A few days ago, Qualcomm acquired privately held Digital Fountain. The deal went down almost a week ago and while I have yet to see a press release, Digital Fountain's website now has a brief announcement about the acquisition on their home page. While Digital Fountain does have a CDN offering, that's clearly not why Qualcomm wanted them.

Digital Fountain's CDN offering only recently got off the ground and their real value is the technology they provide to the defense department and other companies in the IPTV and mobile space. Much of their core technology has been adopted by standards bodies including 3GPP, DVB and others.

I'll update this post later in the day when I get some more details.

Updated: Short e-mail I got from Qualcomm with some more details. "Qualcomm has acquired a team of seven key engineers that will continue to support the technology and existing Digital Fountain customers. The Digital Fountain team will be located in Qualcomm’s Santa Clara campus. Also, that team will be led by Mike Luby, Digital Fountain’s founder and CTO, who will report to Qualcomm’s Chief Technology Officer."

About two weeks ago I published an article entitled "Steps Internap's New CEO Could Take To Get The CDN Business Back On Track". In it I outlined steps I believe Internap should take to streamline their content delivery product offering which would enable them to get their CDN business back on track. Internap's management read the post and last week contacted me to arrange a call where they could discuss my ideas and give me an update on the steps they are working on and have already taken regarding their CDN business.

While some of my conversations with Internap's CTO, Tim Sullivan, VP of Engineering, Steve Kiene, and VP of Marketing, Jim Leach was off the record, much of what we discussed about their CDN offering I can talk about. One of the overall themes I got from the call was that Internap has already streamlined their product offering, decided on what market they are going to focus on and has a CDN plan in place. To me, it's very clear that Internap has put the legacy VitalStream technical issues behind them and is only looking forward to the service they deliver today and the steps they need to take to grow their CDN business. I got a clear sense that their number one goal is to improve the functionality of their CDN offering, re-brand their product line, re-focus their marketing message and go after a very specific segment of the market.

In my blog post, many of the suggestions I made for their CDN business are already underway or in some cases have already been completed. For a long time now I have believed that Internap needs to sell their CDN services stand alone, without the need to have to bundle them with other non-CDN related services. Internap agreed that in the past, there was too much emphasis on the bundled offering and as result, they missed out on much of the stand alone CDN business in the market. Going forward, their new approach will be to highlight to current Internap customers the value in the bundled offering while at the same time targeting content owners who only want CDN services. This is a good move for Internap and one that should enable them to get on the list for more RFPs that require nothing but content delivery services.

Internap took action in this area late last year by establishing a CDN only focused sales team. These CDN specialists are experienced and focused on selling just content delivery. This is a major shift from earlier days where all reps could
sell any product offering, but none really focused specifically on CDN.
Having experienced CDN reps out in the field enables them to have
evangelists who are now championing Internap's CDN message to the rest
of the industry. This process is only just underway and Internap plans
to hire more experienced CDN sales specialists to increase their
visibility in the market.

I was happy to be told on the call that Internap has officially exited the ad sales business and is working with partners for ad insertion into the CDN streams it provides. Through the acquisition of VitalStream, Internap had a legacy ad services portfolio that was primarily focused on ad insertion for customers who streamed radio stations on the web. Over the past few months, Internap finished moving the ad insertion offerings off of their network and no longer has any stand alone sales force selling advertising inventory. This is a smart move for Internap as the ad insertion technology was quite old and had many technical issues, not to mention, was not a fit with the rest of Internap's CDN offerings. The ad sales business wasted too many internal resources and never generated much in the way of revenue. Internap will still continue to provide CDN streaming services to radio stations and other music download websites.

While there are many CDNs in the market, Internap made it clear on the call that they are going to focus on different customers than Akamai and Limelight are going after. They know that to land huge customers like MLB or Netflix you need to have tons of dedicated resources internally and need to grow the head count of your organization to a really large number. Internap is being very realistic in their approach to the market and is going to focus on medium size customers and ones who want to grow their business. This is crucial to Internap's success and at no time on the call did I get any sense that Internap does not fully understand the importance of this. From what I can tell, they are setting their own expectations correctly which means they will be able to do the same for their customers.

