CDN Survey Data: 52% Have No Commit Contracts, 63% Use One CDN Vendor

The StreamingMedia.com survey on CDN pricing and trends has now been filled out almost 1,000 times. I'll be keeping it open for another week or so and then we'll start to compile all the data and give away the free iPhone. Taking a look at some of the preliminary data that has been collected reveals some great data points which I will be showcasing all this week on the blog.

When it comes to the length of CDN contracts, customer commit levels and dual-vendor strategy, there has a been a lot of speculation in the market on what the trends are. Here is the data we collected from nearly 1,000 respondents, 25%+ of which are doing over 25TB of delivery per month.

• 60.8% of respondents said they had a 12 month contract with their CDN. Only 12.9% had a two year deal.

• 73.5% said that when they renegotiate their contract, they don't plan to change the length. Only 12.4% said they planed to sign a longer term contract.

• 52.3% of respondents said their CDN contract had no revenue or bandwidth commitment at all. 25.3% have a monthly commit, 6.7% a quarterly commit and 11.4% have a yearly commit.

• 63.3% of respondents said they used only one CDN vendor for the delivery of video and static content. 26.% use two CDNs and 10.3% use three or more.

You can download the pie chart data for the questions here:(Download CDN-Contract-Data.jpg)

Job Opening: Media Delivery Sales Execs, Pando Networks

Pando Networks is currently looking to fill an immediate need for a Media Delivery Sales Executive located in NYC or LA. With nearly every major media company considering peer assisted delivery for long form, high res content, this it’s a good opportunity for someone who’s not afraid to sell into a developing market environment with an emerging leader.

If you are interested, contact David at Pando Networks.

If you are looking for a new position, have taken a new job or are a company that has a job opening, let me know. In many cases I will highlight it here on the blog - free of charge.

DivX Finally Shuts Down Stage6 Portal

Today, DivX announced that it would be shutting down the Stage6 video portal effective this Thursday. DivX originally planned to spin off Stage6 as a separate company late last year but then announced in December that it was looking for strategic alternatives instead.

I'm never pleased to see any service or video portal have to close but this is the best thing DivX could be doing. Operating a portal was not their core business and the last thing we need right now as an industry, or as consumers, is more video portals. Stage6 never got any real traction in the industry, was not a service I heard others discussing and had very little in the way of usage by content owners.

From the get go the service was destined to fail as DivX was using the site to showcase their own technology. The problem being that if the only way you can try to showcase adoption of your technology by content owners is by running your own website, it won't work. The shut down notice on the Stage6 website says the service was started "with the mission of empowering content creators and viewers to discover a new kind of video experience." I'm not sure what that "new kind of video experience" was they are referencing but I think too many companies in the industry think that just because they encode video at high bitrates or large window sizes, they will be successful. You have to do more today than just deliver video that looks good, you have to have a business model behind it and their needs to be a demand for the service.

A high-quality, high-bitrate, large window sized video content offering does_not equal success by itself.

Microsoft Gives First Look At Silverlight 2 Functionality

Last Friday, Scott Guthrie from Microsoft gave out details on his blog about the next version of Silverlight. Scott says that Microsoft will soon release the first public beta of Silverlight 2, which will be a major update from the initial release of Silverlight nearly 7 months ago. Scott says he'll be doing a bunch of blog posts over the coming weeks talking about Silverlight 2 in more detail. Head over to his blog for the details.

Take A Survey On Encoding/Editing Systems: Win A PlayStation 3

StreamingMedia.com is conducting a survey on editing systems, encoding software and content workflow. Also of interest are streaming formats and delivery methods. The survey should take no more than two minutes to complete and all respondents will be entered into a drawing for a free PlayStation 3. The winner will be notified on March 15, 2008.

Adobe Gives Details On FMS 3 Benchmarks, Live Streaming and DRM

At StreamingMedia.com, we operate seven different e-mail based discussion lists based on various topics with over 5,000 members. Our lists are free to join and it's a great place to get answers to your questions from others in the community. One of our most active lists is the "advanced" list where more of the technical discussions take place.

Last week Adobe gave some public info on the benchmarks for the new Flash Media Server 3 and also
addressed the topic of live Flash and DRM. Here are some excerpts on the info they gave out.

