CDN/Media Pricing See’s Big Drop for Largest Customers: Pricing Down to $0.0006

I just finished surveying over 600 customers that use third-party CDNs for the delivery of video and software downloads and the data shows there’s been a big decline in Q1 pricing, year-over-year, for the largest customers. Some of the biggest OTT and gaming companies are now getting pricing as low as $0.0006 per GB delivered. (Contact me if you are interested in purchasing the data) While the list of companies that can get pricing that low is very short, they are also the coustomers that tend to generate the largest portion of the overall total growth of the video and software download traffic in the industry. In the survey data I saw only one customer getting $0.0006 per GB, but I saw a couple brand names we all know getting $0.0007 per GB delivered. A year ago I reported that some of the lowest pricing around was $0.001, and I saw AWS starting to allow $0.0009 on select deals, but pricing has now fallen even below that.

This decline in pricing for some of the largest customers in the market is also one of the reasons why some CDNs pass on taking on video and software traffic at these price points. The margins are simply too slim, and outside of CenturyLink, none of the other major third-party CDN providers own their entire network, where theoretically their costs should be lower. I won’t mention CDNs by name, but I know that some third-party CDNs internal cost per GB delivered is in the $0.0007 range. So taking on customers at that price point means they aren’t making any money on the deal, unless they are able to up-sell the customer on other services, which most times they can’t.

As I wrote two years ago, the current Infrastructure strategy to support OTT services isn’t economically sustainable for third-party CDNs. They can only make up for the low pricing with volume, which is hard to get since all large customers use a multi-CDN strategy or sell other services at a higher margin, which even if sold, are nowhere near the volume of video and software download traffic. And for those that think the recent pandemic is going to produce a large growth in sustained traffic, overall traffic growth specific to video on third-party CDN networks was only up between 12%-20% in March, when compared to February.

Even for customers not doing insane amounts of volume, a mid-sized customer can now get pricing starting at around $0.007 per GB delivered, with a commit of something north of 20PB of traffic a month. Get into the 40PB a month range, and pricing is around $0.005 per GB delivered, depending on the CDN. If you’re a content owner reading this, that doesn’t necessarily mean that’s the rate you should be paying if you have this level of volume. There are a lot of variables that determine the final quoted price and if you need help in your RFP process, reach out to me at any time. I’ll help you free of charge and I take NO kickback from any CDN.

When you add in the fact that there is currently a large wave of new CDN DIY deployments taking place, the market for third-party CDNs is going to get very interesting in the next 18 months. And for those, like Apple, who already built out their own CDN, they are now branching out to work with even smaller ISPs with a minimum requirement of only 25 Gb/s of peak traffic across all Apple services. I am not predicting doom and gloom for third-party CDNs that deliver a lot of low-margin bits, but change is coming to the CDN landscape in the next 18 months in the wave of new DIY deployments, new competitors with scale, and a shift in traffic commitments across multi-CDN deployments. Pricing will probably drop to $0.00045 for the largest customers, in the next 12-months.

CDN Fastly Wins Content Delivery Business For Amazon.com and IMDB Websites

I’ve been tracing a lot of content over the past 60 days to see what changes have taken place with the surge in certain types of content consumption, specifically across OTT video, Xbox and PlayStation software downloads and commerce sites. Over the past few weeks I’ve seen a change where images that use to be coming from Amazon’s CDN CloudFront, are now coming from Fastly for both the Amazon.com homepage and their IMDb website. This isn’t any sort of test or trial as it’s been consistent like this for a few weeks.

As you can see from the screenshot above, images from Amazon.com’s homepage are now being delivered by Fastly. While many CDNs are trying to grab a large share of the long-form video traffic and gaming downloads in the market, that’s business Fastly has mostly stayed away from. OTT video and software download traffic has very low margins, if any at all. Some of the largest customers get to set the price and CDNs that want that business don’t have much leverage to push back.

