For shareholders in any company, these days are trying times. I don't have to tell you that all stocks are down and the market has taken a beating. That being said, even when the market was doing better, I still got more hate mail from Akamai and On2 shareholders than any others, most of which are for emotional reasons as opposed to rational arguments.

Most of the mail comes from individual investors and not large firms and the person typically wants to argue over a post I made on my blog, without either reading what I actually wrote, or not wanting to admit things that are simply facts. And while I am the first to admit that I don't own stock in any public company and have never bought or sold a single share ever, even I know that investing in any company means you have to keep your emotions out of the decision making process.

In my blog post last week about Sun launching the new JavaFX platform, I got tons of e-mails from readers who said I was crazy not to realize how big of a deal JavaFX is and how it would take over video playback on all devices. When asked, most of those who sent me the e-mails said they were investors in On2. While I can understand how an investor in On2 would be excited for the JavaFX announcement since Sun licensed the On2 codecs, you still have to keep the deal in perspective. Sun is not going to make any major traction in the market anytime in the next year. What they released last week was version 1.0 with very limited functionality for video and they don't even expect to have development software available for mobile until half way through 2009. Developers have to build apps first, get content owners to use them, get them deployed and get viewers to start to consume them. This does not happen overnight, or even in twelve months. Yet, many of those On2 investors who sent me e-mail wanted to argue with me that I don't know anything about investing and that I must be working for Adobe or have an interest in seeing H.264 succeed.

I don't need to know anything about investing to know how long it takes for something to be adopted in the market. How quickly do you really think it will take Sun to grab any large share of the market away from Adobe? That will not happen anytime soon and that's reality, like it or not. And while it is very easy to dismiss my post by saying, "Dan must work for Adobe", that's a lame argument. Whenever I write a post that is considered positive about Adobe, people say I must be working for them. If I write something positive about Microsoft, some are quick to say I must work for them. Rather than some investors wanting to actually admit and that they are allowing their emotions to cloud their judgment about how a company is really doing, it's easier for them to come up with a lame, and false, statement that the author must be getting paid by someone to write something that is positive one way or another.

If I were an On2 investor, I would look to the past. When Adobe licensed the On2 codec for Flash, many On2 investors wanted to make crazy statements about how big of a deal that would be for On2 and the revenue that would come from it. Considering how much Flash video is on the net and the rate at which Flash video was adopted, is any On2 investor happy with the deal Adobe got? I'd doubt it. On2 has made very little from the Adobe deal, but that is not stopping some from saying the Sun deal will be completely different. Can Sun get as much adoption as Flash has? No way.

I'm not knocking On2 as a company or their investors. Hell, I would not want to be an investor in any company with the way the market operates and the kind of headache it must cause for those who own shares. But at the same time, you have to remove your emotions out of the picture so you can make informed decision based on data, logic and what is really taking place in the market.

Aside from lots of e-mails from individual On2 shareholders, I also get a lot, if not more e-mails from Akamai shareholders. Many of them want to argue over points that make me wonder if they just want to argue for the sake of arguing? When I wrote the post last week on Akamai and how they were cutting pricing, I got lots of e-mails where people wanted to argue with me on lots of aspects of their business. That being said, not a single person was or could argue that Akamai is not growing revenue as fast as they use to, is seeing pricing pressure in the market, has seen a slowdown of traffic growth on their network and had to layoff 110 employees. Instead, folks wrote in with lots of angry e-mails about how Akamai is going to crush Limelight in the patent case and how Limelight is building a business on stolen technology.

For starters, the post didn't have anything to do with the patent case and I've never said that I think Limelight will win the patent case. In fact, I don't see why the judge would reverse the ruling and I think at some point, Limelight would have to pay some kind of damages, but it is really the rate that will be debated. But even if that happens, why would Akamai investors care so much about it? Lets say Limelight has to pay $50 million in damages and shows that they are no longer infringing on the patent. Now what happens? Nothing major. Akamai gets $50 million dollars, which does not put them in any kind of new revenue bracket and Limelight now only has $127 million in the bank instead of $177. It does not put Limelight out of business and if customers have not left Limelight over the past two years during the lawsuit, what makes you think they would leave down the road after a Limelight payment? It's an emotional win for Akamai shareholders, but it has no real impact on how Akamai is going to get back to growing their business.

