CDNs Need To Evolve To Offer Tiered Performance And Pricing Plans
Some CDNs don't want to admit it, but today, delivering video bits over the Internet is commoditized. While the performance and scale that comes with delivery is not commoditized across the board, Akamai, Limelight and Level 3 all have very similar performance when it comes to delivering video. Of course, they would probably all disagree with that statement, but the simply fact that so many content owners use two out of the three of them, to deliver the same content, proves the point.
Not to mention, when was the last time you saw any of those three CDNs put out any release talking to increased performance of their network? Their releases have been about adding new functionality, moving up the stack, ecosystem solutions, value add services and the like. Not performance. The fact is, the performance of Akamai, Limelight and Level 3 are considered by most to be very identical to one another for video delivery. This notion is only reinforced by the fact that all three of them are at the top of the list in the market in terms of CDN revenue.
While some CDNs may be able to show customers slight performance or network coverage differences between one another, for the most part, customers are not willing to pay a premium for that difference with regards to video delivery. In the app delivery, commerce and ad delivery business, fractions of a second can and do impact the customer's business. But when it comes to delivering video, having a video start up on one CDN two tenths of a second faster than another CDN has no real impact on the customer's business. So why should any CDN think the customer is going to be willing to pay a premium for that service? Some may, but most won't when the performance difference between the networks are so similar, not to mention, very difficult to measure. Of course, if one network is starting streaming seconds faster than another, that's a different story, but today, that's not the norm between Akamai, Limelight and Level 3.
Neither myself nor the vendors dictate anything in the market, rather, customers decide what they will and will not pay for and what the value is worth to them. While CDN vendors and others in the industry may not like this, it's reality. In general, CDNs have been very good over the past year to work on adding value added services and continue to try and solve many pieces of the video ecosystem. While they are moving in the right direction, they need to once again look at the commoditized video delivery piece and how they charge for it. Most CDNs don't distinguish between what is commoditized and what isn't and they need to start offering different tiered performance and pricing services to the market. This is not an option for them, but rather something that they will be forced to do and should start to embrace it now. This is where the industry is moving and what customers are starting to demand in the market. The smart move by CDNs would be to get in front of it now.
Many times I have customers tell me that they are willing to pay less to have good performance, but not the best performance known to mankind. Other times, customers say they don't need any reporting, self provisioning tools or other ecosystem pieces and as a result, should not have to pay a high per GB price to help the CDNs build out a platform they are not using. Other times, content owners will tell me that the vast majority of their traffic is passed over the CDNs during off peak hours and wonder why they aren't getting a lower rate.
In all of these instances, customers are looking for a tiered pricing plan based on different levels of performance. Like it or not, before too long, CDNs are gong to be forced to offer tiered performance pricing. While some may say we already have this in the market today, we don't. Don't be confused by tiered pricing which simply changes based on the different level of bits you push, but not at a different rate based upon varying performance.
While I have not heard many CDNs talk about this type of model, I do know that some are already thinking about it and viewing it as something they know they will have to adopt, sooner rather than later. It's also possible that services like HTTP streaming will help drive different performance and pricing plans to the market sooner and that one day, there will be a valid reason to charge more or less for delivery, based on the protocol that's being used. Before long, I see a big shift coming in the CDN market regarding the way customers want to buy these services and the way CDNs are selling them. That's a disconnect that the CDN vendors can't bear to have. Before too long, the CDNs are going to have to change and adapt to market conditions based on what customers are demanding and I think this change is coming a lot sooner than most CDNs may realize.