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Dan Rayburn on the Streaming Video Market

Dan Rayburn gave his regular update on the streaming media market at the end of a busy day at the Streaming Media East conference in New York (see previous post).

Rayburn keeps his fingers on the pulse of the market as executive VP at StreamingMedia.com and principal analyst at Frost & Sullivan. In particular, he talks with lots of customers who are pricing streaming services from Content Delivery Network (CDN) companies like Akamai and Limelight, and he kindly shares not only his insights, but also the real data, on his Business of Video blog at BusinessOfVideo.com.

(As you'll see below, Rayburn has set up a helpful collection of aliases like this that redirect to his blog -- http://blog.streamingmedia.com -- and to the latest entries on specific topics. For example, you'll find his posts specifically on CDNs at ContentDeliveryBlog.com.)

In the overall market, Rayburn sees "delivering bits" as a commodity business, with the need to differentiate by addressing the larger ecosystem of customer needs, focusing on high-end performance and scalability, or on supporting issues like asset transcoding and management.

In terms of general trends, this past year saw a bump in video traffic as many content owners increased video bitrates from 300 Kbps in 2007 to 500 to 750 Kbps in 2008.

For the next year, Rayburn expects technical impacts from more traction for HD video, progress in new approaches for video advertizing, and more emphasis on streaming live events.

UPDATE: The presentations from the conference sessions and workshops are posted at www.streamingmedia.com/east. And many of the videos from the conference and associated Content Delivery Summit are now available at www.streamingmedia.com/videos.

Download Rayburn's presentation on CDN Research Data (PDF).

More on CDN Pricing and Market ...



CDN Companies

And who are these CDNs? Rayburn lists the CDNs in the market at cdnList.com, broken down between pure-play CDNs (most revenue from CDN business), versus non pure-play vendors like carriers and telcos (for which CDN is just part of a much larger business).

- Major pure-play CDNs include Akamai, CDNetworks, EdgeCast, Limelight

- Major non pure-play vendors include AT&T, Global Crossing, Internap, Level 3

CDN Pricing

The top question, then, is what companies are actually paying for CDN services to deliver mass quantities of streaming video. Rayburn posts his quarterly CDN pricing reports at cdnPricing.com.

CDN pricing for video on a per GB delivered model fell between 30 to 35% from 2007 to 2008. Pricing in Q4 2008 ranged from 50 TB service at 40 to 50 cents per gigabyte delivered, to 500 TB service for major portals at 15 to 5 cents.

Storage is typically charged separately, and can be as high as $25 per GB for very little volume to as low as $0.25 per GB for ranges over a TB.

The CDN Market

Rayburn shows the CDN market growing from around $280 million in 2007 to around $400 million in 2008, a Compound Annual Growth Rate (CAGR) of more than 30%. Given the economic uncertainties, the estimate for 2009 ranges from $478 to $549 million, or a CAGR of around 21% to 30%.

The market is expected to grow to $1.0 to $1.5 billion by 2013. (See cdnMarket.com, and the Frost & Sullivan report on World Video Content Delivery Networks Market.)

But is this too many companies? Will there be significant consolidation over the next year or two? Rayburn points out that there were some 50 vendors in 2000, dropping to 12 in 2002, and down to 6 in 2004, but now back to 50 again in 2009.

And this is not a huge business. With total market revenues of say $500 million, the amount of venture funding seems rather high -- As of August 2008, CDN and P2P based delivery vendors have raised over $400 million over the previous 18 months to build out and deploy content delivery services (see cdnFunding.com). And these aren't terribly large and profitable companies (only over $590 million a year in revenue), so consolidation may be driven more by business struggles than strategic acquisitions.

As another confusion, the market faces ongoing patent disputes (as with Akamai and Limelight), which Rayburn covers at cdnPatents.com.

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