But with small object delivery, like images loading fast on Amazon’s home page, it’s the opposite. Customers will pay for a better level of performance and in this case, Fastly clearly outperformed Amazon’s own CDN CloudFront. This isn’t too surprising since CloudFront’s strength isn’t web performance, or even live streaming, but rather on-demand delivery of video and downloads. I can’t tell what volume of traffic this equates to for Fastly, but even though all the images are very small in size, it’s the home page of Amazon.com and IMDb, so it is substantial. Amazon.com is usually ranked in the top 15-20 largest websites, in terms of traffic by Alexa, and IMDb usually hovers around number 60.

While all of the commercial CDNs are typically group together from a product comparison standpoint, many of them really do target certain markets over others. Fastly does have some overlap with other third-party CDNs when it comes to media delivery, but not for the commoditized high-volume traffic. For video, they have fine tuned their network specifically for live and don’t want the kind of big SVOD traffic that many of the OTT providers have, since it requires a big capex spend, for little if any profit in return. And with pricing for the largest media customers having seen a big drop in the last quarter, Fastly continues to target customers that simply don’t want the lowest price around. That’s a good strategy considering the pricing I saw in Q1 on some of these large volume media deals are now down to the $0.0006-$0.0007 per GB delivered. At that price, it’s almost impossible to make money, unless you own the network or have some other kind of cost advantage.

Announcing The Launch of “OTTVIDEO.NEWS”: The Best OTT News & Industry Data, Curated Daily

I am excited to announce the launch of www.ottvideo.news, the best OTT news and industry data, curated daily, by a team of streaming execs. For the industry, by the industry. [Follow #ottvideonews on Twitter and LinkedIn]

While many want to pull back in these current times, my approach is to do the opposite and double-down. Now, more than ever, with the streaming and OTT industry in the spotlight, it’s time we have a way to make it easy for everyone to stay on top of the latest news, deals, data, earnings and events, without having to spend hours each searching for the best content, or having to visit dozens of websites, blogs and newsletters. One site that sifts through all the garbage to bring you the best news, analysis, and data that matters most.

The new site is fast, clean, easy to scroll, with no big images, no ads, and no pop up windows. Get in, see the news, get back to your job. Unlike many news sites that are designed around CPMs and page views, this site is about content first. Articles will link to discussions on LinkedIn and Twitter and you can sign up for a news digest weekly. [Daily option coming soon]

I am excited to announce that at launch, I have 10 curators who have joined me to help highlight the best news daily. They are Yves Boudreau, Tal Chalozin, Lee Chen, Mark Donnigan, Scott Favelle, Glenn Goldstein, Shrishti Gupta, Matt McClure, Andrew Rosen and Jon Watts. Their combined expertise covers video business, monetization and engineering topics across the U.S., Europe, India, APAC and Australia regions.

If you have any questions, comments, see something not working right, or want to give feedback of any kind, I’d love to hear from you at any time. 917-523-4562 | dan@danrayburn.com

My mission is simple. To highlight content that informs, educates and empowers professionals in the streaming and OTT video industry – to help the entire industry grow. I look forward to hearing your ideas, how you want to contribute, what resources you would like to see in the market, and how best I can help you and the industry. Stream on!

Quibi Has Flawless Launch: Negative Press Due To Lack of TV App Unjustified

Quibi has officially launched in the market and so far, based on what I have seen, users aren’t reporting any problems with creating accounts or video playback. I was notified at 11:15pm ET on Sunday night that the app was ready to download and the process of creating an account was simple and quick. I was in the app and watching videos in under a minute. The service is getting some negative reviews in the media today for things like a “lack of a TV experience”, and “no iPad app”, which completely misses the point of the service.

Giving Quibi a negative review because the content isn’t for viewing on a big screen is like complaining a motorcycle is a bad means of transportation because it can’t carry four people like a car. Quibi was made for a specific type of viewing, for a very specific device. Quibi does exactly what it said it would do. It isn’t trying to be a TV app today. Down the line it might, but today it’s filling a specific role in the market for a mobile only experience. The navigation is easy, the video looks great for me on wifi and 4G and it has options to download content, change the quality settings and minimize data usage. All the things you would want and expect to see in a mobile video experience. While I have no confirmation from the company, I do think that Quibi could add a tablet app sooner rather than later.

