Last night, Scott Guthrie at Microsoft posted more details on his blog about the adoption of Silverlight 2 and gave some details on new features in Silverlight 3, slated to be released next year. While I had previously heard Microsoft say 1 in 4 machines on the Internet has some form of the Silverlight player installed, this is the first time I have seen the 100 million number for consumer machines mentioned. And since that number does not include installs in the enterprise, the total number of machines that have the Silverlight player are even higher.

While 100 million sounds like a big number, many will want to compare that to the number of Flash installs that Adobe has and say that it's still small. But right now, it's still too early to compare the two. Silverlight is still new in the market and we need to wait and see what kind of growth and penetration rate Silverlight gets over the next 12-18 months before you can really compare Silverlight to Flash. As I have said in the past, Microsoft is in this platform fight for the long term and can spend the time growing their share of the market strategically and steadily. They don't need to surge ahead overnight and they have the ability to compete with Flash over time. Microsoft knows this is a race that will be won year's from now and they have time on their side.

In addition to Scott's post listing many of the new features in Silverlight 2,he also briefly talks about some of the new features coming next year in Silverlight 3 including support for H.264, 3D and GPU hardware acceleration, richer data-binding and support for additional controls.

When Microsoft releases Silverlight 3 next year, adds support for H.264 and we see video services like those from Netflix gain traction, the online video format market is really going to heat up. I'm not making any bets on who's going to eventually win, but I will say that I don't think there is ever going to be a single format the dominates the market. I think we will also have more than one major player in the format space and considering how many different kinds of video solutions are needed in the market, there is room for two major players.

This morning, Sky News and Times Online announced they are teaming up to develop video content to be shared between the Times online and Skynews.com websites. Starting today, Times Online articles will include daily co-produced and co-branded videos. Sky News says the new co-produced videos will focus on two areas: business and home and foreign news. With Sky's expertise in video production and the Times editorial staff, it is a smart use of both company's resources.

For the new video service, I have confirmed that they will be using the Brightcove 3 platform. This is another big customer win by Brightcove who last month also won a large deal with AOL. For Brightove, they continue to lock up the UK market for online news sites with the Guardian and Telegraph already using their system and now the Times online, which does 20 million monthly unique viewers.

With so many new customer wins being announced by Brightcove, the company should see some very good revenue growth next year. And while some want to predict that Brightove will not be profitable by mid 2009, like CEO Jeremy Allaire said they would be, I'm willing to bet that Brightcove can be profitable in the next 6-8 months

North Dakota Senator Byron Dorgan plans to once again re-introduce a bill in January that would stop Internet providers from blocking certain kinds of web content. Senator Dorgan and Senator Olympia Snowe already introduced a similar
bill together in January of 2007, refereed to as the Internet Freedom Preservation Act, but as an amendment to a larger video
franchise reform bill. That bill ended with the vote to add it to the
bill as an 11-11 tie, meaning the amendment did not pass.

Of course Verizon (who's FiOS service I use), AT&T and others oppose the bill and when you read some of their quotes on the subject, you have to wonder how dumb they think we all are? Verizon has stated, "…Net Regulation, is trying to solve a problem that doesn’t exist," and "There is a ‘disconnect’ between consumers’ desires for new products and services and the stifling effects of this bill."

Problem that does not exist? Have they seen what Comcast has been in the news for lately? And forget "new products and services" that consumers want, how about being more concerned with the products and services we have today. With all that has gone on in the past year, I'm interested to see if Senator Dorgan's bill in January will be the same as the one he proposed in the past or if any changes have been made to it. I've contacted his office and am waiting to hear back from them if they have any outline of the bill that they can share.

No one will argue that just about every business vertical and our country are experiencing hard times. But for the online video industry, the challenging times are good for business and as a whole, good for the industry overall. To me, it looks as if too many folks are writing for headlines and want to predict doom and gloom just so they can play on emotions and do things like create lists of ways that companies in our space can "survive" the hard times. How many more posts do we have to read where someone gives advice saying things like "watch your expenses" or "renegotiate vendor contracts"? If any company in any industry does not already know to watch their expenses and isn't constantly working to renegotiate vendor contracts, in good or bad times, then they don't deserve to survive. Let them go under.

