CDN Business May Get Worse Before It Gets Better, Further Details On Pricing

With Limelight reporting earnings last night, it's now clear that the major players in the CDN space, the vendors that control the vast majority of the market share for video delivery, are all experiencing no growth. Akamai's M&E business was down and Limelight, Internap and Level 3 all reported no revenue growth for their CDN business. And with Q3 typically being a weak quarter for the CDNs and some of them setting guidance that shows no growth over Q2, we may have yet to see the bottom.

While Limelight was very optimistic that they will see growth in the second half of this year and that the CDN market as a whole will pick up, I'm not so sure that industry wide, that's going to happen in the next two quarters. While pricing still took a decline last quarter, I see the bigger impact being that traffic growth with current customer is no where near the levels it once was and many smaller content owners continue to go under. While Akamai and Limelight both talked about the future of HD and higher-quality video, more devices on the market, blu-ray streaming etc. none of that will take place any time soon on any kind of large scale to impact their revenue in the near-term.

I'm constantly asked when is the tipping point and what's the next killer app for video that allows the industry to once again grow at a rapid rate? Devices are great, but they are not enough of them yet to make any real impact on volume overall. That will change, but not in the next two quarters. Higher quality video is coming and we see more of it every day, but again, not enough volume yet by itself to push the industry forward with rapid growth. While I think we'll start to see some growth again next year, I don't think the CDN market really starts to grow again, at the rate we've seen in the past, until 2011. As an industry, we're still waiting on all these devices to penetrate the market along with higher bitrate video, over-the-top services, the broadcast of more live content and better ad integration. I don't see this taking place in earnest by next year. That's not to say they won't be any growth next year in the CDN market, but I'm afraid it's not until 2011 that we really start to see the surge in the space that we saw in 2006.

Clearly, a lot of questions still remain about the current decline in pricing and where that is headed. With that in mind, will be rolling out our annual video CDN pricing survey that we do each year. (entire survey results, including raw data now priced at only $295)  Last time we had over 1,000 customers complete the survey and this year, I'm keeping it even shorter and to the point. The questions that will be asked include:

  • 1. Which industry vertical does your company best fall under?
  • 2. How are your videos being delivered across CDN(s)?
  • 3. How many CDNs do you currently use for video delivery?
  • 4. What is your current contract length with your CDN?
  • 5. How much has your total video traffic grown so far this year, compared to last year?
  • 6. On average, what do you pay per month to CDN(s) for video delivery?
  • 7. How much has your video delivery pricing declined from last year or since your previous contract?
  • 8. Are you paying CDN(s) on a per GB delivered model or per Mbps sustained model?
  • 9. On average, what is your video delivery traffic per month?
  • 10. How much do you pay per GB delivered or per Mbps sustained?
  • 11. What bitrate(s) are your content encoded for?
  • 12. What is the one thing you think CDNs need to do a better job of?

The last time we did this survey, I published a lot of the data for free on my blog here, here, here and here. I'll be doing the same thing again this time and hope to have all the data collected within the next few weeks.

If you think there is a question I'm missing from this list that I should add, you're welcome to make suggestions in the comments section but please note that I'm trying to keep the survey small and keep it focused only on video delivery and pricing.

Special Note: I am having the pricing changed on the 2008 CDN pricing survey from $495 to $295. That change will be reflected on the website shortly and I hope that by make it cheaper, it's now affordable for everyone that wants to have pricing data from 1,000 customers so they can see the trends.