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.

Inside the case of  the new James Bond Xbox 360 game that came out today is a special insert card that allows you to trial the Netflix streaming service for 48 hours. While the trial won't officially kick off until later in the month when the new Xbox 360 console upgrades roll out, this is the beginning of what is expected to be some massive marketing efforts by both Netflix and Microsoft for the new service. While this is the first game I have bought that has the trial offer included, I expect other games will offer it as well.

While we've seen a lot of discussion surrounding the technology and implementation of the new Netflix/Xbox service, we have not yet heard much about the type of marketing programs the two companies are going to team up on. While both companies spend a lot of money on marketing, in this case, they should be able to leverage each others distribution and wide reach to create some very compelling programs without having to spend tons of money.

With the new trial offer, Netflix is also going to be reaching a much younger demographic for the service than their typical subscriber to their DVD service. While it is too early to expect Netflix to offer a streaming only subscription service offering, over time, I would not be surprised to see Netflix offer a package for those users who only want to get movies via the Xbox 360, Roku, TiVo or some other device. It may take a year or two before we see such an offering, but eventually, Netflix is going to have to offer some kind of package for those that just want to get movies online.

I was going to do a review of the Windows Media 12 player and some of it's new features, but Peter Bright over at ARS already did a detailed write up and beat me to it. So if you are interested to seeing some of the new features of the player, head on over to the ARS website and also check out the comments section in the article. There are more than forty comments by readers talking about additional features and functionality they want the player to support.

It's been just over two year's now since Google acquired YouTube and while the debate rages on in the industry about how YouTube will make money, few people are discussing the quality problem Google continues to have with delivering YouTube videos. While we know the sheer volume of bits that Google is delivering for YouTube content is massive, you would think that by now they would have figured out how to do it without all the buffering, stuttering and terrible user experience.

And I'm not talking about the quality of the video in terms of the production value of how the video was shot. I'm talking about simply being able to deliver a video without having to wait 15, 20 or 30 seconds for it to start up. Most of the videos on YouTube are short-form and only a few minutes in length. Yet regularly, I have to wait 20-30 seconds for a clip to buffer, even though the clip itself might only be 30 seconds in length. And to make matters worse, for all the people that say "YouTube streaming", YouTube is not streaming. All YouTube content is delivered progressive download, via HTTP, and is not being delivered from a Flash Media Server (FMS). Delivering and scaling video via HTTP is much easier and cheaper than using a streaming media server and streaming protocol. So what's Google's excuse?

It's not as if I am the only one who has this problem. So many people do Google searches regarding the topic of YouTube buffering issues that a short little post I did on my blog a year and nine months ago entitled "Is Google Having Problems Delivering YouTube Videos?", continues to be the number one post on my blog in terms of traffic. As you can see from the comments with that post, this is a constant problem for YouTube viewers.

For all the talk of how YouTube is going to monetize publishers content or what ad model will work best, Google seems to be forgetting that none of those questions matter if you can't even deliver the content with reliability. With such a terrible reputation for video delivery, how does Google think YouTube will ever make money? Viewers only watch so much YouTube content and put up with the poor experience because the content is free and has no ads. Try getting someone to watch a video that takes 15 seconds to buffer and then delivers them an ad before the content. It won't happen.

While I don't know all the details surrounding how Google delivers YouTube content, I know that the vast majority of it is delivered by Google themselves, without the use of any content delivery network. Based on the size and scale of what Google is already delivering, it would make sense that done correctly, Google could deliver the video cheaper than a CDN could offer. But when does Google take into account the quality factor? Why don't they care about the user experience at a time when they are trying to figure out how to make money? YouTube is the quintessential example of how simply having tons of traffic and eyeballs does not guarantee you a business model or sustainable revenue. Quality also plays a role.

While I asked Google for details on why YouTube videos buffer so much and why video delivery is still such a problem, no one from Google would comment. The same way no one from Google ever comments when asked about their bandwidth or delivery costs. And why Google is under no obligation to say how much it costs to deliver YouTube videos, Google should feel an obligation to explain to their users why they have such a bad user experience. YouTube would be nothing without all the people who supported it and made their traffic go through the roof and as a result, enabled YouTube to get bought by Google in one of the worst deals, in my eyes, the online video industry has ever seen.

Last week I moderated a session at the Digital Publishing and Advertising Conference (DPAC) on the subject of video monetization and syndication strategies for publishers. We had a great mix of panelists represented with Matt Wasserlauf, CEO of Broadband Enterprises, Johnny Boston, President of Raw Digital and Lynn Bolger, EVP  at comScore.

While we discussed many topics including the best content approach for increased traffic and ad revenue and the many different advertising formats, the discussion was all about making money today from online video advertising. I asked for a quick show of hands in the room on how many attendees were content publishers, at which time more than fifty hands went up. I then asked, how many publishers are making enough money today from online video advertising to cover anything more than your distribution costs? With that question, the room fell silent and not a single hand out of the more than fifty went up.

And these weren't YouTube style publishers and independent video creators in the room. These were some of the largest online video publishers across many different industry verticals. After the panel, I spoke to many of them about their specific business challenges and what they needed in the market to be able to truly monetize their content. While answers varied, the number one complaint from all of them was that online video advertising still lacks targeting which keeps CPM rates lower than they would be if the right ad was being targted to the right user. I complained about that myself during the session saying it was bad enough I kept getting Gillette Venus women's razor commercials on MSNBC.com, but even worse was that MSNBC.com delivered me that same ad eight times in a row before I got a new ad.

While I keep hearing online video advertising networks and platforms say they do targeted advertising, non one seems to be using it and I question whether or not the technology even works. Major publishers aren't targeting ads to viewers even though it sounds like this is what they need to be able to charge a higher CPM and start to cover more than just their distribution costs. And until publishers can target the right ad to the right user, based on demographics, many publishers are going to have a hard time ever making money from their online video.