Stream This: What the CDNs are Charging for Delivery
This summer, we saw a lot of analysts and others comment on CDN "pricing wars," but none of them mentioned any actual numbers revealing what the CDNs are charging or showing any real data on the pricing trends. With that in mind, I’ll detail today's going rates, how they have changed from last quarter, and who it’s affecting most in the market. In many cases, the pricing war is not as drastic as many make it out to be; many times, services are not being compared equally. Also, a lot of customers still don’t know what the going rates are and are still signing contracts at higher rates than they should.
For example, in early August, two content companies—each of whom do more than 100TB a month in streaming delivery—called me asking for data on pricing trends. In both cases they said they were paying just above $0.40 per gigabyte with Akamai. They simply didn’t know that the going rate for 100TB a month is, on average, between $0.12 and $0.19 at Limelight Networks, Internap, or Mirror Image. And I’m talking straight vanilla delivery of video via streaming and progressive download, not some custom need or custom requirement.
In many cases, Akamai is still getting paid twice what the going industry rate is for charging customers on a monthly per-gigabyte-delivered model. Now Akamai and others may say that the company is charging more due to a different level of service or broader reach, but that determination can only be made by the customers themselves who are comparing the same product from one CDN to another. That being said, Akamai is feeling the pressure to reduce its pricing as more and more customers see that the pricing gap between Akamai and everyone else in the market has been so wide for so long. Yes, two years ago Akamai was the only game in town for certain-sized deals. But today, no one can legitimately claim that there is only one option for video content delivery. With more providers in the market and some customers using a dual-vendor strategy, Akamai is no longer the only game in town for most deals, even the largest ones.
Over the summer, Akamai aggressively cut their pricing in half on large deals in order to keep the business. While they are not matching the lowest pricing in the market, they are coming close to it on large deals, classified as over 100TB a month. I heard from at least six customers in this time frame who have confirmed their pricing to me as being half what it was last year with Akamai on large deals. In some of these cases, when they negotiated these contracts six months or a year ago, the Akamai pricing was still the same. It was only this summer that Akamai really started to reduce pricing on larger deals due to pressure in the market.
I’m also hearing that two-year deals are not being signed as frequently and that customers are doing bandwidth commits quarterly and yearly—instead of monthly—with all the CDNs. Another trend I am seeing is a replacement of bandwidth commits with revenue commits, where a company promises to spend a certain amount on any service with the provider over the course of a year. This practice is not new, but I am seeing it more often, and it is more common with Akamai since they offer more than just CDN services. In many cases, Akamai’s ability to bundle services other than content delivery for video is a major reason why many of the streaming-only CDNs lose business. It may not be because their service is not as good as an Akamai’s; it’s just that they don’t offer other products like whole-site hosting, application delivery, and other non-CDN products. For some customers this doesn’t matter, but for others it does, and it’s a deal breaker.
Every week, customers from the media and entertainment, broadcast, government, and enterprise verticals call me asking for pricing data. They want to know who is out there, what they charge, and what the going rate in the industry is. From all I have seen in actual contracts, RFP responses, and pricing negotiations, Internap, Limelight Networks, and Mirror Image are all about the same, price-wise. In many cases, Internap is a bit higher in pricing, but I see most of that from the legacy VitalStream side. Once Internap is finished integrating VitalStream into its network, I’ll be curious to see if its pricing changes. It should go down, since Internap owns the network and VitalStream didn’t.
CDNetworks and EdgeCast would not share any actual pricing information with me, so I can’t say if they are near the industry average or are more expensive. And since they are new in the space, I have yet to see a customer who uses them or has included them in an RFP, so I’ll have to wait to see what they are charging. Panther Express is undercutting all of the CDNs out there on pricing, but keep in mind that they support only HTTP delivery, not content delivered via streaming media protocols. And there is a difference, since HTTP is easier to deliver and costs less to scale.