Today, Cisco announced a new media media processing platform that provides media conversion, real-time post production, editing, formatting, and network distribution capabilities for formatting video and rich media on any device. The first product now offered for this new platform is dubbed the Cisco Media Experience Engine (MXE) 3000. A rack-mount device that delivers real-time post production and processing capabilities such as watermarking, voice and video editing, text and image overlays and noise reduction for creating customized broadcast quality video experiences.

The MXE supports file-to-file transcoding only, not real-time streaming, and supports H.264, QuickTime, MPEG1, MPEG2, AVI, Windows Media, VC-1 and H.264 as input formats and spits out video for MPEG2, MPEG4, H.264, AC-3 Audio, Layer II Audio, Windows Media Proxy, MPEG1 and MPEG 2 amongst others.

While not that impressive as just a stand alone transcoding solution, the unique aspect is that the MXE allows you to do complex video editing like stitch clips to form a single contiguous clip, make graphic overlays that include the addition of title slides, captions, logo insertions, watermarking and voice overlays. The graphics feature supports Flash 8 Pro template authoring and supports Web Services and XML APIs. The system also includes a ton of monitoring functions and pre-processing options.

This product announcement should come as no surprise to anyone since Cisco is hard at work to move the entire ecosystem of video creation, transcoding and delivery to the network layer and bundle more video functionality into all of their network based systems. Once these types of solutions can start doing things like transcoding and delivery in real-time, that should be a catalyst for the industry. That being said, with the economy being what it is today, Cisco is going to have a harder time in the near-term in selling such solutions unless the customer is able to save money in the long run by using just one platform.

No word yet on what the MXE costs but I will updated the post in a few hours when I hear back. Cisco says the list price of the unit is $65k.

In an interview this week in the Wall Street Journal, Adobe's CEO said that with the recent round of layoffs, Adobe would be better focused to grow their online video business. That's good news to hear from Adobe because being at the top requires a lot of work to stay there, especially when the competition is heating up. If there is one thing Adobe needs to really work on, it's their strategy for getting content owners to use Flash for video that needs digital rights management (DRM).

To date, Microsoft is still winning the business that requires DRM. Their free PlayReady solution PlayReady server costs $30,000 but as noted in the comments below, is offered by third party hosting companies without the need for content owners to buy their own server, which is what I was trying to imply when I said it was free. The PlayReady solution supports connected playback with streaming or progressive-downloaded content and yesterday Microsoft announced another customer, BSkyB, that is using Silverlight powered by PlayReady. Other recent wins by Microsoft also include Netflix which is using Silverlight for their Watch Now service for Mac users.

Adobe on the other hand is selling a server for DRM called the Adobe Flash Media Rights Management Server with a list price at $40,000 per CPU. Since there is no SDK, as noted in the comments section, third parties can't offer the functionality as a hosted service. If that price has come down, I hope someone will let me know, but from what I can tell, it is still that expensive. Right now, content owners needs more tools and support to help protect their content and try to make a business model out of online video. It would make more sense for Adobe to give away the DRM functionality to act as an enabler for content owners to use the other pieces of their Flash video platform.

I'm sure Adobe is just trying to be compensated for the work they have done to create the DRM server, but with so few content owners willing to pay the price, Adobe could make more money in the long run by bundling the DRM functionality into one of the other Flash Media servers.

Today, Sun officially launched JavaFX 1.0, a new development platform for building rich internet applications (RIA) for Web browsers and desktops. Sun's apparent belief is that with Java technology already being on more than 90 percent of desktops and laptops and 85 percent of mobile devices, they can give Flash and Silverlight a run for their money over time. While that sounds great on paper, I wonder how realistic Sun in being in regards to the lead-time it takes to get a new platform out into the market.

While player penetration holds some weight, as Adobe and Microsoft would tell Sun, it all comes down to getting developers to build on your platform. JavaFX is way late to the game and has quite a few limitations right from the get go. For audio and video applications, JavaFX supports On2's video codecs and On2's Flix software application is the only tool that can encode video for JavaFX. Nothing wrong with On2's codecs, but if JavaFX won't support H.264 soon; they won't get a lot of support. And with Flix being the only tool that can encode video, it puts the costs of encoding content out of the reach of many developers.

