In the nearly two years since Level 3 first got into the CDN business, they have managed to accomplish a lot with their CDN offering in a very short period of time. From both a revenue perspective and from a product feature set, Level 3 has done in two years what took Limelight four years to do when Limelight first started offering their CDN services in the market. It took Limelight from 03' to 06' to break the $50M revenue mark, something Level 3 achieved after its second year. And if we estimate that Level 3 does at least $75M in CDN revenue this year, they will already have done more than half of what I expect Limelight's revenue to be this year, around $150M.

Much of Level 3's success with their CDN offering has been a result of the CDN group being treated like a startup. For all of the internal politics and red tape that all large companies have, from day one the CDN group has moved quickly, executing their product road map and operating outside much of the confines of the rest of Level 3. For any telco wanting to get into the space by way of building out their own service, this is the only way to grow a CDN offering in the market. The CDN market is very competitive, you have to be able to turn on a dime, get proposals out the door fast and roll out product upgrades every quarter. The business is lost or won based on speed and how responsive you are to customers. Most telcos don't have the mentality for this, they can't do anything quickly and as a result, they can't nurture a new product like content delivery to the market.

Level 3 has done the opposite, but only because the CDN group has been able to operate like a startup inside the larger company. With Level 3 announcing their restructuring plans last week, they are basically saying it's time to move the CDN product out of startup mode and into the rest of the company. While that makes sense if they really want to grow the business and ramp the revenue, it's also a surefire way to kill the business if not handled correctly. If the integration of the CDN offering is not done right and the product road map, marketing, sales and delivery side of the business gets bogged down internally and no longer operates with the speed needed to win in this market, Level 3's CDN offering could lose all momentum.

While I am not saying that will happen, we have seen it take place in the market before and it should be a concern to Level 3. With the company restructuring internally, it also means they are now losing at least three of the key executives who have helped bring the service to the market and were responsible for helping to integrate other Level 3 services like Vyvx into the CDN offering. While losing some key people does not mean Level 3 can't move forward and doesn't still have a lot of smart people working in the CDN group, it's to be seen what the strategy and vision is going forward. Level 3 has appointed Peter Neill as the new SVP of the Content Markets group for the company, which the CDN product falls under. And while I don't know Peter at all and have not had the chance to speak with him since his new role, his background is not in the broadcast or contents market, something that all three of the former executives were very strong in.

In trading emails with Jim Crowe yesterday, he made it very clear that their "views on the strategic importance of CDN have not changed" and that they "are not backing away from our determination to be a leader in CDN." That's very good to hear, but I think the point needs to be driven home stronger in the market. As I mentioned earlier in the week, I got a lot of calls on Monday from Level 3 customers when Level 3 made these restructuring changes. Many wanted my opinion on what was happening, how that would affect them and what this means to Level 3's commitment to the CDN product line. While I don't doubt Level 3's continued commitment to their CDN offering, they also need to realize that they created a lot of this turmoil in the market. Nearly five month ago Level 3 started talking about the changes, but really only executed on them last week. That means that in that time, they let their competitors use the prospect of change against them and it opened up doubt with some of Level 3's customers. In my opinion, the changes took too long to make and should not have been discussed so far in advance. Customers should not be wondering for months what is going to take place.

Level 3 has been a hot topic this week and I've traded e-mails with a lot of industry folks who think this is now the end for Level 3's CDN offering. I don't think that is the case and I still continue to hear from Level 3 customers who are very happy with the service and the support they receive. Level 3 is not charging the lowest price in the market just to give this stuff away and they still have the momentum. But Level 3 needs to manage the integration of the CDN product into the rest of the company very closely and in my opinion, needs to share with the market and customers their CDN strategy moving forward. When you lose three key execs who to date have been responsible for sharing that vision with everyone, you can't go months before you decide who your CDN evangelist is going to be. You need to get them out there immediately, talking to everyone, explaining the vision, laying out the product road map and showing everyone that while change sometimes brings uncertainty, it won't impact the success of Level 3's CDN offering.

I'm getting a lot of questions asking if any of the sessions from the Streaming Media East show and Content Delivery Summit will be available online. The short answer is yes. We have always recorded all of the sessions from all of our shows and made them available on-demand about a week after the show is over. You can always find all of these archives at our video portal located at www.streamingmedia.com/videos

We'll also be streaming live some of the tracks for both shows next week with the help from Ustream, so look for those links on my blog next week.

In addition to our video portal, we also have archives of every Streaming Media East, West and Europe show dating back to 1999, nearly 2,000 hours worth of content. While we don't have many of the older shows online, as we don't have the original masters and many of them are encoded at 56k, if you are ever looking for a specific session let me know and I can track it down for you.

Last week Level 3 announced that they were making strategic changes to the company, including eliminating approximately 150 positions and realigning their customer facing groups in North America. Today, most of those changes were communicated internally and some of these changes will directly affect the CDN group. It was announced last week that Grant Van Rooyen who was the President of the Content Market Groups is gone and I've now learned that Lisa Guillaume who is the VP of CDN Services for Level 3 will be leaving this week. While Level 3 said about three people from the CDN group are leaving due to these changes, I'm hearing the number may be higher. Updated 5/5: Todd Coleman, SVP of Media Operations for Level 3 is also leaving the company.

While all companies make changes, the way in which Level 3 has communicated these changes has been odd. Today alone, I took quite a few calls from Level 3 customers asking me exactly what is going on at Level 3 and multiple customers told me of various changes as opposed to me hearing about them directly from Level 3. A quick check with some of Level 3's competitors also shows that in the past 24 hours, some Level 3 CDN customers have been reaching out to other CDNs, which means someone is not communicating the change very well.

