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?

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.