Speaking to Sun about this very issue, they did say that this is only version 1.0 and the start of an audio video framework that will support H.264 and other functionality going forward. That's good to hear but again, Adobe and Microsoft has such a head start that I wonder how many additional releases of JavaFX are needed to where developers can start to compare Sun's functionality to Adobe or Microsoft's, specific to video. Sun also mentioned that over time, their Java business model will evolve to where they are generating licensing from things like their Streamstar server. A Java based streaming server that they want to license when the demand for JavaFX video requires enterprises and content delivery networks to support the format. While I understand Sun's desire to generate revenue from a server license, ask any of the CDNs what they think about supporting yet another video delivery platform. Sun won't like the answer.

Along with the announcement, Sun also launched a new website, JavaFX.com which showcases some of the functionality of the new platform. While I really would like to see some of the video examples, they don't work. I keep getting an error message saying, "There was one error opening the page" or "Sorry! We couldn't find the document requested." When I questioned Sun on this they told me the site is getting a lot of traffic and that I should try back later. Come on. You're Sun. You launch a new platform that you want people to check out yet the site can't handle the traffic? And how much traffic can it really be getting? At the time of me publishing this post, not a single website or blog in my RSS reader, of which there is over 100, even mention the JavaFX announcement. Sun should be doing a better job with the showcase website.

While it is too early to know if developers will like some of the advantages that JavaFX has when it comes to dragging applications from the browser to Windows desktops, the real question is what are the advantage of using JavaFX as a consumer? Other than the interface and the way the viewer interacts with the content, viewers are the ones that drive the adoption of video platforms. Unless Sun can show viewers through the use of some new applications why they should want to use JavaFX over Flash or Silverlight, Sun is going to have a very hard time cracking the audio and video market.

That being said, while more platforms means additional confusion in a world of online video that already has no standards, competition tends to make companies work harder at making their solutions better. So welcome to the party Sun, but if you want to have any shot at making it, you need to be in this for the long haul and can't expect to see any big gains for years.

For all the talk of the poor economy and how tight VCs are being with their money, companies tied into the online video space still seem to be having no problems getting funding. A quick roundup of funding announcements over the past sixty days shows that more than $75 million has been raised and I'm sure there are a few I missed that would make the number even higher.

• ExtendMedia: $10 Million (news)
• Baofeng: $15 million (news)
• LiveRail: $500K (news)
• KickApps: $14 million (news)
• Magnify.net: "high six figures" (news)
• EyeView: $1 million (news)
• Boxee.tv: $4 million (news)
• Taboola: $4.5 million (news)
• blip.tv: $5.2 million (news)
• Transpera: $8.5 million (news)
• Digitalsmiths: $12 million (news)

There still seems to be quite a lot of interest by VCs in companies that are somehow tied into the online video market in some shape or form. And while the cost of entry is relatively low to get into the market, I have to wonder just how many VCs have a really good handle on the size of the market for the company they are investing in and how much market share that company can truly grab. Companies need to be able to show very quickly that they can stand on their own and deliver a very clear and compelling message to the market at a time when it is crowded with many similar companies.

While I do think money has dried up for those looking for some cash to simply experiment with an idea, for those who have something they can show as a real product, the money still seems to be easy to come by. Last month, NewTeeVee Live had a panel of VCs talking about this very idea and you can see the video archive here.

So what do you think? Will the money dry up soon or will VC money only continue to flow into the online video market?

The FeedRoom announced this week that it will acquire privately held ClearStory systems with the intent of integrating ClearStory's digital asset management (DAM) solution into The FeedRoom's enterprise video platform. This is the latest in a string of recent acquisitions in the industry (Entriq/Dayport, Accenture/Origin Digital) with the intent of giving content owners more control over managing multiple forms of rich media assets.

On paper, this seems like a natural fit for the two companies since The FeedRoom does a lot of work in the enterprise market and to date, their content management solutions were very customized and focused almost exclusively on video assets. Adding a true digital asset management platform to the fold should only help The FeedRoom's customers deliver a lot of the other pieces of content that go along with video.

That being said, it seems kind of scary that as far along as we are in the market, we are only now starting to see some acquisitions with the intent of solving the work-flow and management issues associated with rich media content. Customers content management demands are only going to increase as more content on placed online and gets consumed.

Over the last 60 days, I have seen Akamai getting more aggressive with video delivery pricing and in some cases, appears to be doing a better job of trying to keep existing customers at the time of contract renewal. While that should come as no surprise considering current market conditions and Akamai's recent slowdown in the growth of their business, I think it's being done too late and on too small of a scale.

