Most CDNs Still Charging More To Deliver Flash Streaming

For content owners who want to stream Flash videos with a CDN in the Adobe FVSS program, it’s always been more expensive to deliver streaming videos with Flash than Windows Media. The reason for this is that unlike Microsoft, which makes its money by charging a CPU fee per Windows server that can then run Windows Media Services, Adobe gives CDNs a special build of the Flash Media Server and then makes their money by charging CDNs a license fee based on the number of bits they deliver.

For some CDNs, they bundle that license fee into their cost of doing business. For others, they pass that cost along to content owners on an average of about a penny per GB delivered, which is much_less than it was about a year ago. For customers, that amounts to an extra $1,000 a month for every 100TB of transfer. For larger customers, Adobe has been flexible in working with CDNs to reduce the license fee if the content owner is doing a really large volume of Flash streaming each month.

To find out which CDNs still charge a license fee versus those who don’t, I asked about half of the CDNs in the Adobe FVSS program, on the record, if they charge a Flash license fee.

  • CDNetworks: Typically does not charge a license fee, but depends on price points. The lower the unit
    price, they may charge more for flash due to licensing and lesser
    efficiency of server capacity
  • ChinaCache: Does not charge any license fee
  • EdgeCast: Does not charge any license fee
  • Highwinds: Does not charge a license fee unless the pricing is for a really large deal
  • Internap: Generally does not charge a license fee but they do take Adobe royalty into account on large deal pricing
  • Level 3: Does not charge any license fee
  • Limelight Networks: Depending on the deal size they may charge a license fee
  • Velocix: Does not charge any license fee

Based on contracts I have seen in the market, Akamai and Mirror Image, who are also in the Adobe FVSS program but didn’t respond to my inquiry, charge a license fee for all Flash streaming deals. AT&T, who wasn’t listed on the Adobe site as being in the FVSS program only a few weeks ago, has just recently been added. They also didn’t return my request for details and having just been added into the program, it’s too early for me to know their Flash streaming pricing.

The good news from all of this is that EdgeCast, Velocix and Level 3 no longer charge any license fee for Flash streaming. Last year, all CDNs charged a license fee of some kind, so the fact that three CDNs in the FVSS program are no longer charging customers for Flash streaming is a good thing. Over time, I expect more CDNs will join them in doing away with the license fee as they get more traffic on their networks and ramp up their services.

While Adobe has been good at reducing the license fee amount since last year, my opinion still is that it’s a bad pricing model. I continue to hear from content owners who don’t use the Flash platform for streaming due to the increased cost, especially for those who are pushing a lot of traffic. Why should the customer have to pay more to deliver their content in one format or another? For a lot of the CDNs that have just built out their Flash streaming networks and have a lot of capacity that is not being utilized, running all their servers at 50%, the license fee is best.

But as they ramp up their business and their build-outs are done, every CDN would prefer to pay Adobe a CPU fee instead of a fee based on traffic. Right now, the Adobe Flash license fee is annoying and a nuisance to many CDNs who want to sign up content owners quickly and ramp up their business as fast as possible. Having to explain to content owners why one format is more expensive than another and trying to then figure out how much more expensive Flash streaming is, when the customer does not even know their traffic, only complicates the process.

I expect that over time, Adobe will move to a CPU based fee for CDNs that deploy Flash Media Servers. Last year, Adobe saw that the high cost of the Flash license fee was hurting adoption and hence made a move to reduce it from around five cents per GB delivered, to about one cent per GB delivered. That change had a big impact on the CDNs and Adobe and as a result, Flash streaming has gained a lot more traction in the past twelve months. To date, Adobe has been good at keeping their eye on the market and adjusting their business model to give content owners more of a reason to adopt Flash for streaming, live and on-demand. If Adobe were to take the step of doing away with the Flash license fee for content owners completely, and get their revenue stream from a CPU license from CDNs, the adoption of Flash streaming would only continue to grow.