This morning, News Corp. and NBC Universal announced that their new online video portal, most recently referred to as NewCo, will now be officially named Hulu. The release says that starting today, users can sign up at the Hulu website to be included in an invite list for the private beta which will start in October.

Kevin McGurn, VP, National Sales Leader for Hulu will be one of our keynote presenters at the Streaming Media West show in November in San Jose. Keynote presentations are available for free to all registered attendees and online registration is now open.

If you thought the pricing battle between the CDNs was fierce today, just wait till the next quarter when Level 3 (LVLT) enters the market with its new content delivery service for video.

Back in May in a post entitled "Level 3 Could Become A Major Player In The Content Delivery Market" I outlined the reasons why Level 3 has the potential to really enter the market as a major player in the content delivery arena. Based on everything I have seen, Level 3 has finished it's CDN initial build-out for the caching and progressive download of content and is nearly complete with being able to support the delivery of video via streaming. I expect we'll see an announcement about this in the next 30 days followed shortly thereafter by the launch of the CDN service for streaming video.

And if my prediction is right, I expect Level 3 will come to the market with an aggressive marketing campaign talking to competitive functionality and performance at a much lower price. And I don't mean slightly lower, I mean less expensive by a wide margin. While that would not be a new tactic by a CDN, (remember iBEAM?) it is unique to Level 3 since they own the network and should be able to have lower costs than anyone else. While other CDNs in the past lowered pricing to essentially buy market share, none of them ever succeeded, as in the end, their costs caught up with them. If Level 3 is this aggressive, we're going to have to wait to see what impact it has on the market and what tactics the other CDNs will deploy to combat Level 3. While we know that customers are not buying on price alone, and Level 3 still has to prove it has a good service, other CDNs will have to decide how to adjust to the shift in the market.

Now I know that some CDNs will say that it does not affect them as they sell "value added services" and customers will pay more for those, which is true, but only at times. Not all customers need more than a CDN product and if that's all they are looking to buy, then additional services won't allow CDNs to keep their pricing higher for that specific customer. Also, Level 3 is an interesting one to watch in that it also offers co-lo and other services, so some of the CDNs who offer those additional services are getting a competitor on multiple levels when it comes to the product portfolio.

Level 3's caching platform is already fully deployed in the U.S. and Europe and will also be beefed up in Asia by the end of the year. They started selling their progressive download capability last month and will continue to add to it to have nearly 500Gbps of capacity by years end for their caching platform. While Level 3 was able to use some of the infrastructure they acquired from SAVVIS for static caching of content, the streaming assets of SAVVIS were discarded and Level 3 has built a CDN for video from the ground up, which could be an advantage. Yes, late to the market, but a completely new network with no legacy issues that they have to deal with. They own all aspects of what it takes to operate a CDN; wavelengths, collocation, power and cooling, server infrastructure, the largest IP backbone on the planet and direct interconnectivity to other top networks and their core knowledge has always been deep intelligence of their costs to move bits across their backbone, to their customers and to their peers.

Does cheaper pricing mean Level 3 is guaranteed to succeed? No. They have to prove they have a reliable network, have the geographic reach customers want and have all the other services that go along with a CDN offering like reporting, SLA, customer service etc. in order to be taken seriously. But when they have all of that in place, which I expect will be before the end of the year, Level 3 will have a service that the other CDNs will have to compete with. We already know that Metacafe is now a customer of Level 3 and other large customers are currently using signed on and others have been testing the network for both live and on-demand streaming. While Level 3 would not comment on who any of these customers are, or even confirm that Metacafe signed on with them, Dan Golding at Tier 1 Research correctly pointed out last week in a report that the URLs for Metacafe were coming from Level 3. Level 3 has been busy signing up numerous large customers and since they have a huge customer base for other services to leverage, I expect we'll see some announcements about these customers in the fourth quarter. Throw into this the fact that Level 3 acquired Servecast back in July and Level 3 is going to hitting the market in multiple locations globally from a sales, marketing and product perspective.

