Internap Looking For New VP Of Engineering: Steve Kiene Leaving Company

Internap has confirmed that VP or Engineering Steve Kiene will be leaving the company in August to pursue another career opportunity. Steve joined Internap about six months ago and one of his tasks was working on Internap's CDN platform. The company said it is currently looking for a replacement and that Steve will be with the company until the end of August to help with the transition.

Cisco Says Video Traffic Growing, But Where's The Business Going To Come From?

This week, Cisco released their second annual visual networking index which predicts that by 2013, all forms of video will account for almost 90% of the total consumer traffic on the Internet. While that sounds like a big percentage, I'd like to know how Cisco came up with these numbers. Cisco's website shows a lot of charts and numbers, but then says the source for the data is themselves. Where is Cisco getting these numbers? How did they come up with them? What are they based off of? What is their methodology? Come on Cisco, show us the data behind this. More importantly, if Cisco's predictions are right, that's not necessarily a good thing for the industry.

We keep hearing about traffic growth due to video, but what we don't keep hearing from are content owners making money from all this traffic growth. If Cisco's numbers turn out to be accurate, that's a lot of additional video traffic that someone needs to monetize unless they want to be though of as someone like YouTube. A company that pushes a lot of traffic, but can't break even. Don't be fooled into thinking that just because video traffic is growing, so too is the revenue of the companies in the space. Video now easily accounts for more than 50% of all the traffic on the CDNs, but it accounts for far less than 50% of their overall revenue. That's a problem.

For all the traffic growth we keep hearing about, we also see companies like BT and others capping users or telling content owners they are going to have to help foot the bill for network upgrades. We've now got content owners doing 3MB streams and folks like Microsoft announcing they will do 8-10Mbps 1080p streams on the Xbox 360 later in the fall. All of this is great, but there needs to be some kind of business model behind this surge in traffic. If it's not figured by the ISPs and content owners, many are going to have a false sense of security thinking that because video traffic grows by a large percentage, the revenue of companies in this space will grow by the same volume. That won't happen. While the CDNs won't tell us how many total streams or GBs they deliver each quarter or each year, if they did, we'd see that they are delivering five or ten times more volume, yet their revenues are not going up by the same rate.

I'm all for video growth, but lets be realistic when companies like Cisco put out numbers like these and won't show us how they came up with them. Traffic growth without revenue growth really does not matter.

FLO TV, Epix and TV.com To Keynote At Streaming Media West Show

I'm pleased to announce that executives from FLO TV, Epix and TV.com are confirmed as keynote speakers for the upcoming Streaming Media West show taking place November 17-19 in San Jose. I'll be posting more details soon and in the mean time, the call for speakers closes in the next few days. Get your submission in now if you want to be considered.

While dates for the 2010 Streaming Media West show have not yet been announced, all signs point to the show being moved to LA for next year. We'll make the official announcement as soon as we have the dates and location confirmed.

Level 3 Launches New CDN Focused Website, Level3Delivers.com

For the past few months, Level 3 has been working on building a brand new video based website dedicated to showcasing their content delivery offering in the market. Yesterday, the site Level3Delivers.com went live with nearly 75 video clips that do a really great job of telling the Level 3 CDN story.

The mini video portal has interviews with Level 3 executives, customers and features a whole bunch of case studies and shows logos from such customers as Netflix, Microsoft, Comcast and Yahoo! amongst others. The videos provide a great insight into Level 3's entire CDN ecosystem including Vyvx and their broadcast operations services and it's great to see Level 3 really focus an entire website to their CDN offering. The new site is well thought out, provides answers to a lot of technical questions about their ecosystem and will be a valuable sales tool for Level 3 when pitching content owners.

A few weeks back, I got to spend a good deal of time with Level 3 executives at the Content Delivery Summit and Streaming Media East shows. I also recently had a call with Peter Neill, the new SVP of content markets for Level 3 to hear more about their CDN strategy. While some of our conversation was off the record, what I can say from the calls and meetings is that while some turmoil came out of the changes made within the CDN group last month, Level 3 is clearly still committed to their CDN offering.