At one point or another, change happens with all companies. But when it happens in such a short span of time and the company does nothing to communicate those changes to the market, it leaves everyone speculating on what is actually taking place. I never understood why companies don't get in front of the news and manage that message to the market and to customers, instead of letting the market come up with their own message and interpretation of what is taking place.

Many have been asking me today whether or not Level 3's new alignment of their business spells the end of their CDN services. While Level 3 has said the opposite, I do have to wonder how the change affects the way the product is marketed and sold. While Level 3 has been smart to integrate CDN into their other offerings, selling CDN can't be thought of as selling something like transit. You need to have a hands-on approach with CDN and all of the various video ecosytem pieces that go along with it.

To date, Level 3 has done what I consider to be a terrific job in the market going from nothing to $50M in CDN revenue in just under two years. They have a real ecosystem offering, have very happy customers and for the past 24 months, have been executing what I consider to be a very solid and strategic game plan. But with Level 3 now realigning the company and putting new people in charge of the content markets group, which the CDN product falls under, we'll have to keep a close eye on how these changes may affect their CDN offering going forward.

At next week's Streaming Media East show, I'll be meeting with executives from Level 3's CDN group to hear more details on what their CDN strategy is moving forward, so look for a blog post with more details on this subject in two weeks.

I just had two companies both cancel their speaking spots next week at the Streaming Media East show on a session entitled "The Impact Of Broadband-Enabled TVs, Gaming Consoles And Devices". I don't know why companies in that segment of the market are so flaky as this seems to happen each year with the devices panel.

I'm now looking for two new speakers for this session and am open to all suggestions. Below are the details, please contact me via e-mail only, as I have the flu and am not answering the phone. Thanks.

Wednesday, May 13, 2009 – C202 – 11:45 a.m. – 12:30 p.m.
The Impact Of Broadband-Enabled TVs, Gaming Consoles And Devices
With the influx of new devices, consumers no longer rely on just the PC for their online video consumption. With the number of new broadband-enabled TVs and Blu-ray players expected to be sold, along with devices such as the Xbox, Roku, TiVo, and PS3, consumers now have many ways to get their video fix. So what are the new business models that will be created from these new devices? What hurdles need to be overcome so that content can be monetized for multiple platforms? Explore with this panel the role of current consumer entertainment devices in this new convergent world and how these devices will play together to offer a superior video experience.

Last month I started hearing whispers from the banking community that content delivery network Velocix was close to being acquired with multiple parties interested. I can now confirm that Velocix is in fact negotiating the sale of the company with at least two interested parties at mid to late stages of the process.

While I am not giving out any more details on who those two companies may be, I can say that various companies in the telco and network equipment community have shown interest in Velocix, primarily for their recently announced Metro product. The expected acquisition will not be a fire sale like we saw with Panther Express and Grid Networks as acquiring Velocix is more about getting access to their Metro technology and platform rather than their CDN contracts.

When contacted, Velocix declined to comment on any potential M&A activity, but did say that since announcing their Metro CDN enablement solution for ISPs in December last year, there has been a significant increase in the level of interest in their business. I expect we'll see the acquisition take place sometime in this quarter.

The Content Delivery Summit is only a week away and on Monday May 11th we’ve got nearly 50 speakers discussing a dozen different facets of the content delivery business. One of the afternoon sessions brings together a group of Wall Street analysts from Kaufman Bros., BankStreet Group, Globespan Capital Partners, Thomas Weisel Partners and Flybridge Capital who will discuss the M&E activity in the CDN industry.

CDN Economics: Consolidation And Evaluation (2:30 p.m. – 3:15 p.m.)
Analysts have widely speculated that we’re going to soon see merger and acquisition activity grow in the CDN space, but to date, little has taken place. CDNs continue to raise large amounts of VC money, and each quarter more CDNs enter the market. What are the current valuations for CDN companies, and where will VC money be directed in the future? What types of deals are being pitched to bankers, which ones are they having the most success selling, and what are the characteristics of the ones they are searching for. Come hear speakers discuss the current M&A and VC environment  and assess whether the economics of the CDN industry make it ripe for rapid consolidation.

• Moderator: Colby Synesael, SVP, Equity Research, Kaufman Bros.
• Panelist: James Henry, Senior Managing Director, Investment Banking, BankStreet Group
• Panelist: Jonathan Seelig, Managing Director, Communications and Internet/Infrastructure, Globespan Capital Partners
• Panelist: Blake Warner, Managing Director, Software, Media, & Telecom Investment Banking, Thomas Weisel Partners
• Panelist: David Aronoff, General Partner, Flybridge Capital

If you have a question you want me to ask one of the companies, put it in the comments section below. And you can still register with the special discount price at this link.

While many conferences only allow attendees to hear opening keynotes from those who have paid to attend the conference, keynotes at the Streaming Media East and West shows have always been open to anyone at no charge as long as they register for a free exhibit pass. I've gotten a lot of questions and about this lately and am happy to confirm that the keynotes are in fact free.

We've got a great combination of verticals represented in the keynotes next month including infrastructure, (Akamai), enterprise, (Bank of America), telco, (Verizon) and TV media center, (boxee).

You can register now for your free exhibit pass and hear all of these keynotes free of charge.

• Paul Sagan, CEO, Akamai
• Gregg Moss, SVP, Enterprise Streaming Media Strategy and Delivery, Bank of America, Knowledge Channel
• Joe Ambeault, Director, Product Development and Management, Video Services, Verizon
• Avner Ronen, CEO, Founder, boxee

If you have a question you want me to ask one of the companies, put it in the comments section below.