From day one, Level 3 has also talked about being a major player in this arena in the long run. Level 3 does not need to do tons of revenue next year. The company won't be impacted by the revenue from CDN Services for a long time to come since it already generates billions from other products. But that's also an advantage for Level 3 in that it does not need to ramp revenue as fast and as hard as companies who's sole revenue, or a large chunk of it, comes strictly from the CDN product. Level 3 is not looking at this in the short-term and clearly wants to win not only the business that is out there today for short-form content, but really win down the road when it comes to long-tail content.

Will Level 3 be successful? It's still too early to know. But it would be pretty hard for anyone looking at all of the resources Level 3 has to not realize that they could easily become a serious competitor in the market for the long run. Come the middle of next year, I think the market will shake out quite a bit and that out of all the new CDN players that are entering the industry, we'll see who the real ones are. I would be surprised if Level 3 is not on the top of that list.

Jeff Hanley is moderating the "Tools And Best Practices For The Enterprise Streaming Media Department" panel at Streaming Media West this year and is currently selecting speakers. If you come from an enterprise company and would like to sit on a round table panel and talk about the video market in the enterprise vertical, please let me know and I will put you in touch with Jeff.

We are not accepting any vendor speakers for this session but do welcome any vendor who may have an enterprise customer that they want to get on the panel. I define enterprise as a Fortune 500 company. In the past such enterprise speakers have included Accenture, Bank Of America, MasterCard, Wachovia, Lockheed Martin, Boeing, Lehman, Johnson & Johnson, Pfizer, Microsoft, Target, Vanguard Group, JPMorganChase, Verizon, General Mills and many others.

Thursday, November 8, 2007
11:30 a.m. – 12:30 p.m. B302 (Panel Session)

Tools And Best Practices For The Enterprise Streaming Media Department
This session will bring together four frontline streaming media professionals to discuss their favorite toolsets and techniques for producing enterprise communications and training content. The emphasis will be on in-house production with "off-the-shelf" tools and apps, rather than turnkey or outsourced solutions. Premiere or Final Cut Pro? Camtasia or Captivate? Flash or Silverlight? Or all of the above? What works and what should be avoided? All this and more will be covered in this enterprise-focused session.

For all the talk of YouTube’s new advertising model and the number of eyeballs they have, the biggest problem facing YouTube is the fact that half the time, their videos don’t even play back properly. Why can’t YouTube get poor quality, short-form videos to play back without all of the wait, buffering, and starts and stops that users are experiencing? I first wrote about this back in February with a post entitled "Is Google Having Problems Delivering YouTube Videos?" and since then it has gotten far worse.

Last week, I saw that my February post about the poor YouTube playback experience had quickly become the number one post on my blog that people were finding via Google. TypePad shows me the phrases that people are putting into Google and it’s phrases like, "you tube video wont load", "slow youtube videos", "youtube video loading" and "can’t load you tube" amongst others.

What is the problem here? This is not an infrastructure problem. Google is not lacking in technical expertise, capital, or the resources to make these videos work. If smaller companies can get high-quality, long-from content to work without these playback problems, then what is Google’s excuse? They have no business model today for YouTube, have been working on their "advertising plan" forever yet they can’t even get the basics to work.

When it comes to YouTube’s advertising strategy, they have a major flaw. In order for their advertising strategy to work, it requires users to actually be able to view the videos. YouTube is the most overrated, over hyped company ever in this industry.

Originally, I had no plans to write up any type of post about the Microsoft (MSFT) and Limelight Networks (LLNW) announcement last week. But after reading so many analysts all saying the same thing, it’s clear that many of them are missing the bigger picture and not asking the right questions.

