▼ Scroll to Site ▼

CDN News Roundup: 2009 Content Delivery Year in Review

Article Featured Image

Content delivery becomes more commoditized with each passing fiscal quarter. But that doesn’t mean that significant changes and developments aren’t still taking place in the content delivery network (CDN) space. Here’s a roundup of some of the most significant news of 2009, taken from posts on Dan Rayburn’s Business of Video blog.

Bandwidth Costs Continue to Plummet
While working on an inquiry for WIRED magazine, I was looking through a lot of my data on bandwidth pricing over the past 10 years. It’s incredible to see just how much the cost of bandwidth has declined and how that rate has accelerated over the past decade. And that rate of decline is just what content owners were paying for; it doesn’t even include the rapid decline we’ve all witnessed with transit costs.

In 1998, the average price paid by content owners to deliver video on the web was about 15 cents per MB delivered. That’s per bit delivered, not sustained. Back then, nothing was even quoted in GB or TB of delivery, as no one was doing that kind of volume when the average video was streamed at 37Kbps. Fast-forward to today where companies such as Netflix are encoding their content at a bitrate that is 90 times what it was in 1998.

To put the rate of pricing decline in terms everyone can understand, today Netflix pays about 5 cents to stream a movie over the internet. If Netflix tried to do this in 1998 at the same quality it’s doing it today, it would have cost the company $270 per movie. Of course, in 1998, no one was capable of getting a 3Mbps stream. But even if Netflix only encoded its videos for 37Kbps in 1998, it still would have cost the company $4.80 to stream one 2-hour movie. This gives you an idea of just how far video quality, consumption, and pricing have come over the past 10 years. Yet even with the rapid rate at which pricing has declined, 10 years later, companies are still struggling to figure out how to make money from online video.
—Jan. 6, 2010

HD Adoption Growing, but Slowly
While I’ve heard some folks say that one of the reasons Akamai is showing signs of its media & entertainment (M&E) business picking back up is a result of the adoption of HD-quality content, that’s not what’s driving revenue today. Yes, Akamai and all of the other CDNs are seeing more content owners use HD-quality video, but it’s not yet happening in large volumes or at mass scale to impact revenue.

In a StreamingMedia.com survey we conducted in fall 2009, we asked content owners what bitrates they were encoding their content in. Of the 812 content owners who responded, only 11.4% said they were encoding video for at least 2Mbps or more. Compare that to the same survey taken in 2008, when 8.9% of more than 1,000 content owners said they were encoding more than 2Mbps. That’s not a lot of growth.

Some might say that the M&E vertical probably has better adoption of HD video than, say, the enterprise or advertising market, and they’d be right. But of the 812 content owners who took our survey, nearly 45% of them classified themselves as being in the M&E vertical. HD-quality video will drive additional revenue and growth for the CDNs, but it won’t be in the next few quarters.
—Dec. 8, 2009

Video Traffic Growth Flat Year Over Year
The question I was asked most frequently at November’s Streaming Media West show was when I thought the rate of growth for video traffic would once again begin to accelerate. In the same survey cited in the previous post listed here, 53.3% of the respondents said their traffic grew on an average of only 35%–40% in 2009. When compared to the same survey taken in 2008, 53.9% of more than 1,000 content owners said their traffic grew a total of 35% in 2008. This lack of growth probably comes as no surprise to anyone who tracks the CDN space, as revenue among the CDN vendors has been flat all year. When pricing is down nearly 40% year over year, and traffic is only growing at 35%–40%, that makes it very hard for CDNs to show revenue growth from their M&E video business. 

If you’re wondering just how big these content owners are who took our survey, 13.4% of them spend at least $10,000 a month, 4.8% of them spend at least $25,000 a month, and 3.9% spend at least $50,000 a month, just on video delivery. —Dec. 7, 2009

Streaming Covers
Free
for qualified subscribers
Subscribe Now Current Issue Past Issues
Related Articles

Akamai Simplifies iOS Streaming

Customers can now encode only once and still deliver streams to the iPhone and iPad.

Akamai Looks at the State of the Internet

Asian countries are the speed leaders, while Alaska offers America's slowest connections.

Companies and Suppliers Mentioned