Part of the reason why we see so many of these is lists is that quite frankly, there are way too many companies that have to do with the Internet, being run by a bunch of young kids with no business experience at all. What other industries besides the Internet space do you see lists like this being made? The airline and automotive industries as a whole have been taking for years. We don't see the Airlines and those who cover the space talking about how airlines should "watch their fuel costs" or "make sure they don't have empty planes". A lot of what we are reading about in the online video space is due to the fact that many running these companies just don't have a lot of business experience. I don't fault them for that, you have to get your start somewhere, but those who have money in these companies should be overseeing them very closely all the time, not just when times are bad. And how many companies have a CEO or executive management team who might have very strategic visions or be very smart people, yet have no leadership skills or business experience. Many of the companies in the Internet space as a whole are founded by very smart technology people, not business people.

It seems that many writers want readers to give into the scare of these articles talking about how bad things are, and how much worse they are going to get, without looking at the real reason companies are having problems. Most of the companies I see laying off employees, don't have any business model to begin with. So at some point, in good economic times or bad, they are going to layoff employees anyway. That is not the case for all companies, but it is for many of them. And what about the positive impact this will have on the industry as a whole? Do we really need a hundred user generated video sites out there? Chopping many of them out of the market will help better define who the leaders are, what business models work and will assist those with real business models to grow faster and help them stand out from the sea of confusion. Many companies who have a legitimate shot at making it tell me their main marketing problem is how they make themselves stand out from all the noise that comes from having way too many companies, with no real business, in the market.

That being said, I'm not suggesting that anyone losing their job is a good thing or easy to deal with. And some cuts are coming to companies who I do think have a real business model in the future. But layoffs are a part of any business. The thing I don't like hearing is how so many executives of these companies are only just now talking about keeping an eye on costs because of the economy. Any real business person will tell you that you keep a closer eye on costs when things are good, when you tend to waste money, so that when things are bad, you are already prepared and don't have to take drastic actions. More money is wasted in good economic times with things like lavish dinners, expensive hotel rooms and company branded swag, than in times when the economy is bad.

I think it is also crucial for all facets of the online video industry to keep things in perspective and set expectations properly. For instance, at the beginning of this year it was all about how online video advertising was talking all this money from broadcast and print advertising. The death of every medium except the Internet was being predicted and as a result, people expected more than what was possible. The most aggressive prediction I saw was for online video advertising to be a billion and a half dollars in 2008. Now, at the end of this year, it looks like it will be more along the lines of $500 million. While there is nothing wrong with that number, even if it was a billion and a half dollars this year, that's less than 3% of the entire TV advertising market, that the industry is predicting such immediate death for. Lets be positive and excited about the growth we have coming, but also be realistic.

We have to keep in mind that even though this industry has been around for more than ten years now, every facet of the online video industry is still very small. The markets for online video advertising and content delivery for video are both under half a billion dollars this year. The market size for video transcoding, video publishing platforms and niche video networks are all under a few hundred million each. I think it is very easy for people in the industry to forget that while many have been working in this industry for years, our industry as a whole is still very small when compared to just about every other vertical market. We still have a lot of growth to do, a lot of innovation to bring to the market and many applications that need to be developed on top of the basic underlying technology that has been created.

Things will get worse for companies with no real business model, product offering or clear and defined message of who they are and what they offer. That's just business. But after the shakeout, our industry will still be here, business is still growing and the industry will be stronger as a result of it. We are only just getting started.

This month, Level 3 officially opened their two new broadcast encoding centers and has already started signal acquisition, content ingestion and video encoding services for customers in their content markets group. The two broadcast centers, located in Manhattan and Tulsa, now enable Level 3 to market to customers a unique offering, controlling customers video content from creation to distribution.

While many content delivery networks (CDN) are trying to figure out how to get out of the commodity business of shipping bits and are talking about the "ecosystem", Level 3 has now deployed one of the most unique ecosystem offerings in the market. The new broadcast centers allows level 3 to provide support for encoding up to 24 simultaneous live events in Windows Media, Flash or Move Networks formats. And with both broadcast centers tied into Level 3's Vyvx offering, the company can also ingest video directly from customer's locations and downlink and uplink video from nearly 95% of the world's satellites.