But the best thing I always get from many individual Akamai shareholders is that I must be working for Limelight or trying to "pump" their stock. Again, what an easy argument for them to make, except for the fact it's not true. When I write something positive about Level 3, people write in and say I must be working for them. When I write something positive about Limelight, they must be paying me. And when I did two posts about Akamai's application delivery product, some said they probably paid me to write that. By all accounts, apparently I work for just about every CDN company in the market. Too bad they are all wrong and that I have never been paid by any CDN ever, except for Mirror Image which I stopped working for over a year ago and have never written about them on the blog.

If investors want to debate, great, lets have a discussion on how or why one company is going to grow over another. The comments section is always open on my posts. But bringing emotions into the picture and wanting one company to do well over another just because you have stock in them is not the reasoning behind why they must do well in the short or long term.

Velocix has launched a new product named Velocix Metro that enables ISPs to deploy servers within their access network, providing them with their own content delivery network for video and other rich media content. (press release)

While Verizon was the first to announce they would deploy Velocix servers to deliver content to their last mile customers with FiOS, this announcement now takes that offering and makes it available as a product to any ISP looking to cut their costs, manage traffic more effectively and generate a new business model.
Besides being a unique offering in the market where a CDN is looking to license their distribution technology to other providers, Velocix also announced that Metro comes pre-bundled with server software from Adobe and Microsoft to support Flash, Windows Media and Silverlight and is working with Sun as the preferred equipment provider.

For Velocix and ISPs, this is a very different approach to the market and one to watch very closely. Most ISPs let CDN providers come into their network and deploy caching boxes to allow the ISP to pass traffic directly to the CDN which helps to reduce their transit costs. This new approach by Velocix lets ISPs build what is essentially their own private CDN enabling them to control costs and potentially add additional revenue if the ISP has good peering and wants to deliver content to users outside of their last end mile. Something Verizon is not doing today but is expected to utilize down the road due to their extensive peering arrangements. In addition to the cost savings, Velocix Metro enabled ISP's receive a revenue share based on traffic delivered via their networks from Velocix.

While this won't put any of the CDNs out of business anytime soon, it is something they have to closely watch. As the press release says, "Traditional CDN providers charge video broadcasters for premium delivery services but ignore the fundamental role that ISPs play in the end-to end delivery process. Rather than including ISPs in the value chain, CDN providers simply pump video traffic into their networks, leaving the ISPs to bear the cost of distribution on to their subscribers". As more video gets delivered at higher bitrates, the burden to ISPs is only going to increase and many will be put in a tight situation trying to manage the costs on their network. We are already starting to see this happen with the major players, but think about how this affects the smaller ISPs to even a larger degree.

For now, the Velocix Metro solution is completely managed by Velocix and over time, Velocix plans to allow the ISP to take full control of the solution and turn the management of the boxes over to the ISP directly. While the fact that Velocix manages the boxes worried me at first, it does make sense for Velocix to get it up and running with the ISP and do the majority of the work before the ISP resumes control.

There are a lot of really interesting things that could come from this solution and the more I think about how Verizon might use it down the road, it leads to some very interesting possibilities that could have a big impact on how video bits are delivered and how some of the current issues that ISPs have with video may be solved.

Look for my follow up post this week on how the Verizon and Velocix deal might evolve into something that's very important for the rest of the industry.

Level 3 announced today that it would be laying off 450 employees in North America or about 8% of their total workforce. While that's not good news for the company as a whole, the company has confirmed that the CDN group is not being affected and none of the cuts are coming from the content delivery markets group.

While I expect a lot of the 115 open jobs listed on Level 3's website to disappear, Level 3 is currently looking to fill various positions in the CDN group. In particular, they have three sales engineer positions they are looking to hire for right away in SF/San Jose, LA/Tustin and NY. If interested, contact Brian Gero at Level 3.

As we put the final touches on our Frost & Sullivan report entitled World Video Content Delivery Networks Market, which breaks out CDN video revenue and market share, Level 3 will do between $45-50 million in total CDN revenue this year. While most of that revenue comes from small object delivery video downloads and not video streaming, Level 3 is showing some good progress with their streaming offering. $50 million in revenue for 2008 won't make any impact on Level 3's total company revenue, but it would rank them at number four in the industry based on total CDN revenue behind Akamai, Limelight and CDNetworks.

That being said, Level 3's content delivery group can easily be affected if the rest of Level 3's businesses can't increase revenue, cut costs and reduce their debt. The job cuts today is intended to help reduce their costs but it is to be seen if that will be enough even in the short-term.

Recent Level 3 Posts:

– Level 3 Opens Broadcast Encoding Centers: Ecosystem Offering Now In Play

– Q&A With Jim Crowe, CEO of Level 3 About Their CDN Business

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?