For starters, this announcement has nothing to do with Akamai (AKAM) or any other CDN provider. Some analysts did get it right, but way too many of them are asking
if Akamai lost this business, if it was taken from another provider or
how this may affect Akamai. Akamai did not lose this business.
Microsoft did not shop around an RFP for some delivery services. This
deal was about Microsoft extending a relationship that was already in
place and working with Limelight on some very specific long term goals of improving the Microsoft platform for digital media. And some analysts were saying that Akamai didn’t win this business since it is not in the co-location business, therefore it didn’t even bid on the business to being with. Limelight is not in the co-location business either. This deal had nothing to do with co-location.

While I must have seen at least a dozen different analysts commenting on the announcement, why is it that not a single one of them that I saw went into detail on the bigger piece of the announcement, that being the cross-licensing of technologies. Why aren’t the analysts asking about that? Think bigger picture here guys. Have you ever seen Microsoft cross-license any technology from a CDN before? I haven’t. That’s not to say that it has not happened in the past. And while I encourage anyone to point me to a similar announcement, I could not find any release by a CDN with Microsoft talking about cross-licensing technology in any public record, over the last five years. Why is no one asking about the details of that and what it may mean for the companies and the industry? Why aren’t the analysts asking what is different this time around and what it means for the CDN industry as a whole?

And don’t you think this says something about the market and the growth we are about to see? Why would Microsoft cross-license technology from a CDN? Very simple. Microsoft knows very well that what we are experiencing today with content delivery is only scratching the surface of where this business is going to go. They know that a few years from now this will truly be a powerful medium for delivering all kinds of video content and Microsoft wants to prepare now by making their platform ready for when it does hit. So what type of technologies might be cross-licensed? What does each company get from that portion of the deal? What are the longer-term implications that we may see? Why aren’t the analysts asking those questions and reporting on the answers? Aren’t many of these same analysts the ones who are predicting doom and gloom for the CDN space due to lower pricing and the "perceived" slowdown in the market? Doesn’t an announcement like this of cross-licensing technology from a CDN make you think otherwise, or at least question it?

I listen to a lot of the earnings calls these companies have and so
many of the analysts all ask questions pertaining to numbers, but not
the questions about the products and services that the numbers come
from. What about looking at the long term affect that any announcement
will have on the industry and companies in this space? It’s not about
what a company’s stock price does in one day.

I wish analysts would ask harder questions. I wish they would know more about the products and services of companies as opposed to just looking at market share, numbers, and all of the financial data. If many of them had a better understanding of the market and of a company’s products and services, they would be able to better analyze the numbers that come from those services. Also, while there are now over 30 CDN providers in some shape or form, and there are tons of new analysts covering the CDN space, I’d like to point out that the content delivery market for video is not a new industry. It’s been around since 1996. Analysts need to spend the time to look at the CDN landscape over the past many years to see how the business models and market has evolved. There is a lot that can be learned from what’s happened in the past and it will give great insight into the market today.

I’d also like to add for those of you who may think I am talking about all analysts that I’m not. I like analysts, I talk to a lot of them daily and I think some of them do a really good job. But I think many analysts should act more like reporters, asking about more than just numbers and questioning any information they are given.

The Video 2.0 Meetup in NYC usually takes place at Columbia Business School but the building will be closed next week. The organizer of the meetup, Yaron Samid, is hoping someone knows of a space that can be used for next Thursday, August 30th from about 6:30-9:30pm. We’re looking for space to accommodate roughly 250 attendees. If need be, the date can be moved if that helps secure the space. If you have a location yourself, or know of a location that can be used for free, please let me know.

While there are tons of spaces out there, most of them are very expensive and the Web 2.0 Meetup is a free networking and demo event for everyone. The way it is kept free is by keeping the costs down to zero or to something extremely small. If your company has the space and is willing to donate it, I’ll be happy to promote your company on my blog with a thank you and write a brief description of who you are and what you do. Its free visibility on a blog that gets roughly 300,000 page views a month in exchange for some space.

As you know by now, on Tuesday Adobe announced their support for H.264 for the latest version of their Flash player. While I saw many blogs and news sites that covered the announcement, most didn’t really provide any insight or analysis into what this announcement by Adobe means for the market. The best posting I saw was on a blog from one of the engineers at Adobe who works on the Flash player. If you really want to know the technical details, it’s the one post to read.

