The drawing for the Roku Netflix Set Top Box is now over. Congrats to Robert Schumann who was selected as the winner using a random number picker website. I should have another set top box related product giveaway later in the week.
Sponsored by
When Akamai sued Limelight Networks over patent infringement, many speculated that customers would shy away from Limelight and that it would be hard for them to sign new business going forward. While Limelight’s revenue has been flat for the past three quarters and it has had to focus some of its attention on the legal proceedings, Limelight is still signing new business and expanding their relationships with current customers.
This morning, Limelight announced some traffic numbers for a special online Disney event where users could watch the full-length Disney Channel Original Movie “Camp Rock.” What wasn’t mentioned in the release is that the Disney Internet Group, which Limelight has worked with for the past few years, has just recently expanded their relationship with Limelight and renewed their contract for content delivery services across many of Disney’s online properties including Disney Online, ABC.com, ESPN.com, Club Penguin and others. Limelight will be providing a variety of CDN services for on-demand video delivery, webcasting events, website acceleration and professional services.
I have also learned that Microsoft, which already has a 5-year deal with Limelight, has just recently expanded their contract with Limelight for a large volume of additional services. Terms of the new business were not disclosed to me but I expect we’ll hear more about it on Limelight’s next earnings call. I also see that about two weeks ago, Limelight launched a new blog on their website at blog.llnw.com
For me, I’m not surprised to see Limelight still signing new business. Over the past 10 years there have been numerous CDN patent suits across a lot of companies and to date, no CDN has even been shut down and had to turn customers off. I have yet to hear of any CDN customer who has ever been affected by any of the suits and while I’m sure many customers are interested to see what happens in court, it’s still about running their content business as usual.
Yesterday, there was a lot of talk about AT&T and their CDN announcement and as usual, a lot of questions, mostly from Wall Street, on what this means to Akamai and the rest of the CDN industry. While many sites covered the news, I saw very few sites give more details on what, if any, impact this has on the market. Lots of re-hash of the press release with very little additional info or data to compare AT&T’s plans with the rest of the market.
To me, the important take away of the announcement was AT&T’s appointment of Cathy Martine as the executive vice president of Content Distribution. AT&T has had technical folks working on their CDN offering since last year, but to date, did not have anyone leading the business. It’s really hard to start any new product offering in the market if no one is responsible for it on the business side, which AT&T now has. A 25+ year veteran at AT&T, Cathy formerly launched and ran their VoIP product line but will now focus solely on the CDN business. Late yesterday, I had a chance to speak to Cathy and some of her technical team to get my questions answered.
A lot of news sites and blogs had some pretty big headlines about how AT&T is going to challenge Akamai and Limelight with their CDN offering, but those are just headlines, written to make noise. The fact is, Cathy and her team were very realistic in knowing that you don’t build capacity overnight and challenge the leaders in the market with a press release. They know it will take time to build out the right level of capacity and additional services around the product offering before you can compare yourself to leaders in the industry. At no time did Cathy or her team call out Akamai or Limelight in my conversation with them or make wild claims about dominating the market.
On the call, AT&T clearly understood what it’s limitations are today with their offering and how they will stack up against other competitors by the end of the year, when their initial build-out is complete. As I reported in May, AT&T plans to have 400Gbps of global capacity for all of their CDN offerings by the end of the year. To put that in perspective, that would be 20% of Limelights capacity today and less than 25% of Level 3’s CDN capacity. Wall Street analysts, I love ya, but please, keep things in perspective.
The idea that AT&T is going to put any of the other CDNs out of business or grab a lot of market share anytime soon, will not happen. That’s not my opinion, it’s fact, based on their current product offering and the amount of time it takes to really build out a competitive service. Could AT&T be a real competitor sometime next year? Yes. But to what degree, with what level of service, in what vertical markets and with how robust of an offering we don’t know, and won’t for a long time. And while today’s announcement talks to the enterprise market, there is no suite yet of solutions specifically tailored to media and entertainment customers and AT&T is not yet in Adobe’s Certified Flash Video Streaming Service provider program. It’s also too early to know what kind of pricing AT&T is going to offer in the market and how they will compare to the competition.