While Akamai's pitch to customers has always been that you should pay more if you want multiple services like content delivery, app acceleration and ecommerce services, for customers who need just video delivery, that sales pitch simply does not work. Yes, if you need content management or other services outside of pushing video bits, I think Akamai has a legitimate sales proposition. But for customers who need just video delivery, streaming or download and no additional services, Akamai has no justification as to why a customer should pay 3x the going rate. No one can debate with any reasoning that pushing video bits across a network is not already completely commoditized in today's market.

If Akamai was the only CDN who had the scale or performance to push even commoditized bits across the Internet, then the argument could be made that even if the service is commoditized, Akamai is the only major player in town so it costs more. But that is not the case. The fact that Limelight, Level 3 and CDNetworks combined will do more than $200 million dollars this year in CDN revenue proves that point.

While Akamai has been more aggressive on pricing for video delivery, many times, their pricing is not matching their sales proposition to customers. I am seeing many proposals where Akamai is pitching the customer on the value of their network for commoditized video delivery at 3x the going rate, yet when the customer balks at the pricing, Akamai proceeds to drop their pricing in half. That's a confusing message. If Akamai knows the customer needs basic delivery services, why try to pitch them on a higher level of service only to drop the pricing right away? In some cases, customers aren't even giving Akamai a second chance to bid on the business as Akamai's initial pricing is too high and does not make the initial cut. In cases where the customer does go back to Akamai saying the pricing is too high, I am also seeing Akamai cutting pricing by more than half, but only after three or four rounds of negotiations with the customer. Again, if this is commoditized business, why jerk the customer around? It should not take four rounds of negotiations to get a price that the customer is actually willing to consider. Give them a fair price for the service being offered and do your best to win or keep their business.

I know many Akamai investors are going to want to knock my reasoning by saying look how much cash Akamai has or look how big their revenue is. But no investor can argue that Akamai's business, while still growing, is showing some serious signs of slowdown and increased pressure from competitors. That being the reality, there are a few things Akamai should do to help increase their market share and increase the growth of their video CDN business.

For starters, Akamai should stop trying to charge more for streaming delivery than progressive download. I know some are going to say streaming costs more, but Akamai has long said that the value of their network is that it is so distributed and flexible that all their servers can delivery any type of content and do it at a cheaper cost. If that is the case, then there is no need to charge more for one type of protocol than another. And even if it is more expensive to Akamai, no other major CDN charges more for streaming. So like it or not, the market has dictated how customers are buying these services. Akamai can continue to think they can charge more or they can listen to the market and realize they are losing business to competitors due to their pricing strategy. If Akamai were to charge one price, they would win more business and get the opportunity to bid on more business. I can't even begin to count the number of times a customer has told me they are not going with Akamai due to Akamai's increased cost to stream content.

Second, Akamai should start offering two levels of content delivery pricing. If they are going to end up discounting their initial pricing by half, then just admit that some video delivery business is commoditized and come in with an aggressive price the first time. Do what you can to win this business outright. I know some will want to argue with me that Akamai does not want this business to begin with but then I ask, why is Akamai dropping their pricing in half? If they don't want the business, then stick to the high pricing they are giving out let the customer leave if you don't want them. You can't say you don't want the business to begin with, but then you drop your pricing in half to try and win the business. That's a conflicting message.

Akamai has been around for ten years now and no question has been the leader in the content delivery market. But times are different now and all companies need to deal with reality of what is going on in the market. Companies must evolve with the times and that includes how you price, package and productize your services. Akamai seems to be doing a really good job with their other services outside of CDN and lining themselves up as a company for when things like app acceleration truly begins to grow. But in my eyes, they are doing all of this at the expense of the CDN product, which is the service that really helped them grow for many years.

Some will say my argument makes no sense because if Akamai takes on this business, at a reduced cost, it will only have a negative impact on their margins. My response to that is that this business is all about volume and the economics of scale. While overall margins for CDN would go down initially, they would go up over time, as the added impact of so much additional traffic on Akamai's network would reduce their overall cost. Again, this is what Akamai has pitched the industry on for years, their ability to scale their delivery services like no other company. If that were the case, then signing up enough customers for commoditized video delivery services would have a positive impact on margins over time. I'm not saying for Akamai to give the stuff away or to match some of the lowest pricing in the market. I'm saying Akamai should price it to win, within reason, based on what the customers needs are and the type of traffic it is.

