Content Owners See Their Video Traffic Growing 2-4x Over Last Year
I talk to a lot of content owners large and small and no matter what subject we are discussing, I always ask them for their predictions on their traffic growth for 2008. While many of them share their numbers with me but don’t allow me to make them public, the vast majority of content owners are telling me that they expect to deliver 2-4x more bits this year when compared with 2007. For most of them, that does not take into account the fact that this year, many content owners are bumping up their encoding bitrates from 300Kbps to 500-750Kbps. Taking that into consideration, with increased bitrates they could see their traffic growing from 4-8x over last year.
In most cases, nearly 100% of this content is being delivered via content delivery networks, so it’s the CDNs who really make out from this growth. But the real question is while the number of bits goes up, does the price per GB delivered come down to the point of where the volume really does not make up for the reduced price? From what I can tell, even if a content owner increases their traffic by 4x over last year, the typical price break they are going to receive is somewhere around 35%. On a 200TB a month commit, a customer who is paying say $0.20 per GB delivered now, is going to be paying on average around $0.13 per GB delivered for 1000TB a month. Now that’s not what ever content owner is paying, some pay more, some less, but if we use that as an average, CDNs should still see higher overall revenue based on increased volume.
Now for larger deals, that may not be the case. For a content owner who does 500TB a month today and grows to 2000TB a month this year, I expect they will see close to a 50% reduction in price based on the additional volume. So for some of the really large customers, increased bits delivered may not equate to more revenue for CDNs. For larger customers it may cancel it out. Bottom line, content owners are expecting to deliver a lot more bits this year and don’t see the recession cutting back on their growth or spending.