At the Streaming Media East show, the biggest thing I heard Level 3 competitors talking about was just how many Level 3 sales reps were at the show looking for new jobs, implying that Level 3 was really losing people. Yet when I asked Level 3 competitors if any of them were going to hire these reps, they all commented that most of them weren't qualified. So while Level 3 has been losing and cutting some account managers, it does not sound like it's due to anything negative at Level 3. Level 3 still continues to sign up large content owners and I still think they are on track to do nearly $100M this year in total CDN revenue, defined as streaming, software downloads and small object delivery.

Sitting On 50Mbps Verizon FiOS Connection, Looking For High-Bitrate Video

I've been a long time customer of Verizon's FiOS service, starting off years ago with 10Mbps, then 20Mbps and as of last week, now 50Mbps. For those who can't get FiOS I feel for you as it's hands down the best offering available in the market and puts cable to shame. Even with Cablevision's recent announcement saying they will offer a supposed 101Mbps offering, it's not fiber to my house. If it's not fiber to the home, then it's not FiOS and can't be compared to FiOS.

I called Cablevision last week only to be told their 101Mbps service won't be available "for some time", the price is not "guaranteed" to be $99 when it launches and the service won't come with any guaranteed throughput. When I asked Cablevision how they can compete with a service like FiOS that pulls fiber to your house I was told "the service is just as good as FiOS as Cablevision's modem has lots of power." Too funny. When will Cablevision get a clue.

Cablevision's poor marketing ploys aside, I'm looking to test as much high bitrate video as possible across multiple entertainment devices. I have a Xbox 360, PS3, Wii, Roku, TiVo Series 3,VUDU, Slingbox PRO-HD, Apple TV and broadband enabled Blu-ray player setup in my living room. So if you know of some really high-bitrate video offerings, streaming or otherwise, please let me know and I'll test them out. In addition, if you'd like me to test anything on any of the above mentioned devices, drop a note in the comments section.

Related Posts:

- Numbers Show Consumers Are Not Cutting Cable In Favor Of Online Video

- Verizon Cuts Peering Costs To CDNs: The Real Story Is More Than Price

- If Everyone Had Verizon FiOS For Broadband, Capping Would Not Be An Issue

- Verizon's FiOS Service Will Change The Game For Video Delivery

- Verizon's FiOS Service Pays Off: Adoption Growing, Service Capable Of 50MB Today

1080p Streaming On Xbox 360 Will Require 8-10Mbps Connection For Full Quality

Last week at E3, Microsoft announced that later in the fall, 1080p streaming will come to the Xbox 360 using Zune video technology. While full details of the technology and how it works are not ready to be released by Microsoft, they did share some additional details on the service which I can make public.

Zune video on Xbox LIVE was built from the ground-up for Xbox 360 to take full advantage of the Xbox platform and is built on top of Smooth Streaming. It features what Microsoft is calling a "state-of-the-art encoder" for the highest level of fidelity and a high performance decoder capable of full-framerate 1080p playback, which enables Smooth Streaming playback, smooth fast-forward and smooth rewind functionality. Microsoft says their 1080p instant on technology will offer a level of quality and performance only previously seen with downloadable or physical media.

For the full instant on 1080p streaming and 5.1 surround sound experience, Microsoft recommends at least an 8 Mbps broadband connection. The beauty of the technology however, is that movies and TV shows on Zune video will automatically scale to the best possible resolution based on the speed of the users connection. So if a consumer has a 6 Mbps connection, they will still get 1080p and a great audio experience, but may not get 5.1. And as a back-up, Microsoft says anyone can have a 1080p/5.1 experience, but they may be required to download the content instead of streaming it if they don’t have an 8 - 10 Mbps broadband connection.