If Akamai re-tooled their pricing, their sales pitch and their strategy for how to deal with customers who only need very high volume of commoditized video delivery, they would win a lot more business. It would also enable them to hopefully be able to up sell the customer on additional services down the road when the customer grows their business and needs some actual services that come with a premium. If Akamai does not want to be in the business of offering commoditized video delivery, fair enough. But then stop giving out quotes for that business and pass on responding to the RFP. They can't have it both ways.

Akamai is not dumb, in fact, I've always thought of them as being very smart folks. And I don't think this is a case of Akamai not knowing what is going on in the market. I think Akamai has been in a comfortable position for the past few years, with little in the way of pressure and competition and is still sticking to their old mentality of how they sell their services. It's time for Akamai to evolve their CDN business and re-tool it for the current market. But to do that, they have to throw out the legacy idea that they are the only game in town and the attitude that comes with that. Akamai has all the resources needed to make this transformation in the market and now is the time they need t
o do it.

If Akamai is going to make this change, deliver a new message and adapt their CDN business to the changing times, I'm even willing to go on record and say I will give them any outlet they want, be it at one of our shows, my blog or StreamingMedia.com for them to deliver that message to the industry. Akamai has always been seen as the market leader in the CDN space, and as a result, is expected to educate and lead the entire market with their vision. That needs to happen soon as before too long, it's not going to be such a clear-cut decision as to who the market leader for CDN services is anymore.

Reminder: I have never bought, sold or traded stocks in any public company ever, including Akamai.

Lately, I've been getting a bunch of questions asking for the latest news on the Akamai and Limelight Networks patent suit. While there is not much news to talk about, Akamai and Limelight were back in court last month and there is a good chance the judge will issue a ruling by the end of this year.

Even if a ruling comes down in the next few weeks, it is unlikely that the judge will reverse the original decision in Akamai's favor and such a ruling would then just result in Limelight filing an appeal. Since the appeal process tends to move a lot faster, we can expect for both sides to be back in court probably by the second quarter of next year. When that happens, details of Limelight's workaround for the Akamai 703 patent will then be detailed and we'll get a lot more information on what exactly Limelight has done to circumvent the patent in their eyes.

It will also be interesting to see if Akamai files an appeal to any of the rulings from the Markman hearing in regards to how the court ruled on some specific language and the definition of certain technology. Some folks I have spoken to have mentioned that it might make sense for Akamai to contest a few of the rulings based on the interpretation of the technology. Whether or not this will happen is hard to say as most of the records and rulings from the court are not available to the public.

No matter what happens, this suit won't be ending anytime soon but a ruling this month could be important for Limelight. While Limelight has been a frequent target of take out rumors, anyone looking to acquire Limelight is going to wait until after the ruling when things are clearer. Even if the ruling only results in Limelight filing an appeal, any company looking to acquire Limelight will then be able to review their workaround and decide if they think the appeal process will be successful or will have a better handle on what damages may cost. Keep in mind, with the money Limelight has in the bank, even having to pay damages to Akamai does very little to impact Limelight's bottom line.

Limelight is reducing pricing in the market while at the same time increasing their margins, something I didn't see many folks talk about on their last earnings call. Last quarter they finished cutting a lot of the smaller customers from their network that weren't growing and they now have over 120 customers for small object delivery, ecommerce and enterprise services. They are starting to get some traction outside of the video delivery market and still continue to close big deals.

This is a very interesting time for Limelight as they are showing signs of added growth at a time when the market stinks and their market cap is down to $185 million. I still think Limelight gets acquired by a major telco next year but with the market being what it is, anyone not offering close to $8 a share and I think Limelight passes and holds out until the market improves. They have the cash to wait and don't need to be in any hurry to sell out. While there was some speculation three quarters ago that Limelight's CEO might be replaced if things did not improve by year's end, Limelight has had a couple of good quarters in a row and last week renegotiated CEO Jeff Lunsford's compensation package.

Whether or not Limelight can do anything to improve their stock price remains to be seen, but the company does seem to be building a lot of momentum for the New Year and is expected to drive a lot of marketing and product focus away from video and into small object delivery in 2009. That's probably not good news for other CDNs who have always been able to win business that required both video and small object delivery since Limelight has typically focused on mostly video related content.

Disclaimer: I have never bought, sold or traded stocks in any public company ever, including Limelight and Akamai.