AT&T In Talks To Re-Sell Akamai or Limelight’s Enterprise CDN Services

Dan Rayburn | Wednesday August 15, 2012 | 12:01 AM | Comments (2)

After many years of AT&T (T) trying to sell their own CDN services into the enterprise, multiple sources tell me that AT&T has decided that it makes more sense for them to simply re-sell CDN services from either Akamai (AKAM) or Limelight (LLNW). Both vendors are currently in negotiations with AT&T bidding on the business and while AT&T has not yet picked a winner, I’m hearing that even though Limelight had been favored to win the deal, the reseller business is now Akamai’s to lose.

No deal has yet to be finalized and considering this involves AT&T, who doesn’t have a track record of moving quickly, we’ll have to wait and see if they execute on this plan. From the details I have, Limelight has put forth a better offer business wise but AT&T has more confidence in Akamai’s ability to sell into the enterprise market. While Akamai does have the advantage there, the downside is that AT&T will run into a lot of channel conflicts with Akamai since a very large percentage of enterprise customers are already taking services from Akamai. AT&T would have less channel conflict re-selling Limelight’s CDN services, but to date, Limelight hasn’t had a lot of success in growing their enterprise business.

I’m told that as part of this contract with AT&T, the winning vendor would take on some of AT&T’s employees from their digital media group, so Akamai or Limelight would stand to gain some additional headcount with the contract. While many would be quick to assume that a re-seller contract with AT&T would generate a lot of revenue for Akamai or Limelight, it won’t. At least not in the near term. Last year, AT&T did a total of $10M in CDN revenue and right now, no telco is killing it when it comes to selling their own CDN services, or re-selling those from a third-party. There is a good opportunity to grow the CDN business over time, but it’s over many years and it won’t amount to a large amount of revenue for either Akamai or Limelight over the next 24 months.

While many are familiar with the multi-year contract that AT&T already has in place with EdgeCast, that should not be impacted if AT&T goes through with this new strategy. AT&T has always been using EdgeCast’s licensed CDN platform for their wholesale CDN services and federation model, so I would expect AT&T would still manage this portion of their CDN business. Customers who are currently buying this solution from AT&T purchase it from a wholesale division of the company, not from an enterprise sales team, so a new re-seller deal with Akamai or Limelight should not impact AT&T’s wholesale CDN business, which continues to grow. We don’t know exactly how much traffic AT&T is pushing for this portion of their business, but earlier in the year EdgeCast did say that combined, “multiple operators” are “already pushing tens of Gbps via the CDN federation”. So it sounds like any CDN business already running across EdgeCast, wholesale or not, would not see any disruption.

While enterprise customers could also go direct to Akamai, most of AT&T’s large enterprise contracts are for multiple products, including things like co-location, transit and managed services, which are services Akamai does not offer. So AT&T isn’t trying to get CDN only business with a re-seller deal like this, but rather want to use CDN to keep or get them more of the non-CDN business they already have.

We’ll have to wait and see exactly which CDN vendor AT&T teams up, if they follow through on this new strategy, and how long it would take them to execute such a plan. But it seems pretty clear now that AT&T has finally made the decision not operate their own CDN outside of the wholesale business and that by re-selling Akamai or Limelight, it will give them access to a bigger section of content delivery products and a bigger piece of the pie.

Updated: I did not contact any company mentioned in this post asking for them to comment as I know none of them would have been able to talk about a potential pending deal.

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Wednesday’s Webinar: “Best Practices For Live Event Encoding”

Dan Rayburn | Tuesday August 14, 2012 | 02:19 PM | Comments (0)

Wednesday at 2pm ET I’ll be moderating another StreamingMedia.com webinar, this time on the topic of “Best Practices For Live Event Encoding“. There’s more to getting a live event online than just being there with a camera and an encoder. What efficiencies are you overlooking, and how can you ensure the best experience for the widest possible audience at the best price? What’s missing from your toolbox? Join us for this event and bring your questions as we explore the following:

  • Importance of delivering the right bit rates to the right devices
  • Taking advantage of the medium, multiple camera angles, metadata to highlight key events
  • Monetization – Ad insertion across multiple formats and platforms
  • Accessibility – Captioning and Multiple languages

Register here and bring your questions for the presenters for the live Q&A portion of the event.

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Free Giveaway: Win One Of Two Google Nexus 7 Tablets

Dan Rayburn | Tuesday August 14, 2012 | 11:46 AM | Comments (719)

Right now, in the $200 price range, Google’s Nexus 7 tablet is the one to beat. I’ve got dozens of tablets I use for testing and between the Kindle Fire, Nook Tablet, Samsung Galaxy 2 and Blackberry Playbook, the Nexus 7 tablet outshines them all. This is your chance to get hands-on with the Nexus 7 as I have two 8GB units to give away to some lucky readers of my blog.