Quibi will be an interesting one to watch over the next 12-months. We’ve never seen a focused video service like this in the market and while some suggest it can’t compete with Netflix, it’s not trying to. Netflix is long-form video, no ads, available on every screen possible. Quibi is content that is 10 minutes or less in length, ad supported, available only on mobile. So while the services aren’t competitive from a content standpoint, all video streaming services are competing for our eyeballs. We have a limited number of hours in the day to consume entertainment, news and music, both short and long-form, and it’s too early to know how successful Quibi can be in capturing our on-the-go video viewing. I expect we’ll hear some metrics from Quibi before too long on the number of downloads of their app, or accounts created, but with a 90-day free trail, we really won’t have any metrics that matter until Q3, when we know what percentage of users turn into paying customers.

Updated April 7: Now that I’ve spent the past 24 hours using Quibi, here’s my list so far, of the UI/UX features that Quibi is missing. Some of them are pretty major.

CDN Video Traffic Update: Higher Demand for VOD Content and Software Downloads, Offset By Loss Of Live Sports

Over the past week I’ve spoken to nearly every major CDN, many ISPs, as well as dozens of content owners to get an accurate sense of the traffic growth they are seeing for live and on-demand video streaming. Based on those I talked to, overall traffic growth specific to video on third-party CDN networks was up between 12%-20% in March, when compared to February. Video on demand traffic and game downloads are up, as one would expect, but overall video traffic growth isn’t higher as some might think, due to the loss of live sports.

While the media is quick to use all kinds of numbers when talking about the growth of streaming, use cases like video conferencing and multiplayer gaming has little to no impact on the CDNs. It’s important to know which services use third-party CDNs, what technology they are using and which online services deliver a lot of the content themselves.

Zoom and other web collaboration services are designed as one-to-few solutions, not one to many, like webcasting based offerings that use streaming media technology. The majority of services like Zoom don’t use CDNs to deliver their video. Sometimes they rely on third-party CDNs for the caching and acceleration of APIs or other pieces of content that are very small in size, but that doesn’t drive much in the way of additional traffic to CDNs. [Side note, this morning Zoom said it’s daily meeting participants went from 10M in December to 200M in March.] And when it comes to multiplayer gaming, third-party CDNs don’t deliver any of that video. None of that video goes across their network.

CDNs do deliver software downloads of games like Fortnite and Call Of Duty and CDNs are seeing a big growth in that traffic. To put it in perspective, a two-hour movie streamed at 4.5Mbps takes up just over 4GB of data. The last COD update on the PS4 in February was 51GB in size, the one before that was 53GB in size, and the COD 1.18 update that rolled out on March 27th was 11.5GB in size. The last three updates combined were over 115GB of data, for just one game. That’s equivalent to watching 29 movies, at two hours each, encoded at 4.5Mbps. This is why when CDNs like Akamai and others report earnings they always mention that “software downloads” was the big driver in the media vertical.

This isn’t to say that third-party CDNs deliver all of these game downloads. Many ISPs utilize virtual servers from the game companies/platforms to help deliver the content inside their networks, but some third-party CDNs certainly do benefit. It should be noted though, this is not “video” traffic, it’s software. So for all the media reports saying “streaming” is the biggest driver of growth for CDNs, many times that’s not accurate. “Gaming” is a use case, it’s not a “type” of delivery. Talking to ISPs in the U.S., March 10th was the largest day of traffic on their networks so far, even surpassing any traffic they have seen since then. ISPs told me that Xbox One and PS4 game download traffic was up “40%” on average that day, with one ISP saying the traffic was up “62%” on the 12th.

When it comes to video streaming, traffic is up across all of the third-party CDNs I spoke with, but it’s not up by that much, due to the loss of live sports streaming. More people are watching video during the day, both VOD movies and TV shows as well as live news, but the traffic at night looks similar to a month ago. I’ve seen some reports that talk about the peak hour of usage on ISP networks, but that’s talking about all traffic on their network, not just video streaming. For video streaming, the peak hours are 7pm-11pm Eastern Time and Sunday night is the busiest night of the week. CDNs I spoke with told me that a week ago, Sunday night traffic was up, but not by much. ISPs I spoke with said traffic was up 7%-10% on average, specific to streaming.