On the subject of making Internap a fun place to once again work, a point I brought up in my earlier post, Internap
executives said that there are still many good people at Internap who
like the company and enjoy their job. While that is what I would expect
them to say, I did get quite a few e-mails, almost a dozen, from
employees who work at Internap and contacted me privately after my post
about two weeks ago. The vast majority of them said that Internap has
some really smart people in the company and that they still want to
work hard to get Internap back in shape. Many of them did say the mood
has gotten better knowing they will get a new CEO and many are hoping
that he will rally the troops and give them confidence that Internap
can once again grow. So it does seem like the mood has gotten somewhat better and the new CEO could really take that up a notch very quickly with the right actions. Only time will tell.

Overall it was really good to hear that Internap now has a solid plan for their CDN business and something they can follow and work to execute on. While they still have some work to do and have not yet re-branded their offering out in the market, this should happen soon and start to get the Internap name back in the spotlight for content delivery services. After the VitalStream acquisition there were simply too many legacy VitalStream employees involved and too many cooks in the kitchen. The CDN business strategy which is closely aligned with sales opportunities now falls under the responsibility of the VP of Engineering and it seems that internally, it's very clear who is responsible for what.

While a plan is always great, everyone knows that execution is the key to any company's success, a fact not lost on Internap. They know they need to do more than just streamline their CDN offering and need to continue to execute on the steps they have started taking. While it is too early to know what impact Internap's new CEO will have on their CDN business when he takes over next month, the fact he comes from Tandberg Television and has experience in the video market should only strengthen their efforts.

Tomorrow at 2pm ET is another StreamingMedia.com webinar that I will be moderating, this time discussing the subject of transcoding. Because no single format can serve all needs, transcoding technology is
fast becoming the linchpin in enterprise and broadcast content
delivery pipelines.

David Trescot from Rhozet will discuss the different video and audio formats, why and when format transcoding is critical, the vocabulary of transcoding and how content owners can generate supplemental revenue streams via IPTV, VOD, DVD, web and mobile media.

We’ve already got over a thousand participants pre-registered for the event and will be doing an extensive Q&A session so that we can answer as many questions as possible. All those who attend the event are also entered to win a free TOMTOM GPS unit. You can sign up for the free webinar here.

Washington State Representative Ross Hunter is proposing a new bill (House Bill 2075) that would start charging consumers a tax for any content that is delivered via streaming media, even though the consumer is not downloading any physical assets. As I understand it today, the proposed bill would only affect those companies who have physical offices or employees in Washington State. But if this bill passes, it could set a really bad precedent and could easily have a trickle down affect.

Almost twenty states already tax digital downloads of movies, music and books, but in those cases, the consumer is actually buying something and retains some kind of physical asset. So even though you are already paying tax when you sign up for MLB.com's streaming service, or a Netflix account, this bill would require companies who charge for any kind of service that has a streaming component to it to have to collect a new "streaming" tax. Details are still sketchy on how exactly this would all work, but the bill is starting to get some play and was discussed last week in the House Finance Committee.

I'll be dammed if we're going to let someone try to come along and tax our industry unfairly without a fight. Trying to use a "streaming tax" to make up for the budget problems in their own state is a pretty poor excuse. While you may not have read a lot about this as of yet, get ready to.

We're going to take all the resources we have at StreamingMedia.com to get the word about about this tax and get the industry to fight it. I'll be putting up an information site shortly at www.StopTheStreamingTax.com and we will be looking for those in the industry to help us get the word out on the damage such a tax could have on our industry. I've also spoken to a firm in DC that we are going to team up with and will have more details on all of this shortly.

In the mean time, if you know of anyone writing a story about this, please have them contact us so we can start to tell our side of the story.

This morning, CDNetworks announced that it has acquired Panther Express. Headquartered in NYC, privately held Panther Express has been in the content delivery business since 2005 offering HTTP based delivery services in the U.S and Europe. While details of the acquisition are not being discussed by either company, I will post more information on the valuation as soon as I dig up more info.

To date, Panther Express had raised $21.75M in two rounds of funding and was the largest privately held pure-play CDN on the market, doing between $15-20M in revenue in 2008. Steve Liddell, former CEO of Panther Express will stay on with CDNetworks and has been appointed President of CDNetworks International, focusing on U.S. and Europe.