Flash Media Server 3 Benchmarks

"The benchmarks for Flash Media Server will be out shortly. I can leak that the numbers will show a staggering difference from the version 2 of the product. We are seeing 200% on Windows 2003 (SP1; Standard) increase in both VOD and Live capacity given the same hardware. In Linux, the numbers are over 300%. The key factor for streaming servers is the threshold of how much CPU usage someone will run. Similar to how high you rev the engine to get your speed. We’re seeing a 1Gbps network card saturated with just 20% CPU on Linux. Given this is our lab, which we use as a baseline for testing.  RTMPE (the new real-time Encryption protocol) only adds an addition 10% to the CPU usage."

Flash Player Adoption

"We all know that Flash Player is ubiquitous across both the consumer and enterprise markets. This is the core runtime required to render a video, and connect via RTMP or encrypted RTMPE protocol to FMS. We just published the December 2007 census and Flash Player 9 now enjoys a 97% penetration in mature markets."

Flash Live Quality

"Live video in Flash can be done in 3 ways."
1) Using the Flash player’s live capture feature (SPARK/Nellymoser Codecs); (webcam quality)
2) Using Flash Media Encoder (On2/MP3 Codecs); (good quality at higher bitrates)
3) Using 3rd party partners such as ViewCast, Kulabyte, Digital Rapids and many of the ones that support Ben’s initiatives.   You can see a list of them on the Adobe website.

"Adobe will also be releasing an update to the Flash Media Encoder to support H.264 live streaming in a couple months. This should put aside many of the “quality” concerns you may have. H.264 is higher quality video at much less bitrate."

Addressing Digital Rights Management (DRM) With Flash

"You will be hearing a lot more about this from Adobe over the next few months, but from a streaming point of view, DRM is built on top of 2 key requirements; Encryption of content and Access Control. When you break it down, to protect content from mis-use, you need to protect the bits as they leave the server and before you get the bits, you need to protect the access (i.e. creating a policy)."

"Streaming to Flash resolves both of these requirements WITHOUT a DRM server and WITHOUT any disruption in the playback to download a key. To set the stage, RTMPE and RTMPS (SSL version) encrypts the video bits in real time as they leave the server, and render on the player. There is no client cache (as there would be with a HTTP delivery) so you don’t need to worry about people stealing the bits after they have arrived. There is also a very advanced set of APIs that let you build out your own policy rules for accessing the content. Out of the box, you can protect access to the server using SWF Verification or Domain white listing or even restrict by version of the player. You can build time-out tokens, or anything else you need to protect the delivery channel, and the playback. Because your user is always connected to the server, you have full control over policies for content access."

Experience Does Matter

"Flash / Flex are just one part of the experience process. It’s not just the adoption of the run time that makes Flash Player / AIR the best choice to deliver these experiences. Often times we all focus so much on the adoption rate of Flash player. There is a reason why the proliferation of Flash is so ubiquitous, and there is a reason why Adobe is seeing the fastest adoption of new players then ever before in its history. The reason is from planning to playback – from the person shooting video, or designing the video player experience to the person consuming the video."

"By understanding the workflow of the creative designers and developers and ensuring that their workflow are made as easy as possible using the tools they use every day (Photoshop/Illustrator/Premiere/AfterEffects/Soundbooth….) When you make life easy for people making content, more content will be produced on the platform – it’s really that simple. All the other pieces are in place to ensure content protection, quality and reach so all that effort can be monetized and protected."

Sounds like we will be hearing a lot more news from Adobe about these topics very soon.

JumpTV Selling Their CDN: Shows It's Too Expensive To Operate Your Own Network

Last week, JumpTV announced that it was looking to sell its content delivery network and would be "refining its strategic focus toward high-value sports and Hispanic broadcast content." This is a great example of where trying to own and operate your own network specifically for the delivery of video does not makes sense. In the release, JumpTV said "The content delivery network is currently a significant cost center for the company, and the Company believes its sale will enable it to lower its ongoing operating costs."

When asked by investors who their biggest competitors are in the market, some CDNs choose to say "companies who do it themselves". That may be the case when it comes to the static caching of images and HTML, but for video, nearly no content owner builds out their own CDN. Yes, Google and MySpace deliver the majority of their video content themselves, and AOL does a lot, but how many companies are truly like those three? Certainly not JumpTV.