Why many will say that in the bigger picture, these services are not a huge money maker for Level 3, the point of this offering is to enable content owners to be able to get more content online faster and easier. Moving forward, this new offering will also enable Level 3 to become one of the premiere CDNs in the market for live events since they can do more than just deliver the bits. I got my start in this industry as a webcaster and understand the need customers have when it comes to live broadcasting, a trend we are seeing more of on the web. For live events, it's all about the production, getting the signal from one location to another, encoding the video into the right formats and distributing it to the right partners. Not to mention do it all at broadcast quality and with complete redundancy. With live events, you get one chance and once chance only to get it right. And while Akamai and Limelight still retain control of the most of the large scale live events on the web, Level 3 is quickly catching up.

While not announced, Level 3 is already broadcasting many professional sports events in Europe and other locations and has over 700 Vyvx customers. Add in the fact that Level 3 gets more than 20,000 requests for short term Vyvx accounts each month, mostly for sporting events and breaking news, and it does not take a lot of math to figure out how quickly this business will ramp up for Level 3.

To support live events, most other CDNs currently use partners like iStreamPlanet, Origin Digital, or OnStreamMedia to handle the signal acquisition and encoding needs for events. And while those companies and others do a good job, the vast majority of customers, especially in the broadcast vertical, are looking for one company to handle it from end-to-end. For most customers, calling a CDN and asking for live event help, outside of delivery, is a painful process. Typically they are told to call a partner or find someone who does live event production and then call the CDN back when they have it all worked out. While CDNs are very good at delivering live streams, they are pretty poor in handling all of the others pieces of a live event and assigning a live event manager who can assist with things not under control of the CDN. That hands-on approach is what makes a live event successful. And if we think about where video is going with higher bitrates, longer form content and HD video quality, the process of ingesting and encoding video is going to be harder to manage and become more important to major content creators.

While Level 3's broadcast encoding centers are primarily handling one-off events right now, in the first half of next year, Level 3 expects to make much of their live event services available on a self-provisioning model. Clients will have the ability to reserve encoders and ingest and encode their own streams on the fly, without having to call into Level 3. While most content owners are content to have someone else do it today, there is a shift going on in the industry as those in the media, entertainment and broadcast verticals take more control of their content. As online and broadcast divisions inside a company merge, more are shifting resources to where they want to provision encoders and live event solutions themselves. That logic is part of the reason why Level 3 acquired Servecast last year so they could layer some of Servecast applications on top of the Level 3 infrastructure.

For the past year and a half, I have been saying that Level 3 is going to become a serious player in the content delivery arena, offering more than just pushing bits. And while they still have a few pieces of the solution to bring to the market, like better reporting and some of the front-end applications, 2009 should be a good year for Level 3's content delivery business.

Comments from a meeting last week with journalists at Adobe’s headquarters indicate that Adobe’s CEO, Shantanu Narayen, thinks Adobe has already won the online video platform battle and that Flash can survive any threat from Microsoft. That’s a dangerous assumption to make and underestimating Microsoft’s ability to challenge any company, in the long run, is never a good idea.

In the article, which appears on the guardian.co.uk website, Adobe’s CEO is quoted as talking about how much adoption Flash has and the penetration rate of the Flash plugin on computers around the world. While I would agree that the penetration rate is high, keep in mind that Flash has almost no penetration in areas like the enterprise vertical, or mobile, markets that Microsoft still dominates. It also has literally no penetration when it comes to downloaded video to the desktop, which is dominated by Windows Media and QuickTime. And for all the talk of the Adobe Media Player (AMP), which allows you to play back downloadable video, when was the last time you saw any website offering Flash video as a download with the Adobe Media Player? While Adobe is clearly trying to push into the enterprise market and offer a platform for downloadable video, Flash has gotten almost no penetration in those markets.

