December 2009

For all the talk of how many videos YouTube delivers each month and the number of hours of content that's uploaded to YouTube each minute, why is it no one seems to ever question Google on why their playback experience is so poor? Why does the media continue give Google a pass on this? This should be something that everyone is talking about, yet it seems that hardly anyone is writing about it, even while so many users continue to complain about it, myself included.

This morning, I had half a dozen emails in my inbox from people asking me who's doing the delivery of the videos for Vevo and why they won't play. While I know Vevo has only been up for less than 48 hours, that's no excuse for Google not to be able to have it working properly. How many times am I going to be given a message that says "We're sorry, there was an error processing your request" when I try to play a video? Even worse, most times I don't get a message at all. I just get a blank page when I click play or the video starts to buffer and gets stuck at 73% and goes no further.

I've been complaining for three years now (2008, 2007) that the quality of delivery for YouTube's videos, delivered via progressive download, continues to stink. It's a regular occurrence that videos take two minutes to buffer, don't buffer at all, or stops halfway through to re-buffer. And I'm taking about videos that are only ninety seconds in length. And every time I write a post about YouTube's playback problems, I get dozens and dozens of comments from viewers experiencing the same problems.

In a CNET article this morning, it was reported that in his speech introducing Vevo, Doug Morris, Universal Music Group's CEO said, "the best thing about Vevo is that it's our platform". Actually, no, it's Google's platform. But if this crappy, poor-quality user experience is the best thing about Vevo, then we should consider it to have already failed, less than 48 hours after launching.

And I still want to know, why does the media give Google a pass on the problems YouTube's platform has in delivering videos for so many years?

Updated: YouTube just announced the launch of the Vevo site on their blog saying, "it blends Google and YouTube's leading technology…." and will "redefine the way people watch and engage with music online". That's a great strategy, hype the launch, when it does not even work.

While I've heard some folks say that one of the reasons Akamai is showing signs of their M&E business picking back up is as a result of the adoption of HD quality content, that's not what's driving revenue today. Yes, Akamai and all of the other CDNs are seeing more content owners use HD quality video, but it's not yet happening in large volumes or at mass scale to impact revenue.

Based on a recent StreamingMedia.com survey we conducted in September and October, we asked content owners what bitrates they were encoding their content in. Of the 812 content owners who responded only 11.4% said they were encoding video for at least 2Mbps or more. Compare that to the same survey in 2008 when 8.9% of over 1,000 content owners said they were encoding over 2Mbps. That's not a lot of growth.

Some might say that the M&E vertical probably has better adoption of HD video than say the enterprise or advertising market and they'd be right. But of the 812 content owners who took our survey, nearly 45% of them classified themselves as being in the M&E vertical. HD quality video will drive additional revenue and growth for the CDNs, but it won't be in the next few quarters.

Three weeks ago, Brightcove announced the general availability of Brightcove 4, the latest version of their online video platform. Along with the release, Brightcove also announced a new product version of their platform called Brightcove Express. The Express product starts at $99 a month and allows small and medium sized content owners the ability to use Brightcove at a fraction of the cost of a professional or enterprise account.

Over the past few days, I’ve been using the new Brightcove 4 platform and will have a hands-on review of it later in the week. To celebrate the launch of Brightcove’s new Express offering, Brightcove has nicely offered to give away 25 Flip Mino cameras to the first 25 readers of my blog who sign up for a Brightcove Express account.

The rules are that the first 25 U.S. residents who (i) sign up for a Brightcove Express account via the Brightcove website at www.brightcove.com, (ii) remain a Brightcove Express customer in good standing for at least 60 days, and (iii) provide Brightcove with a promotional code obtained from Dan Rayburn will receive a free Flip Mino Camcorder! To request a Brightcove Express promotional code from me simply email me at mail@danrayburn.com and be sure to check out all the details on the official rules page.

The offer is only good for the first 25 folks who sign up and I’ve already given out a couple of codes, so email be quickly if you want one. A BIG thanks to Brightcove for this giveaway for readers of my blog.

The question I got asked most frequently at last month's Streaming Media West show was when I thought the rate of growth for video traffic would once again begin to accelerate. Based on a recent StreamingMedia.com survey we conducted in September and October, of which 812 content owners responded, 53.3% of the respondents said their traffic grew on average of only 35%-40% this year.

When compared to the same survey last year, 53.9% of over 1,000 content owners said their traffic grew a total of 35% in 2008. This lack of growth probably comes as no surprise to anyone who tracks the CDN space as revenue amongst the CDN vendors has been flat all year. When pricing is down nearly 40% year-over-year and traffic is only growing at 35-40%, that makes it really hard for CDNs to show revenue growth from their M&E video business. 

If you're wondering just how big these content owners are who took our survey, 13.4% of them spend at least $10k a month, 4.8% of them spend at least $25k a month and 3.9% spend at least $50k a month, just on video delivery. I'll be giving out more details and numbers from the CDN pricing survey in the coming weeks.

