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Honestly 12/5/2012 | 3:02:11 PM
re: More CDN Pressures Ahead Ryan, good story. Many industry watchers thought that CDN services would become very competitive and Akam and others needed to add service layer offerings to add value and margin. Add an L3 that can drop prices like a hat and this spells trouble for Akam and others. As for Limelight add the class action lawsuit that was filed in the United States District Court for the Southern District of New York on behalf of all common stock purchasers of Limelight Networks, Inc. (Nasdaq: LLNW) ("Limelight" or the "Company") pursuant or traceable to the Company's June 8, 2007 Initial Public Offering (the "IPO") through August 8, 2007, inclusive (the "Class Period") and you will see a share price that will make them a loss for investor Goldman Sachs and a steal for another buyer. The winners here are the content owners and we consumers. Cheap bandwidth means more entertainment for us. CDN's will need to find more value.
Ryan Lawler 12/5/2012 | 3:02:10 PM
re: More CDN Pressures Ahead RE: Level 3's low prices.

I've been writing about Level 3's ability to offer services without having to pay a lot of the transport fees that would apply to Akamai or Limelight, but I'm not sure that it's going to translate directly to lower prices being passed on to customers. Level 3 has never said that it is going to compete with heavy discounting to CDN customers, and I'm not sure why they would even want to. If I had to guess, I'd say that they might offer CDN as a value-added service to existing customers, or try to get CDN customers to buy other services and create value that way.

There are plenty of CDNs that are going to offer discount services, but I don't think Level 3 is one of them. After all, they'd be much more profitable if they competed on the breadth of their portfolio and left the discounting to the pure-play CDN shops.
Ryan Lawler 12/5/2012 | 3:02:10 PM
re: More CDN Pressures Ahead RE: Level 3's low prices.

I've been writing about Level 3's ability to offer services without having to pay a lot of the transport fees that would apply to Akamai or Limelight, but I'm not sure that it's going to translate directly to lower prices being passed on to customers. Level 3 has never said that it is going to compete with heavy discounting to CDN customers, and I'm not sure why they would even want to. If I had to guess, I'd say that they might offer CDN as a value-added service to existing customers, or try to get CDN customers to buy other services and create value that way.

There are plenty of CDNs that are going to offer discount services, but I don't think Level 3 is one of them. After all, they'd be much more profitable if they competed on the breadth of their portfolio and left the discounting to the pure-play CDN shops.
materialgirl 12/5/2012 | 3:02:08 PM
re: More CDN Pressures Ahead The CDN market has a number of desperate new entrants. However, how many of them will gain the critical mass to survive? If LLNW is having trouble, who smaller than them has a chance?

With WAN acceleration all the rage, and web apps becoming ever more complex, it seems to me that CDNs have a long-term bright future. What other transport technology is going to paper over the uncertainties of the net in a more effective manner? MPLS?

We may be witnessing a shake-out now, only to see it represent a big barrier to entry to a market that will be quite large in the future. That said, any winner has to compete on something more sophisticated than caching gobs of video to deliver over a few networks.
Honestly 12/5/2012 | 3:02:05 PM
re: More CDN Pressures Ahead Agreed and they are trying to figure how to best use the CDN they bought from SVVS. They are in a position to really put price pressure on If they choose.

Is the AKAM Limelight law suit alive.?
Alpine 12/5/2012 | 3:02:04 PM
re: More CDN Pressures Ahead I agree with Material Girl is so much as video has a bright future over IP but I don't believe this translates to the business models and economics of CDN's. Strict video transport of content via a cdn is and will face substantial pricing pressure. Some of the reasons for this include:

1. the delivery of video over a cdn is a commodity. More importantly it is essentially an arbitrage on bandwidth prices. Take AKAM for instance; they procure bandwidth at volume based market prices from backbone providers and in some cases pay (or not) transit bandwidth prices to reach through the last mile. On top of that they provision a bunch of streaming and caching services and deliver the video. Sure they provide a big footprint due to their capital investments (servers and storage mostly) to achieve scale but how much value is in that.

2. Level 3 does not have to pay for bandwidth - they own the pipes. Thus they can make substantiate cuts in cdn prices and not impact their own margins. they simply need to cover the marginal costs of opex and incremental hardware to light up the fiber. Level3 core philosphy is to be the low cost provider on a per bit basis, they have been clear on this and will (IMHO) take this strategy. I believe that they plan to make up the margins on value added services on top of their cdn. See note 3.


3. The value for customers is no longer in cdn transport. The value is in the applications and services on top of the CDN. AKAM, Internap, Level3 have all been and will continue to purchase companies that provide incremental value on top of cdn's. Nine Systems is a good example of one of the types of applications. Media Mgmt, Ad serving, behavioral tracking are all being layered on top. L3 and others understand this is where the value is.

4. P2P points even more pressure on cdn's. As a customer how do I justify paying for CDN's, when there is a free alternative? Personally, I'm not a big fan of peer to peer for a few reasons but that is not the point. AKAM purchased red swoosh to deal with this issue. Give customers a choice but be able do deliver lower and lower cost/bit or the customers will go some place else.
Ryan Lawler 12/5/2012 | 3:02:03 PM
re: More CDN Pressures Ahead The AKAM-LLNW lawsuit is still alive. Akamai filed a motion to have an immediate judgment in the case a few weeks back and the motion was denied.

Most people saw that as a sign that Akamai expects the final court ruling to go against it, so it's hoping to get the case over with and start the appeal process as quickly as possible.

The good news for Limelight is that it seems likely to win the suit; The bad news is that the case is going to continue to drag on and remain a risk factor for the company's stock.
Ryan Lawler 12/5/2012 | 3:02:03 PM
re: More CDN Pressures Ahead The AKAM-LLNW lawsuit is still alive. Akamai filed a motion to have an immediate judgment in the case a few weeks back and the motion was denied.

Most people saw that as a sign that Akamai expects the final court ruling to go against it, so it's hoping to get the case over with and start the appeal process as quickly as possible.

The good news for Limelight is that it seems likely to win the suit; The bad news is that the case is going to continue to drag on and remain a risk factor for the company's stock.
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