While many deals look good on paper, this is one of those rare mergers that makes sense on many technical and business levels as well. Panther Express has a bigger footprint in the U.S. and Europe than CDNetworks with over 350 customers currently using their CDN services. Panther's footprint gives CDNetworks quicker access into North America and Europe and allows them to ramp sales much faster. What Panther Express lacks is the reach into Asia, the ability to support streaming media services, including live delivery and access to a large sales and marketing force. CDNetworks has the footprint in Asia, supports streaming of Flash, Silverlight and Windows Media live or on-demand and is an organization of over 400 employees after the inclusion of Panther's team.

CDNetworks said they will retain the bulk of Panther's employees but didn't say exactly how many that will be. Over time, CDNetworks will phase out the Panther Express website and brand but that won't take place until all customer integrations have been done, which is expected to take several months. In a briefing with CDNetworks yesterday they reinforced the point that they are in no hurry to finish the integration. They made it very clear that their number one goal is making sure current Panther Express customers get the same quality service they expect.

For me, there are a couple of key take away points from this deal. To almost any other CDN, Panther Express would not be a good acquisition since they are not global, only provide HTTP delivery, have no applications and are still relatively small revenue wise. CDNetworks is probably the one company where this does make sense since both company's strengths help equal out their weaknesses. Since Panther's services are very basic, the integration of Panther's infrastructure under the CDNetworks umbrella should be pretty straightforward. Unlike what we saw with the VitalStream and Internap integration, CDNetworks does not need to migrate any applications, streaming servers or customers broadcasting live content. While CDNetworks does not appear to be in any hurry to integrate, and does not need to be, it should be pretty simple when the time comes.

One thing that came across to me on the briefing was that at no time did CDNetworks use the Panther acquisition to call out the competition. Usually when I speak to CDNs that are expanding, the first thing they want to do is say how they are going to beat up on Limelight or Akamai. CDNetworks executives didn't use the merger as an excuse to try and convince me how they could crush the competition. It was refreshing to hear that they have very levelheaded expectations as they work to grow their business in the U.S and Europe.

On paper, this merger looks smart, seems logical and should be able to go down without a hitch. But like anything else, it's all about the execution, which is exactly the metric that CDNetworks wants to be judge on. They know that things can look good on paper but they made it clear to me that they want the industry to judge them on their actions going forward and the execution of their CDN business, as opposed to just a press release. I could not agree more.

While most folks know what a venture capitalist (VC) is and the role they play in helping to fund companies in the industry, many don't know the differences between private equity (PE) firms, investment banks (IB), buy and sell-side institutional investors and money managers. To help clear up some of these terms, we've got a short article on StreamingMedia.com that many will find useful, describing the role each plays in the industry. The article was written by Colby Synesael, who yesterday announced his new job at Kaufman Brothers as SVP of Equity Research.

Considering how many telcos and carriers have recently entered the market it should come as no surprise that BT plans to offer a content delivery service of their own by the end of this year. It's been widely known that for some time now, BT has been looking at the CDN landscape evaluating how best to enter the market and it appears they have decided on a strategy.

Based on an interview they did this week with Informa Telecoms & Media, BT said that, "We believe that we can build our own CDN as effectively as reselling others solutions." While this built it yourself approach by BT does not surprise me, unless BT only wants to have a regional CDN footprint, I think it's the wrong approach. It is possible that BT may just focus on building out a European based CDN which would be a lot easier for them than trying to deploy a CDN with a global footprint. But if they want to service content owners who need delivery to all regions of the world, BT is going to have a really hard time playing catch up in the market. You can't just throw a bunch of money at the problem. It takes a lot more than deploying lots of boxes to have a real CDN offering in the marketplace.

If BT only focuses on Europe, or even just the UK to start, they could have an offering out sometime this year that could be fairly well received. BT has a deep customer base to sell to and already has loads of infrastructure in place in the UK. If BT starts out small and stays regional, they could see some success with their offering beginning next year. But if they want to become a global content delivery network and think they can have something out in the market by the end of this year, that's just not realistic.