Too many people who watch the CDN market want to talk about capacity and say how easy it is to "turn up" capacity? They say why can’t AT&T build out the same amount of capacity Akamai has within a year? Capacity is needed on many levels besides the pipe. What about the volume of servers needed? For instance, how long do people think it would take to deploy 10,000 servers? That’s not a fast process. Ans what about the capacity for customer service and support? Capacity is not built out overnight and it’s only one piece of what is needed to have a true solution. How do you handle live events, ingressing streams, transcoding video, managing content, provide reporting and do authentication amongst other things. A lot goes into a CDN offering, especially if you want to target Fortune 1000 customers in the long run. AT&T knows that for awhile, they have to target smaller customers,
who have simpler needs and will stay away from any live streaming that
has the potential to have large traffic spikes.
Not to mention you also have to price, package, productize and market the service, something AT&T is clearly aware of. Cathy said that over the next few months, AT&T plans to make it easier for potential customers to contact AT&T and get CDN quotes out the door quickly. That being said, AT&T has a lot of work to do and realistically, in my eyes, it will be a good 18 months before we know if they can seriously challenge any of the top providers. Owning the network is a good first step, but it takes a lot more than
that to be a real competitor. Last year, we had only 3 companies (Akamai, Limelight, CDNetworks) who offer
CDN services doing more than $40 million a year in CDN
revenue.
While Cathy would not give specifics on any potential acquisitions, she did say that AT&T was open mined on any partnerships or acquisitions that could speed their time to market. Now that AT&T has officially announced Cathy’s role, she’s getting a lot of inquires and requests, as expected, from companies who want something from AT&T. We also discussed the current state of the CDN market as it pertains to IP lawsuits and at this time, AT&T said they did not believe that their CDN product offering is infringing on any currently granted patents. That’s an answer I expect any company to give, but the real question, which we will find out at AT&T grows, is whether or not other CDNs think they are infringing.
For now, AT&T is not putting any growth numbers or projections on the CDN business for this year or 2009, which makes sense since they will be spending that time to build out the service. It’s very similar to Level 3’s approach to the market where AT&T wants to control the entire ecosystem for content owners and will have to spend a few years, and more money, to truly build it out. The bottom line is that AT&T is new to the market, just starting to offer their service and is not seriously challenging any of the CDN leaders for the next year.
While AT&T is one to watch, we should also all keep a clear head and not declare other CDNs to be dead just because telcos like AT&T and Level 3 are entering the market. Right now, the telcos are the underdogs and are behind in the market trying to play catch up to CDNs who have been building out and growing for years. The telcos have a lot of work to do, have a lot of money to spend and need to show real revenue before anyone can declare them a winner. It’s also crucial for the telcos to operate their CDN business like a quick and nimble startup if they want to be successful, which is something very difficult to do inside such a large company. It will be fun to watch.
Last quarter, StreamingMedia.com conducted a survey on the costs of CDN services specific to streaming and video delivery. This report is now available for purchase for only $795 and includes all the raw data and summary charts with answers on
pricing trends, traffic growth, contract terms, formats used, bitrate
growth, P2P interest and the most important factors when choosing a
CDN. All the raw data on over 25 questions is included along with pie
charts on each question. (All end-user customer names and company
info has been removed)
I have already released some of the highlights of the report for free here on the blog and you can see some of them below.
Rather than only providing the pie charts like most research houses do, I wanted to make sure we provided all of the raw data as well so that you can parse the numbers based on exactly what you want to know. You can break the numbers down based on a specific industry vertical, size of customer or pricing metric used and we’ve kept the report affordable to be able to get it into the hands of as many folks as possible. Anyone who purchases the report will also have access to me to ask any follow up questions or talk through any of the data with me.
Last week, Motorola announced it had launched a full-length movie store for its mobile phones. God know who’s going to want to watch a full-length movie on their cell phone, but that does not seem to be stopping the carriers and content owners from trying the long-from approach. Last100.com has an article with all the details on the list of titles available, cost of the service and limitations of the technology.
I am happy to announce the keynote lineup for the Streaming Media West show, taking place Sept. 23-25th in San Jose. Confirmed keynotes include: Werner Vogels, CTO of Amazon, Jordan Hoffner, Director of Content Partnerships for YouTube, Anthony Wood, CEO of Roku and Albert Cheng, EVP of Digital Media for the Disney ABC Television Group.
At Streaming Media West, all keynotes are free to attend. Registration is now open and you can sign up for your free exhibit hall pass online.
On Thursday, I will be picking one random reader of my blog to give away my Roku Netflix unit to. If you want a free Roku Netflix set top box, go here and leave a comment on the post to enter.
UPDATE: Drawing is now closed. Robert Schumann was selected as the winner using a random number picker website.
Please note that the Roku box does not come with any Netflix service.
So you either need to be a Netflix customer, or need to be willing to
setup a Netflix account.