To enter the drawing, all you have to do is leave one comment on this post and make sure you submit the comment with a valid email. The drawing is open to anyone with a mailing address in the U.S. and I will select the first winner at random next month. Good luck! The drawing is now over. Congrats to Kristie D. who won the item.

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Aereo Has Less Than 2,000 Customers, No Shot At Surviving

Dan Rayburn | Tuesday August 14, 2012 | 12:01 AM | Comments (9)

Last month when a federal judge ruled in Aereo’s favor denying the major broadcast networks’ request for a preliminary injunction to block Aereo’s streaming service, many in the industry wrote that it was a “significant milestone” and “major legal victory” for the company.

In reality, that’s far from the truth as anyone who has covered these kinds of lawsuits knows that prelimanary injunctions rarely ever get granted. Those who think Aereo is in the clear really shouldn’t be writing about this space. All Aereo got was a stay of execution, but they haven’t been found not guilty yet. Aereo still has to face the broadcasters’ copyright-infringement lawsuit and Aereo is only in round one of what is going to be a long legal battle. In reality, even if Aereo can win in court, the company is already dead in the water for multiple reasons.

By Aereo’s own omission, the company can’t survive a drawn out legal battle as they simply don’t have the money to support it. To date Aereo has only raised $20.5M and they have already set aside $3M of that just for legal costs. And if they want to survive and fight the broadcasters who plan to keep them busy in court, Aereo is going to need a lot more money. The major broadcasters know what is at stake in this fight, the hundreds of millions of dollars they each make every year from retransmission fees. So they will have no problem spending money to drown Aereo in legal costs, something Aereo has already acknowledged. As one reporter put it who was covering what took place during the hearing, they described the broadcasters as having a mass of legal counsel, at least “three long lines” of lawyers in court.

In May, based on court testimony, we know Aereo had 3,500 people in NYC who had signed up for the service, but we’re still under the 90-day trial period. Someone at IAC that I spoke to, which is the company that invested in Aereo, who wanted to remain annoyomous, said that so far, Aereo had well less than 2,000 users paying for the service. Aereo didn’t return my emails when I inquired about the numbers, but if Aereo wants to stick around and try and grow their business, they are going to need a lot more money. Multiple sources tell me Aereo has already burned through half their cash. While many say how excited Barry Diller is in this offering, if he’s really that interested, he’s going to have to put $100M into this company just to give it a shot at fightning the broadcasters in court and trying to grow and expand the business. Even tens of thousands of paying customers isn’t going to get this company anywhere near break even.

It would take Aereo signing up 150,000 customers, each paying $12 a month for a year, just to make back their original investment of nearly $21M and of course, none of that would be profit. Streaming consumer business models like this do not scale cheaply and you have to pump a lot of money into the service before you can get it to a scale. Just look at all of the other companies in the market who have some kind of video streaming service and the amount of money they have spent just to get their platform to the point of where they can guarantee a QoS that consumers have come to expect. And I’m not talking about content licensing costs, but rather the technical infrastructure needed to support such a service, let alone market it to consumers. That’s not going to happen with $20.5M in funding. And what do you think Aereo’s customer acquisition costs will be? They won’t be cheap, espeically with a user only paying $144 a year for the service.

Aereo seems more focused on wanting to fight the broadcasters, without the cash needed, and talking about good their “groundbreaking technology” is, instead of having any insight into the demands of consumers. What Aereo is doing isn’t groundbreaking at all, since anyone can get an atenna and get channels over-the-air (OTA). You don’t need Aereo’s service to make that happen and besides the one-time cost of the antenna, it’s free. I get that Aereo is offering viewing support to more than just the TV and some DVR functionality, but those aren’t features enough consumers are willing to pay for. You don’t launch a service in the market just because the technology exists to allow you to do it, you launch a service because there is a real demand for it from consumers. In Aereo’s case, consumers aren’t demanding what they are offering.

Aereo is quick to say that there is a, “significant portion of the population that is not interested in continuing the closed ecosystem of cable bundles”, but of course, they haven’t said what those numbers are. And Aereo likes to say their solution provides an a la carte model to consumers, a phrase that people in the media go wild over, yet Aereo is only offering about 15 english speaking channels. So there is nothing a la carte about having such a limited choice of 15 channels.