While no specific date has yet been given, Zune video on Xbox LIVE will launch sometime this fall with only a small inventory of video available at 1080p. While no exact numbers have been given on the volume of inventory available at launch, Microsoft said they will bring some of the best content from some of the top studios including Warner Bros., Universal, Paramount, CBC [Canada] and the MLB Network, Whether or not content from Netflix will take advantage of the new 1080p streaming technology is not yet known but I would not be surprised if there weren't at least a few title from Netflix available at launch.

While there has already been some speculation in the industry as to which CDN(s) will get this delivery business, that's still to be seen at this time. I've heard various answers including the idea that Microsoft may keep some of this delivery on their internal CDN.

No matter who gets to deliver this content, clearly it's not going to be a lot of traffic. The number of Xbox 360 users who have their console hooked up to a TV set capable of doing 1080p and having at least an 8Mbps connection can't be huge. Not to mention, most of the content available in 1080p is probably going to have to be purchased. Clearly the Internet is not capable of handing the streaming of 1080p content to any large scale and while this offering is all about the future, the Internet still won't be able to handle this level of streaming years from now.

For Microsoft, I believe this offering is their way of getting ahead of the rest of the market and saying they can do 1080p streaming before anyone else and prove the concept. Nothing wrong with that and as a Verizon FiOS user, I can't wait to see what it looks like. But for the average Xbox 360 user, I don't think they will be able to take advantage of 1080p streaming for a long time to come.

CDN EdgeCast Licenses Web.com's Patent Portfolio

In an interesting announcement this morning, CDN provider EdgeCast has licensed Web.com's patent portfolio and will be providing CDN services including web page acceleration and origin and edge storage for the Web.com property.

The patent license agreement grants EdgeCast a license for more than thirty issued and pending patents covering a broad range of methods and techniques including: display and delivery of rich media; unique storage systems; automated hosting and server management; load balancing technology; and dynamic DNS technologies. Some of the patent applications date back as far as 1994.

I've just started doing a little research on Web.com's patent portfolio and you can find a list of most of their patents here on their website. Most of Web.com's patents don't directly involve video and are more focused on things pertaining to DNS, managing servers and load balancing amongst other network related activities.

Outlining The Market Potential For Vendors In The Digital Media Workflow

Frost & Sullivan’s research on the Digital Media market spanning the past decade and the entire value chain from content acquisition down to content delivery shows the market accounting for billions of dollars in 2008. Just the storage and media asset management components together achieved $6.5 billion in global revenues for 2008. The storage and content management markets are expected to grow at a combined CAGR of 13% through 2014 despite a significant dip in 2009 due to longer sales cycles caused by the economic slowdown.

Adding in the professional services and SI components, this market balloons to over $10 billion in 2008 and is expected to more that double its size by 2014 at a CAGR of 11%. The result has been a field day for system integrators (SIs) and vendors who have jumped on the opportunity to provide a solution for the missing glue that would bind such disparate and siloed workflow components seamlessly into a comprehensive, efficient and profitable tool.

Sponsored by HP, Frost & Sullivan has published a free white paper on this topic that details some of the market opportunities for vendors in the digital media workflow. You can download the free white paper here.

CDN's Delivered 95% Of Microsoft's Traffic In 07', But Only 40% By Next Year

During his keynote at the Content Delivery Summit last month, Jeff Cohen, GM of Microsoft's Edge Computing Network gave out a lot of interesting data as it pertains to Microsoft's CDN business. While the theme of his presentation covered a lot of great topics, one of the points that really stood out was how quickly Microsoft is moving away from relying on third party CDNs for delivery and instead, using their own internal CDN. While this trend by Microsoft is something that has been widely known about to anyone who closely follows the CDN space, this is the first time I have seen Microsoft break out numbers that shows the split in traffic. (Note: Jeff's slides can be downloaded here, video of his presentation can be seen here)

Over the past two years, Microsoft has quickly started bringing a lot of their traffic for video, software downloads and small object delivery in-house. In 2007, third party CDNs delivered 95% of Microsoft's traffic. Based on Jeff's estimate, third party CDNs will only account for 40% of Microsoft's delivery business by next year.

