I keep reading a lot of reports and quotes by people who all agree that there are lots of CDN providers in the U.S. and as a result, that must mean that industry consolidation is inevitable. The problem is, right now, very few CDNs have enough revenue to make them worth anything. And with many of the new CDNs not focusing on applications and IP, why would we see consolidation when there is nothing yet to acquire?

There are only three companies, Akamai, Limelight and CDNetworks who will do over $25 million this year in CDN revenue. Maybe someone would want to acquire a CDN doing less revenue, or roll up a few of them together, but since so many of the CDNs are really just getting started in the market, there is nothing to consolidate.

If CDNs start to tackle the workflow and ecosystem problems associated with video and build applications to solve those needs, then they become worth something a lot faster. Case in point. Akamai didn’t buy Nine  Systems for it’s $20 million in revenue and Level 3 didn’t purchase Servecast for their $5 million in revenue. They purchased the companies for the applications they had developed. If either company had large revenue and applications, even better, but the applications were enough.

In the next 12-18 months, I expect we’ll see almost no consolidation at all. Yes, I still think Limelight will be acquired by one of the many telcos who are looking to enter the market, and CDNetworks with its nearly $50 million in revenue for 2007 is also a potential target, but other than those, who else has enough revenue, applications or IP to make it worthwhile today? Eighteen months from now it’s a whole different story as unfortunately, many of the 40 CDNs just won’t have enough traction in the market. But since the CDNs have all raised so much money in the past two years, none of the new entrants are going away anytime soon. And yes, the number one player in any industry can always be taken out of the market. And while there seemed to be a lot of rumors in the past week of Cisco acquiring Akamai, I see nothing in today’s market to indicate why that would happen now.

Eighteen months from now, the CDN market is going to be a completely different industry. We’ll be a billion dollar market in the U.S., we’ll have a few companies doing some real revenue and we won’t have over 40 CDNs in the market. But for now, no consolidation is coming.

[Sept 2016 – email me if you want the lastest version] (OPML File Updated 2/9/09) I’m always being asked what sites and blogs I read that cover the online video industry and what’s in my RSS reader. I have about 100 feeds in Google Reader from many sites and blogs, some mainstream, others not. You can download my OPML file by clicking on the link [Mac users hold down the control key] (Download DanRayburn-RSS-Subscriptions) and drop it into your RSS reader.

I think it would be really helpful if other bloggers and new sites made their OPML file available. I am always on the look out for niche sites and blogs I can keep an eye on.

Today, Pure Digital Technologies announced a newer, smaller version of the widely popular Flip Video camera. Called the Flip Video Mino, the unit comes in at 40% smaller than the original Flip and has rechargeable batteries. Retailing for $179.99, the new unit weighs just over three ounces and is being targeted primarily towards teenagers.

Unfortunately, the new Mino only has 2GB of on-board flash memory and captures up to 60
minutes of TV-quality video, which are the same specs as the original Flip. The Mino has new
touch-sensitive buttons to record, fast forward, rewind, pause and
delete and the new internal, rechargeable lithium ion battery recharges whenever the camcorder’s USB arm is connected to a computer
and provides more than four hours of recording time on a single charge.

I’ll have a review unit in a couple of days and will do a follow up post with some videos.

While there continues to be a lot of talk in the industry about HD quality web video, to date, I still have yet to figure out what classifies web video as HD quality? As an industry we are using the word HD to clarify video as being a certain level of quality, but these days it seems many are calling their video HD or their video delivery offering as supporting HD, but then the video is not truly HD by TV standards.

Depending on who you ask, the HD standard for the web video seems to be all over the map. While we know that for broadcast TV HD quality is usually defined by a resolution of 1080i, 1080p or 720p, the codec used for web video seems to play more of a role in the definition of HD web video than in the traditional broadcast industry. Some also say that you have to take into account the bitrate the file is encoded at in order to classify it as HD or not.

We’ve seen delivery networks say they can deliver HD video over regular 6 megabit connections and others who say they can do it over connections at half that. Many delivery networks all say they support "HD quality" but then don’t define what they classify HD quality to be and what their offering supports. The recent Operation MySpace webcast was touted as HD quality but then I saw many in the industry commenting on how it really wasn’t HD quality due to the codec that was used.

So what is HD quality on the web? What are the classifications we need as an industry? While HD web video has very little traction today, with the term being used so often, we better create some sort of standard agreed upon. If we don’t, over time, the word HD may not be associated with such good quality video as we want it to be.

With the Streaming Media West show taking place earlier than usual this year, September 23-25th in San Jose, TODAY is the day to contact me if you want to organize and moderate a session at the show. The ideal candidate is someone who specializes in some facet of the online video business be it advertising, search, content creation, etc… or focuses on some aspect of the many different technologies in the industry.

If you are an expert in a particular topic and want to design the focus of a session, pick your own speakers and pick the format be it presentations, demos, case studies, round table panel etc….. I need to hear from you, today. Seriously, the program is now 75% planned and if you want in, a week from now will be too late.

I am open to all ideas and suggestions and am looking for those who are comfortable working with me on their session and have the experience in organizing a discussion around a topic. If you are interested, send me an e-mail today or better yet, call me immediately at 917-523-4562.

I turn in the advance program tomorrow for layout, design and printing so I really am down to the wire. I have only a few open spots left and need to hear from you if you want a shot at filling them.

Today, Onstream Media announced that it had agreed to acquire IPTV based platform provider Narrowstep in an all stock transaction. Shareholders of Narrowstep will receive 11.1 million shares of Onstream Media common stock plus have the opportunity to earn additional shares based on reaching future sales targets.

For 2007, Narrowstep had about $6 million in sales and total operating expenses were over $16 million, much of which was spent on the buildout of their own content delivery network. At the end of November of 2007, Narrowstep had about $6.5 million in cash and had started to shop the company. At their current burn rate, Narrowstep was close to having to raise another round this quarter in order to stay open.

Onstream Media, which is on a run rate to do between $15-20 million for 2008, and has a current market cap of around $40 million, gets more than 75% of its revenue from webcasting related services. On paper, this acquisition is an odd combination since Onstream Media is really in the services business and Narrowstep is in the software and platform business. Both companies have two very different business models and very different customers, in different regions of the world.

Thanks to ScribeMedia, we now have some of the Streaming Media East sessions edited and archived online. Thirteen sessions are now available for viewing with more being added each day at www.streamingmedia.com/videos

We welcome anyone to use the videos on their site or in their blog in anyway they like as long as it is non-commercial in nature.