And when it comes to live video, while Adobe has now made live Flash streaming stable in version 3.+ of the Flash Media Server, any CDN will tell you it does not scale as well as Windows Media and has a higher total cost of deployment than Windows Media. It does not support multicasting, that I am aware of, and the DRM capability of Flash has been very late to the game and expensive to deploy. The fact we see Netflix and others offering streaming movies for Mac users is primarily due to the DRM capabilities of Silverlight. Not to mention, in most cases, Flash video streaming is still more expensive for content owners to deliver, especially for those with a lot of traffic.

In the guardian article, Adobe’s CEO was also quoted as saying, “The BBC moved over, the NFL [National Football League] went live with us using NBC. Microsoft and NBC have had a long standing relationship, but they picked us.” The problem with that quote is that it’s factually wrong. Yes, Microsoft and the NBC have a long standing relationship, yet they did not decide to use Flash for the NFL streaming. The NFL decided and is quoted on the record in various locations as saying they are the ones who made the decision to use Flash, not NBC. And from what various sources tell me, Adobe is helping to foot the bill to stream the NFL games. So is it really fair for Adobe’s CEO to be calling out Microsoft for “opening its chequebook” in an attempt to muscle its way into the web video market when Adobe may also be helping content owners foot the bill? The fact no one from Adobe will comment or give any details, on the record about the NFL deal, speaks volumes.

No one is debating whether or not the Flash platform has tremendous penetration in certain segments of the market, it clearly does. But to go on record and say that you think Microsoft has no shot at ever competing with the Flash platform and stating that you feel you can withstand any push from Microsoft, that’s a dangerous message to convey. Especially when, from what I have seen, the Flash team operates with the intelligence knowing that they always need to improve upon their product. I deal with a lot of people on the Flash team and at no time, that I can remember, do they ever talk about having Microsoft “beat” or talking down their competition. They know they have a good product that they are constantly working to improve on and aren’t happy to sit around the rest because of the market penetration they already have. But when the CEO of Adobe comes out and says they have already won the online video platform battle, what message is that conveying to the rest of the company? Should the Flash team now stop working as hard to make Flash even better? It’s a very dangerous tone to set.

We all remember what happened when Real’s format ruled the online video industry and then Microsoft entered the market and took nearly all of Real’s market share in a few short years. I’m not predicting the same thing will happen in this case to Flash, but Microsoft is going to take share from Adobe, with Silverlight, over time. Might not be next year or the year after, but Microsoft isn’t playing for a short-term win. They are in this for the future and can build their platform over time, waiting until online video truly becomes a business, when content owners start making money. Enabling others to make money from online video has been Microsoft’s goal from day one and one of the driving forces behind their DRM functionality in the Windows Media platform since 1999. Adobe only just started addressing DRM functionality this year. Adobe has also been very late to the HD game, something else Microsoft has been focusing on for years.

In the guardian article, Adobe’s CEO is also quoted as saying, “If you look at the number of partners who are signing up [to use Flash] despite the fact that Redmond opens its chequebook and tries to get companies to move to Silverlight, we’re winning.” If Adobe thinks Microsoft has “opened its checkbook” and is not seeing results, think again. While many people think Microsoft throws money at everyone, they have not, as of yet. To date, Microsoft has offered up very little money to content owners, Olympics aside, and has not implemented some of the programs, like “netcredits”, that Microsoft did back when it battled RealNetworks. If Microsoft were to put serious money behind Silverlight and really spend the marketing dollars it did when it took the market from Real, Adobe would be in for a serious fight. Don’t underestimate Microsoft’s ability to do that again, sometime soon.

Last week, StreamingMedia.com launched new discussion forums located at forums.streamingmedia.com, which includes a new topic just for those interested in the content delivery industry. The new content delivery forum allows members to discuss and debate issues surrounding traditional content delivery networks, peer-to-peer networks, and hybrid models of content delivery specific to live and on-demand video.

Got a question about which CDN you should use? Need some help troubleshooting a technical problem? Want some advice about how much you should pay for video delivery? Or just feel like sharing your analysis of the latest developments in the CDN business? Then join the new Streaming Media Forums, and get the discussion started with colleagues from across the industry.

All forums are web based and are free to use, but registration is required if you want to post comments.