While Jeff said that Microsoft would always have the need for CDNs to compliment their own delivery, clearly that's a lot of lost business for the CDNs in a three-year period. During that time, Akamai and Limelight have gotten the vast majority of Microsoft's business and Level 3 has received a good portion as well, but primarily just over the past 14 months. While Microsoft is not pulling the business away from CDNs overnight, it is a lot of lost traffic for them to have to make up, not to mention, revenue growth they can't rely on. Of the three CDNs that have most of the business, it probably impacts Akamai more than anyone else since Akamai always had the largest share of Microsoft's business. And with Microsoft having licensed Limelight's technology, Limelight should be making up some of that lost traffic over time with their licensing contract.

Jeff's slide also shows some interesting numbers when it comes to the type of traffic being passed over their network. In 2007, video delivery account for 10% of the traffic and in 2010, is expected to account for 55% of all traffic delivered on Microsoft's CDN. At the same conference, Level 3 also stated that video now takes up 70% of all traffic on their network. These data points are more evidence on just how quickly video traffic is growing and the challenge third party CDNs have in trying to make money. When the largest percentage of traffic on your network comes from video, yet video only account for lets say 25% of your revenue, those are some skewed numbers.

While Jeff made it clear that Microsoft will always need to rely on third party CDNs for scale and for delivery in regions of the world where Microsoft does not have a footprint, he also said that, "we want to make sure that what's strategic to our business, stays within our business". Jeff also said that the decision to move traffic to a CDN or from a CDN is done on a "property to property basis" inside Microsoft.

While I don't know what percentage of revenue Microsoft accounts for at any of the CDNs, a question I am often asked, with Jeff estimating that Microsoft's traffic is growing "between 30-100% year over year", that's a lot of additional bits the CDNs won't get to deliver in the future.

Video CDN Pricing Drops Slightly In Q1, Other Contract Trends Noticed

Last month I completed my review of all the contracts and RFPs I saw in the market for the first quarter of 2009 and presented these findings at the Content Delivery Summit in NYC two weeks ago. (click on the video window for the presentation or go here here. you can download my slides here) Overall, pricing for delivery services from the major CDNs changed very little from Q4 2008 to Q1 2009, although some price erosion was seen at some of the mid-tier and higher level customers pushing a lot of traffic. (note: you can always find my latest pricing post at www.cdnpricing.com - Previous Quarters: Q4 08, Q3 08, Q2 08, Q1 08.)

While I continue to see a lot of analysts reports still talking about the "pricing pressure" in the CDN market, I still don't see anyone giving examples of what the "pressure" is. I think it is important to keep that in perspective as many in the market make the pricing declines sound bigger than they actually are. While Limelight did mention some pricing pressure with some of their largest customers on their Q1 earnings call, after the call they told me the pricing reduction for these customers was typically fractions of a penny, on per GB delivered contracts. While a company like Limelight has more exposure to pricing reductions since roughly 20 of their customers make up 50% of their revenue, fractions of a penny is not a huge drop in the market. And for customers who are already pushing a ton of volume and continue to grow their traffic, they expect to get some discount based on growth.

The lowest price I saw in Q1 was two and a half cents per GB delivered for over 500TB of traffic a month. When I questioned many of the major CDNs about this price, nearly all of them told me they don't price delivery that low, but the contracts say otherwise. That price is not the norm as 500TB a month in delivery is a very large customer, but there are now more than a handful of those customers on the market. Bitrates are larger, video is higher quality, some is in HD and the major content owners are pushing some ridiculous volumes of traffic. That said, my guess is that 100 top content owners probably push over 60% of all the video traffic amongst all the major CDNs. So the CDNs are still getting the vast majority of their video related revenue from probably 20% of the customers in the market. This will shift over time and is already beginning to, but the bottom line is that the major content owners are still the ones pushing the vast majority of traffic amongst the CDNs.