Some have suggested that the launch of Disney+ in Europe will be a large surge of traffic for the many third-party CDNs that Disney is using, but that new traffic for Disney’s service was already baked into CDNs projections for “new” traffic growth in March and April. So while that is new traffic, it’s not traffic that’s specifically being generated by what’s currently going on in the world. I’ve seen numbers saying that video streaming was up anywhere between 26%-80% in March, but note that a lot of the growth, whatever the accurate number is, comes from Netflix and other services that deliver most, and in some cases like Netflix, all of the video themselves. So while usage is up for Netflix and others, third-party CDNs don’t benefit financially from that growth.

According to Nielsen, (who’s data should not be quoted as the Bible as it’s missing a lot of measurements), Netflix and YouTube made up 49% of all content streamed to TVs the week of March 16th. Even if their numbers are off a bit, it’s safe to say we all know that Netflix and YouTube combined, usually take up about 50% of viewing hours or more. And 100% of that video traffic is delivered by Netflix and Google themselves. So when the media throws out all kinds of numbers around how fast video is growing, for those tracking the CDN market, it’s important to note that the growth of DIY companies usually has little to no impact on the revenue growth of third-party CDNs. The key is too look at the growth of video services from Hulu, ESPN+, Disney+, CBS All Access, Showtime, Sling TV, Fubo and many others who rely on third-party CDNs. Although some, like Disney and others, are already building out their own DIY efforts.

So what does this mean for third-party CDNs in 2020 from a business growth standpoint? Overall, the CDNs will see some nice traffic growth from new services launching like Disney+, Quibi, Peacock and consumers signing up for other already established OTT services. They will also benefit from larger game downloads but it should be noted that game developers have already said that these downloads will get smaller going forward. As an example, see this thread from Infinity Ward that talks to their intentions to “keep future updates from being this large” and to “minimize” their size. This follows in the footsteps of Apple and many others who have continued to cut their size of their software updates by a big percentage every year.

The downside for third-party CDNs is that live sports streaming on the Internet doesn’t exist and we have no real indication of when it might start again. None of the CDNs I spoke with said they had enough details yet to know what the impact would be to their business over the course of the year. How quickly sports comes back, and which leagues don’t, is anyone’s guess. If live sports don’t come back until Q4, the CDNs will have missed two quarters of live sports streaming traffic, which will impact the growth of their overall revenue numbers. I’m not saying they won’t grow at all, they will, but the rate of growth is what’s in question. The loss of some live sports traffic will be able to be made up in the form of additional traffic from VOD movies and TV shows, but live streaming of sports typically happens at a higher bitrate and users watch for longer periods of time, both of which contribute to more GBs delivered overall. I’ve seen a few people say things like, “the loss of real-time video delivery will be more than offset by increased traffic in VOD,” but that is NOT guaranteed at all and there is no data to back that up.

The other unknown is when people go back to work, which OTT services could get delayed in their launch and what the world looks like in another month or two. The delaying of the Olympics isn’t a big deal for any CDN, as it won’t have a material impact on their company from a revenue standpoint. Some CDNs I spoke with also suggested another potential scenario. When people do go back to work and things start to try and get back to some normality, many people will want to do more outside, spend time seeing others, visit places they haven’t been able to get to and potentially, spend less time in front of their TV. So some of the growth we are seeing now may not spill over into future months and the usual traffic they see on their network when things are back open, may have a lot more peaks and valleys and more unpredictability. There are bunch of unknowns right now, but the good news is, CDNs will benefit from the increased demand for video streaming, the question none of us yet know, is what that demand will look like for the rest of the year.

Side note: I just completed my media CDN pricing survey for Q1 2020. Please contact me if you’d like details on how you can get access to the raw data, minus customer names.