CDN Pricing Data: Average Cost Per GB Declines In Q4 Due To Startups

With all the talk in the market about the"pricing wars" taking place in the CDN industry, each quarter I review what the average going rate is and how it compares to pricing in the previous quarter. (Q3 pricing details here) The pricing data below is from my presentation last week at the Streaming Media West show entitled "CDN Pricing: Costs for Outsourced Video Delivery". The on-demand video of the presentation will be available shortly.

Before I get into pricing, there are some crucial things to cover. For starters, these are the average prices paid in the market. This does not mean that this is what every customer pays, or should pay. I list a high and low price based on the fact that there are a lot of variables with regards to the CDN product that end up determining the final price a customer pays. It is also REALLY important to understand that customers are not buying on price alone. In addition you CANNOT compare one vendor to another and doing so is not a fair apples to apples comparison. You can only compare the product lines of one vendor with another.

That being said, below is the pricing I have seen so far in Q4 and how it compares with Q3. If you look at these numbers by themselves, you will NOT get a full picture of the market. First, read my post from Monday entitled "Pricing Pressure On Akamai and Limelight Overblown By Analysts" which will give more insight into pricing.

While the high and low pricing average went down from Q3 to Q4, the reason behind that is the fact that a lot of new CDNs in the market are undercutting the more established players to try and grab some market share. Can they do this for awhile, yes. But over time, they won't be able to as they will lose money. For now, many of them have raised a lot of cash and can survive pricing lower in the market for the time being. For a new CDN, it is hard to sell a customer on value when you are new to the space and don't have a lot of customers to talk about. Over time, if they are successful, they won't have to lower prices and can sell on value, but that takes time.

These numbers also don't mean that every CDN in the market is undercutting the major players. In some cases they aren't and are selling on different features and functionality, not price. The bottom line is that pricing is still very fluid in the market on large deals, over 100TB delivered a month, BUT there is not as big of an impact in the market as many make it out to be. The whole idea that the CDN space is about to implode because there is a "pricing war" going on is inaccurate and backed up by no data. Are some companies not growing as fast as investors may like, yes. But don't blame that sole reason on the current or future price in the market. Again, there is more to a CDN than just the price.

And next year, pricing will be going up. When the new players in the market have been around for 6+ months, pricing will stabilize and many will realize they don't need to lower pricing to do a land grab. By then they should also have enough in place on their network to have an angle to up sell. We are at the point now where pricing has pretty much leveled off. Sure, there is always going to be a fluctuation in the market, but come 12 months from now, you won't see that much change in pricing at all from the established players. They won't give this stuff away at a lower price just to win business if they are going to lose money on the deal. Those days are over.

The pricing below is specific to video delivery, streaming or progressive download, there is no difference. This pricing does not include the platform license fee that CDNs charge for Flash Streaming. Before long, some things will be announced in the industry that will affect those numbers and I will cover the Flash Streaming license fee numbers at that time. The below numbers do NOT include video delivery costs via P2P. I will break those costs out in a different blog post as I now track those numbers separately.

So with all that being said, below is what the going rate is for video delivery based on a per GB delivered model. These figures are based on actual contracts and RFPs I have seen in the market and comes from customers telling me on a weekly basis what they are paying.

You can download all of the slides from my presentation here (Download DanRayburn-CDNPricingQ4.ppt)

I will be posting details on P2P pricing and P2P market trends shortly and will also cover a lot of what took place at the Streaming Media West show last week pertaining to P2P.

Comments

[grinsandfun]

HUM - there must be an assumption that the amount of content that will be streamed across the web is still growing at huge rates. I believe there are several groups moving to this medium, but you also need to go back to the 90's and early 2000, when VC's funded too many telecom companies. Guess what happened to this product set - they still sell on price to win the deals.

[James Daniels]

Came across these comments, just not representative of the market. As a base reference, Amazon has these services for less then 15 cents per GB at 50tb. This is written with many bold and italics, indicating an agenda. Best of luck to your advertisers, customers will always go with the best mix of price and service, but we are talking about content delivery....not rocket science.

[David]

Why don't you just say what CDNs are actually charging in the CURRENT market? These average prices are not representative and totally meaningless, at the lower end of the volume scale at least. I just got a quote from a major CDN, for instance, for 500 GBs per month @ $0.70/GB and 5 TBs per month @ $0.50/GB. Say whatever you want about "apples and apples," but there's an obvious intent to misinform here. Also, CDN pricing WILL NOT be going up next year... your line of reasoning is based on there being no new market entrants and runs counter to fundamental economic thought.

[Dan Rayburn]

You can say all you want that these prices don't represent the market yet they are real pricing, from real customers from real contracts.

And your examples of why the data is wrong are not valid. You mention Amazon as the example yet Amazon does NOT do streaming. Not my opinion, fact. So how can you compare the cost of a non-streaming service by Amazon, which is built out only in the U.S., to a streaming services on a global CDN. The two are not even in the same league.

[Dan Rayburn]

This IS what the CDNs charge in the current market. I'm not talking about future markets and your idea of a "major" CDN is probably not the same as everyone elses. I'm not making this pricing up, it comes from real contracts I have copies of.

And yes you are right, the numbers I track are much larger than 500GB a month, but that does not make the numbers invalid.

[David]

The CDN I referred to was CDNetworks. And I think that it is plainly invalid to say the low end of the range for 1 TB/month is $1.50 when I just gave an example that does it at $0.70, and the low end for 5TBs/month is $0.90 when I just gave an example that does it at $0.50. There are plenty of other examples too. If you're not tracking 5 TB/month contracts then why would you publish "current" numbers on them as if you are?

And surely CDNetworks is considered a major CDN?

[Steve Lerner]

Most important point above- this is only for streaming / download.

CDN is a far far more complex industry than streaming and download. Distributed DNS, web caching, reporting, HTTP, application acceleration, and consulting all make up the core and irreplaceable part of the industry.

[Dan Rayburn]

But that proves my point re: CDNetworks, they are new to the market and have more of an incentive to lower the pricing to get their service out there.

[David]

Whether or not they are new to the market is completely immaterial (they've been in the US for over a year now). They are a CDN and they are open for business, and this site is called cdnpricing.com, not akamai&limelightpricing.com or whoever these prices actually represent, if anyone. I'm not even going to go into the 5-6 other CDNs I know of that price lower than this.

You claim to be publishing current pricing in the CDN market but you simply aren't.

[Eric]

I'm curious - what is the lowest price on the low and top ends for flash streaming? Any companies you all can recommend?

[ANTONY]

I think that you should compare also services between the CDN companies.
For example when AKAMAI says HTTP delivery used for serving FLV files , the same service can be used to serve the WHOLE DYNAMIC site of the customer with large gains in performance and the cost of the infrastructure.
A similar service is not available from the competitor companies and this is the reason that I think that the price of AKAMAI would be higher (from HTTP delivery and not Streaming) not only because they are giving to the customer the 26.000 servers as a capacity but
because they are offering 100% TOTAL SITE DELIVERY of his dynamic site.

[Jonathan Boutelle]

Thanks for posting this: I'm currently shopping for a CDN, and this information is quite useful.

Any chance you could upload your ppt to SlideShare? I found it quite informative, and I'm sure more people would read it if they could view it as an embed (rather than downloading it). Uploading to slideshare can also give you exposure to new readers and to drive traffic back here! Just a thought... ;->

[Terri in Tokyo]

Thanks for this, Dan.

[Norman Arthur]

Hi. Thanks for the discussion and the numbers. Do you have any priocing updates as to where we are in Q1?
Thanks,
NA