There are more than 100M consumers in the U.S. that pay for TV via cable and satellite and Aereo has implied that a big market to them would be about 300,000 subscribers. That’s not even one half of one percent of the total number of cable/satellite TV subscribers in America, yet they think their service will somehow disrupt the cable TV market or make cable companies change their practices? They aren’t being realistic and so aren’t many of the people who have written about Aereo’s service. I’ve seen reporters say that Aereo will “upend the TV industry” and even “dismantle” the television business. Really, the TV business is going to be “dismantled” by Aereo who by their own numbers says 300,000 would be a big market for them? Many people writing about companies in this industry need to stop as they are clueless as to what is really taking place. If they can’t include the numbers in their article to show the impact, it’s because they don’t know what the numbers actually are, which means they should not be in the business of saying one service will “dismantle” another. Find another industry to report on.

When I first wrote about Aereo’s service back in February and called it “dead on arrival”, naturally I got a lot of comments from people saying I was crazy and that it was a great idea and something people would want. Well, six months later, apparently less than 2,000 people in NYC are willing to pay fo it. Big surprise. It’s time a lot of people in this industry come down to reality and stop being out of touch with what is really taking place in the market, instead of always being so quick to think one service will displace another just because the technology exists. Far too many people and investors can’t remove their emotions from the picture when evaluating a service or technology like Aereo and don’t look at it clearly. In this case, it’s crystal clear, Aereo has no shot in the market and won’t survive. Even if Aereo wasn’t being sued, their entire business model would still be dead in the water.

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Updated List Of Vendors In The Content Delivery and Transparent Caching Markets

Dan Rayburn | Monday August 13, 2012 | 01:29 PM | Comments (14)

It’s been awhile since I updated my list of companies connected to the content delivery market including vendors that offer CDN services, licensed and managed CDN platforms, transparent caching platforms and those carriers and telcos who are deploying these services. Since my last post on the subject, Akamai acquired Cotendo, Internap acquired Voxel, Technicolor sold off their video assets, XO Communications got into the market and other companies have come and gone.

This list is far from complete and I’m sure there are others I could include. For now, I’m not adding any P2P based services, mobile content delivery, commerce and advertising platforms or hosting providers that have pricing starting at $99 a month. When this list first started off, it was composed of just service based CDNs who offered video delivery and over time, the list has evolved to feature other technologies and platforms having to do with optimizing the delivery of web content.

While content delivery is a generic term and probably includes hundreds of vendors if you include all cloud based services, co-location companies, regional service providers, P2P networks and mobile platforms, I’ve tried to keep this list to vendors specifically tied to the delivery of video, be it as a service or platform for both On-net and Off-net applications.

But I do think this list needs to continue to expand so I am open to ideas and suggestions on adding new categories. I’m thinking of adding companies that offer FEO and DSA to the list as well, so I welcome you comments and suggestions. (To make the list easier to find on my blog, all you have to do is go to www.cdnlist.com for the latest update.)

CDN Service Providers

Telcos/Carriers deploying & building CDNs (some deployments are only for internal use, others are selling it as a service, like Level 3 and AT&T)

CDN Management Platforms

Transparent Caching Platforms (An Overview Of Transparent Caching and Its Role In The CDN Market)

If you think a current or former company should be added to any of these lists, I’m happy to hear suggestions in the comments section below.

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Gene Munster’s Apple TV Predictions and Data Are Seriously Flawed

Dan Rayburn | Monday August 13, 2012 | 12:01 AM | Comments (4)

If you had to pick one person that is the most outspoken advocate of Apple’s (APPL) still non-existent all-in-one Apple TV, it would have to be Piper Jaffray Wall Street analyst Gene Munster. For more than three years now, Gene’s been very vocal in predicting that Apple is getting ready to release an Apple TV set. The moment he says anything about the device, many people in the media make it into their lead story, even though to date, he’s yet to be right about any of his Apple TV predictions. While I don’t know Gene personally, and for all I know he’s one of the nicest guys in the world, I don’t understand why anyone listens to him when he’s been predicting the same thing, year after year, with no results to show for it.

When he predicted in June that Apple could sell 11M TV sets in the next 3-5 years, the media was all over it. Why? What credibility does he have? Anyone can predict something for many years and eventually might be right, but does that really matter? What info is Gene Munster putting out today that’s usable? I never went to college, I have no journalism courses or even writing classes under my belt and I don’t know what they teach journalists these days. But writers should be more focused on what is taking place today, not what might, could, or should happen 3-5 years from now because in nearly every case, what is predicted never comes true. I see more articles talking about Apple TV, a product that does not exist, as opposed to a device, like the Xbox 360, that actually has a real footprint, real user base and real revenue being generated.

In a previous note, Gene said that the size of the 2013 connected TV market is 110M units. I don’t know where that number comes from but even if we all agreed that’s the correct number to use, that 110M number refers to the global size of the market, not the U.S. market. And as we all know, if Apple were to start selling an all-in-one TV, it would not start off by offering it globally. So the 110M number simply isn’t a realistic size of the market that Apple would be entering. Adding some real data to my argument, Vizio, who is one of the best-selling TV manufactures in the market recently told me that they are forecasting to sell a total of 1.2M connected TVs this year.

