Economic Conditions Not Affecting Video Traffic On CDNs, For Now

With all that is taking place with the economy, not surprisingly, the most frequently asked question I am getting is what impact is the economy having on traffic growth for video across content delivery networks? So far, I have not seen any content creators putting less video online and from all the content creators I have spoken to, they are still seeing traffic growth. But the real question is not whether or not traffic is growing, but whether video traffic growth across the CDNs is slowing.

While the CDNs don't publish their traffic numbers on a monthly or quarterly basis, I have had in-depth conversations with many of them in recent weeks and so far, they are not seeing any signs of video traffic slowing down. Some of that might be offset by the fact that many content creators have moved to higher bitrates and as a result, are pushing more bits, which could be confused as more traffic. And while some slowdown is being seen in very specific markets for the delivery of things like ads and small objects, the traffic for video related content continues to be strong. Without knowing what percentage of traffic across a CDN comes specifically from video, some of the data from the CDNs is hard to verify. That being said, the best data comes directly from the content owners who are the ones paying for the content delivery services and the ones who know all the traffic data.

I've spoken to most of the major broadcasters over the past month, many of whom were at Streaming Media West, and it is clear that they are still seeing the kind of video traffic growth they expect, with no signs of that slowing. While I don't see the economy having any impact on the CDN market in terms of traffic growth, the economy and the general market for CDN services is going to have an impact on many of the CDNs by 2010. As I have said many times, the market is not big enough, and will not grow fast enough to support 50+ video content delivery offerings in the market.

Comments

[Steve Lerner]

The big question of course is how much of current total CDN bandwidth is filled up by the startups that will die off as the current dot.com bubble deflates...

This was a major contributor to the last CDN market crash. I can recall having customers at Speedera that stopped paying their bills, calling them up, and them saying "shut us down, we are out of cash."

The pricing is lower now, but usage is much higher if its a video based startup.

[Yossi Wellingstein]

Most of the online video is currently ad supported, with ads covering production and delivery costs only partially. As ads spending is expected to slow in the near future, the selection of video offered online will probably not grow or even somewhat shrink.
However, demand for online video has its own drivers. People would rather watch (and eat) at home than go out and spend more. More and more people start watching online video, whether its time shifted TV or video stories in CNN web site.
The pressure on supply, the increasing demand, and the immaturity of business models (not making money yet) are an interesting combination.
I believe this would put price pressure on CDNs, it may open the market for cheaper alternative content delivery offerings and might slow the market development substantially.
An interesting development of the situation could come from the studios. A slowdown in ticket box revenues may convince the studios to open online rent window earlier, trying to make up for the lost revenues through online sales.