

      If we think of the deals that Akamai has done like this in the past, we’ve seen this kind of thing happen. Brightcove got Akamai to resell their service, but Brigthcove also then gave Akamai a contract to use their CDN. So large reseller deals usually have some kind component like this.

      Again, I don’t know what it entails, and there are more ways this could work, but I think that’s the most logical.