Gene’s latest data about a product that does not exist comes to use last week where he surveyed 200 consumers in the Minneapolis St. Paul area and asked them what they would pay for an all-in-one Apple TV. Before you get too excited as to their answers, as the Fortune article points out, Gene says the data he’s collected from these 200 consumers is representative of a population of 300M consumers with 95% confidence. That’s absurd. The findings from a sample size of 200 consumers is supposed to represent the kind of data that would be collected if 300M consumers were interviewed? To put that in perspective, those 200 consumers equals 0.00006666666666666667% of the overall market. But the bigger point is that the data he collected shows people would not pay $1,500 for an Apple TV. When asked how much they’d be willing to pay, the average response from the consumers was $530, for a product that Gene is predicting Apple would sell for $1,500. So his own data collection doesn’t match the estimates and guidance he is giving out.

But according to Gene, if Apple was to capture only between 5-10% of his predicted 2013 connected TV market of 110 million units, it would be a big deal for Apple. On the low-end of that prediction, 5% of 110M is 5.5M units. So Gene is predicting that Apple would sell 4x the number of connected TVs that Vizio expects to sell this year, even though his own survey showed that on average people want to spend $530 for the device? None of this makes any sense. Any connected TV by Apple would easily be much more expensive than a Vizio model. Keep in mind as well, this is all taking place at a time when research firm NPD Display Search says total TV sales worldwide will only grow 2% this year and that global TV unit shipments rose only 0.1% in 2011. The price of an average 42″ smart TV, is between $500-$600 and we all know Apple’s TV wouldn’t be anything close to that price.

Last year, Gene predicted that a standalone all-in-one Apple TV would be available in 2011. In June of this year, he said it would come out in 2012, but then said we should expect it to actually ship somewhere around the first half of 2013. If an all-in-one Apple TV actually ships in 2013, that will be a full five years since Gene has been telling us all that an Apple TV was on the way. This of course is the same all-in-one Apple TV that Gene says must ship with Siri to be successful, a product he gave a D grade to only two months ago when he reviewed Siri’s functionality. In 2009 Gene predicted that Apple would sell 6.6M of the $99 Apple TV set-top boxes that year when in reality, three years later, Apple was barely selling even 3M units. In 2010, Gene said Apple would sell 20-25M iPads in 2011, and they sold 40M. He predicted Apple would sell 4.3M iPads in 2010, they sold 7.3M in one quarter. In 2007 Gene said that within two years, Apple would ship 45M phones a year. In reality, Apple shipped 25M. It’s no wonder that in 2010, on the Apple 2.0 blog, which tracks the best and worst Apple analysts, Gene was ranked 23rd out of a total of 32 analysts. But his poor track record doesn’t seem to stop the media who for some reason, continues to interview him and ask him to give his opinion on Apple products. As far as I am concerned, what Gene is doing isn’t what I would call predicting, he’s simply guessing. And so far, he’s pretty bad at it.

I get that some people are excited about an all-in-one Apple TV unit and if you are a money guy on Wall Street, like Gene is, you’re even more excited about it as you spend most of your time trying to figure out how many units of a new product a company can sell and how you can pump a stock. But we have enough real data in the market today to know what smart TVs cost, how many units are actually being sold, what the growth of the market is and what consumers are willing to pay for these devices. Even with that info available for everyone to see, some of these predictions that Wall Street guys like Gene puts out, are simply irrational and fuel expectations on Wall Street that simply can’t be met. And when wrong expectations get set, we know the outcome from that is never good – for the industry, or investors.

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Back To Regular Blogging Next Week, Lots Of Good Stuff To Come

Dan Rayburn | Thursday August 9, 2012 | 07:02 PM | Comments (5)

I haven’t been blogging too much over the past few weeks as I’ve been recovering from arm surgery which hindered my typing and blogging a lot more than I thought it would. Apparently I’m not as superhuman as I thought. The good news is that I’m well on my way to a full recovery now and can get back to typing for hours on end.

So starting Monday I will be back to blogging on a regular basis. I have lots of stories ready to go and many others in the hopper that I am working on. There has been some interesting news items over the last couple of weeks, so if there is something you really wanted to hear my thoughts on, shoot me an email or give me a call, 917-523-4562, and I’ll be happy to discuss it. I’m always available and I return all calls and emails.

Also, I wanted to say thank you to all those who have reached out to me asking how I have been doing and those who have nicely sent me get well gifts, including the cool custom cookies of me with robot arms on a Lego guy, compliments of NetDNA. More posts to come.

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