Looking to quell investors fears about their acquisition by Google, On2 has posted to their website some more details about the proposed merger. Even with these supporting documentation, I think there is a good chance the deal won't be approved by shareholders when they vote on December 18th. That said, the problem shareholders face if they vote against the deal is that On2 would have to find a way to raise more money. As of September 30th, On2 only had $2.2M in cash and short-term investment and negative working capital of approximately $4.1M. That's not a good position to be in.

On2 also announced that since the proposed merger with Google, no other company has come forth expressing interest in acquiring the company, something investors have really been championing for. That said, if I was a company interested in purchasing On2, I think I'd wait to make that known until after shareholders voted down the deal, if that happens. No company wants to compete with Google in a bidding war. While On2 makes their case in these new documents that the deal is a good one for shareholders since On2 says the transaction valuation is supported by multiple third party financial analysis, I still get the feeling that shareholders are going to vote no on the deal. Exactly where that would leave On2 is to be seen, which puts investors in a tight spot either way.

For the past couple of quarters, I’ve written many times on my blog that Akamai needs to be more aggressive on their CDN pricing for video so they can grow revenue, increase the volume of traffic on their network and make it harder on their competition. Many have said Akamai would be crazy to lower their pricing, as it would negatively impact their margins. But I’ve always argued that you make up that decline in profit with more volume on the network, which in time actually increases your margins. Economics of scale is what the CDN business is all about and determines whether you win or lose in the market.

At the Streaming Media West show two weeks ago, I got to speak with dozens of content owners about who they were using for video delivery and what they are paying. I also got to speak with a lot of Akamai’s competitors and it’s very clear that Akamai started lowering their pricing, especially with contract renewals, when it comes to video delivery. While it’s hard to pinpoint the exact frame time this started to happen, customers I spoke to said they saw the pricing shift around the September time frame. Content owners currently with Akamai said Akamai had dropped their pricing to be near Limelight’s and Level 3’s and in some cases, was matching their pricing for renewals.

At the Streaming Media West show, some competitors of Akamai also privately expressed to me some frustration over Akamai’s lower pricing practice as they said they were losing deals to Akamai as a result of the pricing change and that it was now making it harder for them to close certain contracts. While Akamai’s not re-pricing everything across the board and still being selective, clearly any pricing change in strategy by the leading CDN is going to impact those competitors trying to take away their business. While some will naturally ask me how much Akamai has reduced their pricing on average, there is no way to say. I’ve seen deals where they dropped pricing by 50%, but then other deals where they have dropped it by even more to match Limelight or Level 3.

This shift by Akamai to adjust their pricing strategy is a smart one; I just don’t know why it took them so long to do it. I think that after three quarters of poor growth in their M&E business, Akamai finally came to the conclusion that it would help jump-start their M&E business and that by doing it on the tail end of the year, at a time when traffic tends to grow going into the New Year, it would have a much greater impact. So I’m not at all surprised that Akamai raised their guidance today for the fourth quarter. I think we all knew that at some point, Akamai would re-visit their CDN pricing and when they did, they would see pretty positive results quickly. It was just a matter of when they would start executing that strategy in the market.

For Akamai competitors, especially Limelight and Level 3, this is not good news. Limelight has shown no revenue growth at all for the past three quarters and has guided to a flat Q4. While Limelight believes they are ready to turn the corner with growth in 2010, a topic I will be posting about shortly, having to compete with Akamai’s lower pricing only makes Limelight have to work even harder. By my estimates, Akamai still does 4x the revenue Limelight does when it comes to CDN, which I classify as software downloads, small object delivery, streaming and HTTP video downloads.

Last month at the Streaming Media West show, I presented the last pricing numbers from the video CDN market and I’ll be posting those number to the blog this week.

While the rest of the online video world seems to be paying attention to ad formats, the death of pre-roll, YouTube's ineffectiveness, and video content monetization, a quiet revolution is brewing in the commerce industry. At the Streaming Media West show last month, we had a great session with speakers from the retail industry who explained just how crucial video is to their business.

On of our speakers, Rico Nasol, a Content Team Senior Manager at Zappos.com gave out some great details on what video means to their business, how they utilize video today and what their goals are for next year. Rico was also one of our speakers that was interviewed live on Fox Business News which you can see here. Also, check out this link for a longer interview with Zappos from the show.

The best stat Rico gave out was that Zappos sells anywhere between 6-30% more merchandise, depending on the item, when accompanied by product description videos. Rico says that by the end of next year, Zappos will have ten full working video studios, with the goal of producing around 50,000 product videos by 2010, up from the 8,000 videos they have on the site today. If you want to see a longer interview with Rico, you can check out his red carpet interview on the StreamingMedia.com website.

I get the sense that a lot of people in the online video world forget just how much is going on outside of the media and entertainment industry, or are simply not aware of what's taking place. The commerce, enterprise and government sectors are all doing more with online video today, with positive results, than we have seen so far seeing in the broadcast world. If you're interested in following the online video market in the commerce industry, then you need to check out Justin Foster's blog at www.video-commerce.org and Xavier Casanova's blog at www.videoretailer.org