In the spirit of not just re-hashing a press release on my blog like so many other sites do, and since a few bloggers already gave the same analysis I would have, I decided to ask Bill Joll, On2’s CEO, for his take on the announcement and what it means for content creators as well as his company, which has a big stake in the Adobe Flash platform.

While Bill thinks the announcement is a step in the right direction for Flash video, he correctly points out that many times one technology does not replace another. In some scenarios, H.264 make work out to be the best solution, but at other times, On2’s solution would trump H.264.

Bill says that while there are certain markets for which standards-based codecs are important, there will always be an opportunity for On2’s state-of-the-art proprietary technology as well. H.264 can be very expensive if you want to distribute millions of encoders for applications like video chat or user-generated video publishing. In addition to licenses and fees to acquire an H.264 software development kit (SDK), a second intellectual property (IP) license is also required from MPEG-LA. And the same is true for the new AAC+ audio standard in Flash, which requires a separate IP license from Via Licensing in addition to a SDK license. Additionally H.264 is a fairly complex codec that requires significant CPU cycles for encoding and playback, especially for HD content. For these reasons, Bill says there will continue to be a strong market for VP6-based Flash video in the coming years.

That being said, On2 understands that there are certain market segments for which broadcast-industry standards are and will always be a requirement. The video industry is moving towards higher definition video and longer form content that requires lower power and higher performance along with the consumption of video anywhere. This translates into a requirement for any video on any device, but it also means that video coding blocks are moving more and more into hardwired implementations. For On2, they see the value in being able to support their own technology as well as standards in the market.

The news that Adobe is adding support for H.264 and AAC+ to Flash is something that Bill says On2 is well prepared to support. He points out that in May of this year On2 announced that they were planning to acquire Hantro, a Finland-based company with some of the best hardware implementations of audio and video codecs anywhere, including H.264. The Hantro acquisition, which is still pending, does two things for On2:  first, it provides a vehicle for hardware-specific versions of their industry-leading TrueMotion video technology, including VP6, VP7, and future codecs currently in development; and, as important, it propels On2 into the market of providing industry-leading implementations of standards-based codecs such as H.264, VC-1 and MPEG-4. In that regard, Adobe’s and On2’s announcements both echo the same base message: both companies are expanding their available market through support of standards-based technology.

Bill says that On2 is committed to two business tracks going forward: continuing to invest in their industry-leading proprietary video compression technology; and embracing standards in a way that will allow On2 to become the leading provider of codecs – any codecs – for any and all applications. On2 is fully committed to supporting the new H.264 and AAC+ Flash formats in their entire family of Flix encoding tools and SDKs which they announced this week. Bill points out that in some cases, these are free upgrades that will protect their customers’ investment in their products and he says On2 will give their current and future customers the option of supporting any and all technologies, whatever their needs may warrant.

When it comes to the ecosystem for online video, no one solution works best for every type of content customer. This holds true for compression, hosting, delivery, content management and many of the other technical pieces that make up online video. One format, codec or bitrate is not going to replace another and we’ll always have multiple choices in the market based on the fact that customers all have different needs in different industries and verticals. While Adobe’s announcement of support for H.264 is a step in the right direction for the industry and for content creators, in my eyes, it does not have a negative impact on On2 or their business as many may speculate.

Added 8/28: Check out ScribeMedia.org’s interview with On2’s Mike Savello.

Note: As I have said in the past, I am open to any vendor using this blog to give their take on a market trend in the industry or major announcement that takes place. If something happens in the market that you agree or disagree with, or if you feel you have a different insight into a topic, in most cases I will let you use this blog as an outlet. You can always contact me directly if you want to give back to the market and educate your peers, analysts and customers with your thoughts on what you think is important to this industry. As long as it is not a sales pitch for your company, this blog is a free platform for those who want to use it correctly.