Delivering video to a mass scale, like JumpTV was doing for over 5,500 live events in the last quarter alone, takes a lot of money, a lot of effort and more resources than most realize. Yes, it is not rocket science anymore, but it is very capital and man-power intensive. For all the investors that think any company with some money can enter the market and easily give the top CDN players a run for their money, it's not that easy. And when any content delivery network says that "customers doing it themselves" is the bigger competition they face, ask them for what service they are talking about. It's not for video.

Think about some of the biggest users of video on the web today; MLB, NBA, CNN, MSNBC, FOX, ABC, CBS etc... none of them are building out their own CDNs for video delivery. The CDNs have no major threat from content owners building out their own distribution networks for video delivery.

Akamai, Limelight and The Writers Strike: What It Really Means

Limelight put out earnings this week and once again, many analysts are unfairly comparing Limelight and Akamai numbers and data. Why is it that so many analysts and reporters are willing to make very specific statements about CDN providers, but do so using general terms? Sounds confusing just saying it but I'll prove my point in a second.

Yes, there is no question that Limelight did not show revenue growth from quarter to quarter and its yearly revenue guidance of ($136M) is a lot less than the pre IPO revenue guidance they gave ($179.2) for 2008. Investors want to see revenue growth quarter to quarter, but to me, who has no vested interest in either Limelight or Akamai's stock, the number of net new customers by Limelight each quarter continues to grow very well. Continued, long term, steady growth of customers is a good benchmark. Yes, being profitable is important, I get that, but this is not a dash to the finish line. This market is only just getting started and for Limelight, they are in this for the long term. And even without revenue growth quarter to quarter, the next closest competitor to Limelight in terms of CDN revenue for the U.S. has less than 25% of Limelight's revenue, so its not like anyone is bumping them from the number two spot.

I find it interesting that no one is saying Akamai only had 19 net new customer for the quarter and Limelight had 170? Why is no one comparing that and saying look how good Limelight is doing over Akamai? Because it is not a fair comparison. But that does not stop analysts and others from comparing Limelight's 15% decrease in the monthly average customer revenue, versus 20% increase by Akamai. That's suppose to be a fair comparison? What percentage of Akamai's revenue came from CDN services last quarter? How many new CDN customers did Akamai sign up? We don't know as Akamai won't break out those numbers. But did anyone stop to think that Akamai's CDN business could of been flat for the quarter as well but all of the other higher grossing products they have made up for it?

Limelight lives or dies by two things. It's CDN product, specifically for video delivery and the media and entertainment customers, which is its core vertical. Akamai offers multiple products not related to video and targets other verticals like enterprise and government. So when reporting numbers, we know exactly what product or service customers are buying. With Akamai, we don't.

Now some will say that Akamai stated on their call that a) the writers strike did not affect their business and b) they saw significant seasonal strength in media and entertainment. I agree with both of those statements, BUT, they are general statements. Did the writers strike affect Akamai. Absolutely. Doesn't Akamai have just as many if not more major broadcasters on their network than Limelight? While it did affect them, Akamai answered the question correctly when they said that it did not affect their business. Since Akamai is diversified in their product line, the writers strike had little impact on their revenue overall. But is that then fair to compare that to Limelight since they don't offer those other products? No.

And as for Akamai's statement that they, "saw significant seasonal strength in media and entertainment..." I don't doubt that. But for what product? Why does everyone assume that just because it is a media and entertainment customer that means they are doing video? Media and entertainment customers need other services Akamai offers as well. Why doesn't anyone question the general statements many companies put out and ask for the data behind it?

And before anyone writes in and says I am taking sides or am defending Limelight, I'm not. Yes, Limelight is a sponsor of the blog but Akamai has also nicely been a sponsor of the blog on multiple occasions. If the roles were reversed, I would still be making the point. It does not matter who the company is to me, it's the principle of how data is reported and conveyed to the industry and the market.

I probably saw over two dozen articles yesterday alone about Limelight's earnings. One said, "...it’s at least as likely that customers are pulling away from Limelight because of the costly patent lawsuits brought by Akamai and Level 3..." Really? That's a very specific statement, yet made in a general term with no details. Likely based on what? Customers you spoke to? Something Limelight said? Something you can point to? None of the above. If anything, Limelight's continued growth of net new customers each quarter says the opposite.

