Digital Fountain Building Out Content Delivery Network For 2008 Launch

Back in April, Digital Fountain quietly announced at NAB that they would be building out a CDN for streaming media delivery and last month, again quietly announced they had hired a GM to run the CDN business unit. I had the chance to speak with Digital Fountain last week about the build out and get a sense of where they see themselves competing in the market.

While I believe that there is still plenty of time left for companies to be bale to enter the CDN market, Digital Fountain did say that they don't expect to be able to offer their CDN service until the first quarter of next year. That time frame is going to position them really far behind most of the competitors, especially when the service when it launches will be so limited.

When the service is ready next year, it will only support streaming media, no progressive downloading options will be available and they will only be targeting customers with long-from content at bitrates over 500Kbps. They plan to only support H.264 at launch and customers who want to use their delivery services will need to have end-users download a client based plugin, similar to what you need to do today if you use Move Networks platform.

I had a long chat with Digital Fountain about many aspects of the CDN business today and the needs that customers have for content delivery. But we don't see eye to eye. Digital Fountain really believes that if the quality of video on the web can be increased, then more consumers will watch more video and the CPM rates will then increase. I disagree. If the technology and quality is the hurdle, then why don't content owners today encode all of their content at 750Kbps? It would not take much to increase the quality. Most of the broadband content today is encoded at 300Kbps, the same bitrate it was 2-3 years ago. The problem is not the technology but rather the additional costs content owners will have to pay to distribute the additional bits. If a company can increase the quality and also decrease the price, great, but that is what the P2P providers and others "claim" to be able to do, but to date have gotten very little traction at all. I think they forget that it's not about replacing traditional CDN delivery with P2P or any other technology, it's about using the right combination of technologies based on many factors. Does streaming media replace progressive downloads? No, they are compliments to each other and choosing the right combination is based on many factors surrounding the content, the device and the user. Delivery is the same way.

Does Digital Fountain have a chance? Possibly. In this industry I think anyone has the ability to carve out a section of the market since here is still do much business still out there. Will the market still be like that come Q1 next year? I believe it will. But Digital Fountain will be very limited in who they can sell the service to if it only support streaming and H.264. There may be a market out there for only H.264, but it is a very small one at that. If Digital Fountain expands their offering a bit and supports more in the way of what customers want, they have a better shot at being able to go after a larger percentage of the market and a greater chance at success. But only time will tell. By the time they launch the service, they are going to be years behind their competitors.

Comments

[Digital Fountain]

Dan,

Interesting points. Please allow us to clarify a few things:

The technology used in Digital Fountain’s CDN offering is unique and until recently, ahead of its time. We realize that it is difficult to understand our approach without seeing a live demonstration, however, the truth is that the way in which our CDN solution handles streaming media makes progressive downloading obsolete. Our solution offers instant, full screen TV-quality right from the start. This may sound too good to be true, but it really is the case (we invite anyone to schedule a live demonstration at our offices in Fremont, CA). This same technology has already been standardized by leading IPTV standards bodies across the globe for delivering high-quality video experience over IP networks.

We firmly believe that quality of experience is extremely important. Not only do our customers (tier 1 and 2 content providers) tell us this, but a recent report by Jupiter research confirms that the consumer feels the same way. According to Jupiter’s research, the top 3 reasons why consumers are dissatisfied with viewing video online are: #1 - Interruptions / Buffering, #2 - Video took too long to begin, and #3 - poor picture quality. Digital Fountain’s CDN solution eliminates all 3 of these problems. In addition, Jupiter’s research shows that for those that are dissatisfied with their online viewing experience, 60% would be less likely to watch more videos on that same site, 43% would go elsewhere to watch video, and 27% claim they would be less likely to visit that same site for any reason! Clearly – quality is important!

If content providers increase bitrates, the average consumer would not necessarily have a better experience! Quality is not just bit-rate, but also reliability, lack of re-buffering and instant start. These things get more difficult to mitigate as bit-rates increase. In addition to economic concerns, there is also a significant technology barrier to these problems. P2P claims to address the cost issue, but arguably the cost just shifts to ISPs, and it doesn’t address the other quality issues – in fact it may make them worse (p2p users know all about re-buffering).

Digital Fountain’s CDN solution is for both short-form and long-form content, and to support formats beyond H.264. However, it is our belief (and the market confirms this) that H.264 will be the single most popular encoding format moving forward, due to its cross-platform capabilities.

We realize that all of this might sound too good to be true, but we look forward to proving our point early next year when our solution goes live. Stay tuned!

[Dan Rayburn]

That's all great, but as we have seen many times, the best technology is not what always gets adopted. A for H.264, I don't see any market data like you say that shows it is the most popular encoding format today, or will become the most popular down the road. Of the top 25 video sites on the web, the major portals, the news sites, the ones who have all the content and traffic, how many are using H.264? I don't think a single one of them.

[Digital Fountain]

Dan,

The most recent example of a top 25 video site going to H.264 is YouTube, of course. This was widely announced a few months back. Google 'YouTube H.264' to access several articles and blogs that cover this announcement.

[Dan Rayburn]

To me personally, YouTube is not a good example. The ONLY reason they went to H.264 is because of the deal with Apple for the Apple TV product. If not for that, YouTube would not be using H.264