While it looks like pricing dropped by 50% at the 500TB level, keep in mind that the number of those deals that size is very small. I saw only two deals in the 500TB range for all of Q1. The vast majority of deal sizes are in the 250TB range, which remained pretty stable.

For many content owners, traffic is not growing as fast in 2009 as they saw in the first half of 2008, but it's still growing, just at a slower compound annual growth rate. That's not to say all content owners are seeing slower growth and many like Netflix, MLB, Hulu and others are seeing a lot more growth already in the new year. However, since the CDN vendors won't tell us how much video traffic they push quarter to quarter and what kind of traffic patterns they are seeing, it's too hard to make a general statement on what the overall market is doing. No doubt the traffic growth is down overall, but at what percent compared to previous years can only be compared to on a customer by customer basis until later in the year.

While many are still asking me about Akamai potentially cutting their CDN pricing for video in Q1 in the hopes of getting their M&E business to start growing again, I don't see that happening. I do however see Akamai doing more non-commit contracts with content owners which is great for the customer, but bad for the CDNs. Even content owners who aren't that big, for example doing 150TB a month of delivery, have contracts with Akamai where they don't commit to any traffic on a monthly, quarterly or yearly basis. While this is something Akamai and many of the CDNs have done in the past, I see Akamai doing more of this in the last two quarters. I think this is a sign that Akamai is trying to be more flexible, which is good, but their pricing on most deals is still 35%+ higher than Limelight or Level 3. I still also get at least one content owner each week asking me why Akamai is charging more for delivering videos via streaming as opposed to progressive download. I don't have an answer why and while Akamai is under no obligation to tell me, what I don't understand is why they can't give potential customers an answer. I still continue to see Akamai lose deals because their quote to the customer gives two rates, based on the delivery protocol being used and there is no explanation to the customer as to the difference.

In Q1, I saw more contracts from outside the U.S. from companies based in London, India and Singapore. Clearly the pricing environment is different from those regions and it is clear that many times, content owners do see a difference in performance in places like India and Singapore between Akamai, Level 3, Limelight, ChinaCache and Tata Communications. Akamai's strength still lies in their performance in these regions of the world and I do see some content owners paying more for that service. There is nothing wrong with Akamai charging more in the market, as long as they can show a measurable difference, which they seem to be doing in India and China. It's really the U.S. where Akamai is charging more for video delivery, but not showing the difference in performance and are giving up a share of the market to Limelight and Level 3.

At the Content Delivery Summit I got a lot of questions about content owners using dual vendors and if that is a shift taking place with customers. While some content owners have used dual CDN vendors for years, many others don't. It really does come down to the preference of the customer and what they need. Some want two or three CDNs, some tell me they will never use more than one. So I don't see a trend taking place either way, but I do see more of the largest content owners like Apple, Netflix, MLB, NFL, Comcast and others using two major CDNs today.

As I have written before, I don't expect to see a big decline in pricing this year. The CDNs all know that they can't give this stuff away, they have to make some margin and if pricing declined 35% for the average customer last year, I think we'll see only around a 15% decline this year, on average. The content delivery business is all about the economics of scale and CDNs have to multiply the volume of traffic on their network many times over before the next round of major pricing discounts can take place. I think it will be the first or second quarter of 2010 before we once again see a big drop in pricing across the board.

Related Posts:

- Video CDN Pricing Stable In Q4: Discounts Given For Lower Bandwidth Tiers

- Telcos Outline Their Thoughts On How They Can Win In the CDN Market

- Amazon Building Dedicated Sales Force For CloudFront Delivery Services

- Level 3's New CDN Strategy: Integration Will Make Or Break The Service