No, I don't own any shares of Akamai or Limelight. I have never bought, sold or traded their stock ever. And I know some investors are going to say that I am not a financial analyst so what do I know. That may be. But don't you think that is exactly what is needed in today's market? People who don't have any vested interest in public companies questioning what they say and asking for details on the products that make up the numbers? Anyone can look at a spreadsheet and P&L and all of that. But all of those numbers come from the products and every time I listen to a earnings call, nearly all of the questions are about ARPU and lots of financial data. That data comes from the products and services being sold. Why not ask more about them so you can see how the numbers evolved into what they are?

I'm sure some will say, why the hell do I care about this so much? Why am I always ranting about apples to apples comparison when I have no vested interest in the stock of any of these companies? The answer is simple. I want this industry to grow. I have been in this market for almost 15 years and I want to see it grow for another 15. In order to do this education, data, metrics and examples are the_best way that is going to happen. Maybe I am a fool for wanting companies and Wall Street to be more straight forward with info, ask the right questions and provide real data. I know when it comes down to it it's all about politics and the companies decide what data they put out in the market and what "perception" they want the industry to have.

My relative Sam Rayburn, former Speaker of the House said it best with the quote of "you can never remove politics from politics". That's what this industry feels like to me sometimes, politics.

AP Article: How Internet Video Is Clogging the Pipes

I can't figure out why we still have to read an article every few months talking about how online video is clogging the Internet. Last week the AP published an article titled "How Internet Video Is Clogging the Pipes". It's basis for the argument is that ISPs like Comcast and Time Warner Cable are shaping traffic due to file sharing. Ok, but what does that have to do with online video? Sharing files that may or may not contain video content is not "online video". Sharing a file via a download from one user to another does not involve the playback of any video online, it's played back locally from the users computer.

Yet, after saying that file sharing is the problem, the article then says that "Internet use keeps climbing, with video being the big driver in recent years. Google Inc.'s YouTube, which started up in 2005, already accounts for about 10 percent of Internet traffic." First, is there anyone out there besides the company who produced that report that believes that YouTube accounts for 10% of all traffic passed on the Internet? And second, how can you compare file sharing to YouTube? They are two different types of traffic. File sharing is usually very large files and most times at very high quality. YouTube is short form content at very low quality.

My point is that we keep having to read articles every few months about how online video is supposedly breaking, clogging, or filling the pipes to the point that the Internet is going to come to a halt. There is no data anywhere to back this up. Yes, video traffic has grown and continues to each year, but it has been doing that for the past 10+ years. Online video is not clogging the Internet and I have yet to see anyone with any real data to back up the theory that online video is going to fill up all of the capacity the Internet has to offer.

More VC Money Coming To CDNs and P2P Networks

With over 30 CDN and P2P providers in the market today (www.cdnlist.com), you'd think the VC money would stop flowing to content distribution networks, but it's not. Over the first half of this I expect we'll see at least three more companies who are expected to announce funding. Looking at my list of 30+ providers, there is almost no company left on the list that hasn't raised money. I can't remember a time in the CDN market, even dating back to 1999, when nearly every company in the CDN industry all raised capital within nearly 12 months of each other.

We've seen Limelight Networks go public and EdgeCast, CacheLogic, CDNetworks, Grid Networks, BitTorrent, ChinaCache, Move Networks, Itivia, Rawflow and Rinera Networks all raise money within about the past 12 months. I expect the next round of funding announcements this year to come from Panther Express, Pando Networks and BitGravity and if that happens, nearly every company on the list will have raised money or is a publicly traded company.

This worries me. While it is great for the industry right now, over time, the market can't sustain 30+ providers. I fear that 18-24 months from now we're going to see quite a consolidation in the CDN market and only about half the providers will be left standing. The CDN market keeps going in the same cycle every couple of years. In 1998 there were about half a dozen CDNs. In 2001 that number surged to a few dozen. Then in 2004 we were back down to about six providers, and three years later, back up to a few dozen. It's a roller coaster ride for the CDN market and I really hope that the CDN and P2P providers are taking note of why companies failed in the past, where they went wrong and are aware of how not to repeat the same mistakes made in the market in years past.