Network Status 2009: The European CDN Market
Major Pan-European Players
Level 3 is really the only commodity CDN in the European market, although I understand that Highwinds is also operating on this model. When Level 3 CEO Jim Crowe committed $14 billion of his investors’ money to capital infrastructure investment, he had a vision. And one key aspect of this vision is playing out in the small and highly capable CDN team in Europe. The stated goal by Level 3 is that the future of TV is HD over IP, and the company is very clearly positioning itself to influence and be in the path of this trend.
Figure 2. Content Delivery Networks Market: Revenue Forecasts By Geographic Regions (World, 2007-2013) Source: Frost & Sullivan.The focus of Level 3’s CDN team is “large asset delivery”, a phrase Joe Trainor, Level 3’s senior director of broadcast and content offer, used repeatedly, and something he is keen to deliver in very high volumes. The company is achieving this by providing the media and it’s entertainment and enterprise market place with CDN for video and software download at between €0.05 and €0.09 per GB shipped for clients shipping 500TB of data each month. I strongly suspect there is downward flexibility on the quoted volume commits, making it even more aggressive and reinforcing their aggressive market position. Trainor stated to me that he is seeing an acceleration of high-quality TV content being delivered over Level 3’s network and an increase in software downloads, but he declined to put numbers to this. The Obama inauguration on Sky.com delivered in HD was a clear demonstration of activity, and Sky’s belief that the future of TV is HD over IP, and its network capacity, pricing, and market positioning all talk to this goal.
Level 3 content delivery network is really the only “commodity” player in the European market to offer a pan-European footprint with very aggressive pricing and to have a strategic advantage in that its supplier is the parent who owns the pipes. According to Trainor, Level 3 frequently turns down small-volume business and does not operate in the same market as Akamai or Limelight delivering (or having the desire to deliver) small assets. If you’re looking for a streaming provider for a niche content or UGC site, don’t call Level 3; if you’re a national broadcaster thinking of giving 1Mbps-plus free to consumers with an HD option, then you should have the phone number of Marc Sze, sales director, indirect channels at Level 3, in your address book. Innovation is also not alive at Level 3. But intelligently, the company will openly adopt third-party software that aids the delivery of large assets (such as Move Networks) at the client’s request.
Limelight is clear about its ambitions of moving up the value stack into Akamai territory by offering storage, security, and object and appliance acceleration, again with the focus of keeping costs aligned with client revenues. George Fraser, Limelight’s head of international, is using his deep experience to extend Limelight Europe from the pure streaming business into the more profitable software as a service (SaaS) and software hosting with deeper integration into clients’ digital media services. This naturally brings the client and the provider closer together for a longer time as more client services become reliant on Limelight services. I couldn’t determine if revenues are currently flowing from these services or whether this is a stated desire of future revenue generation. Fraser wouldn’t reveal his pricing, but I understand that significant volumes of more than 50TB per month will get pricing of about 8 cents per GB, close to Level 3 and Streaming Media executive vice president Dan Rayburn’s CDN findings in his U.S.-centric report on volumes (www.cdnpricing.com).
Local Operations With Local Operators: Sprechen Sie Deutsch?
Outside the big three, there is a very different story—and for me, this is the real story of Europe. What has become apparent in my research, and has been of the greatest interest to me while writing this report, is 1) the significant creativity that is evolving to squeeze the most out of existing networks and 2) language that is highly regionalising the European CDN market in a way that I hadn’t expected. Both these factors differentiate Europe from the U.S., and they are invigorating local markets.
Europe’s many distinct languages create highly localised production, demand for content, and monetisation opportunities. This local content in local languages has close to zero demand outside its own region. Stats from comScore demonstrate this trend clearly in France, Germany, and the U.K. (the three countries its research currently covers). Excluding Google, Microsoft, Facebook, and Yahoo!, local video sites account for all of the top 20 video sites in terms of volumes. For example, France features Kewego, Piximedia, TF1, PagesJaunes, Orange, and France Televisions. Not one of the top 20 local sites ranks highly in either of the reports for the other two countries. This translates directly and unequivocally into demand for local CDN operators with the majority of this traffic going over highly localised networks. It follows logic and challenges the global CDN model, which has no demand from these operators. Local publishers are simply not willing to pay for sparse global infrastructure when dense local infrastructure exists and can be easily and economically enabled.
Figure 3. Online video viewing statistics for France, Germany, and the U.K., May 2008-April 2009. Source: comScoreVelocix chief marketing officer John Dillon even went as far as to say that his company had spotted and positioned itself for this megatrend. He went on to cite the Coca-Cola logo on the judge’s cups on American Idol being blurred out in postproduction before the show was released online as an example of content not travelling well and requiring an extra layer of production, cost, and management.
The best case study of the many I have found that demonstrates the model well is KPN’s network enablement by Jet Stream’s VDO-X (VideoExchange) CDN Software. KPN has 8 million broadband subscribers in the Netherlands and had a need to improve its video delivery services. VDO-X empowered KPN to enable its network to CDN capability in just 2 months, including 2 weeks of testing. The efficiencies introduced by the CDN capability have significantly reduced the need for capital investment in upgrades in KPN’s network. The Jet Stream-enabled KPN network carries 50% of KPN’s CDN volumes today.
London-based Astream.com and Global-MIX, whilst small (each with revenues just under £1 million per annum), also benefit from being local. Astream competes less on price and more on services, going as far as having its streaming pricing published openly on www.astream.com and giving users the ability to set up an account on the site, a policy that has served the company well for nearly a decade. Thirty percent of Astream’s business is small B2B streaming, which is a market it values greatly. And like other players in the market, it is seeing bitrates rise to an average of 500Kbps with 30% going out at 750Kbps. Global-MIX has a more aggressive pricing stance that is facilitated economically by its long-term investment in the evolution of its widely recognised multicast network and technology. Global-MIX CEO Dom Robinson is an industry veteran in the truest sense. He and his company build and maintain a very strong, technical relationship with their customers at a local level. He shows local customers the kind of love they do not get from a U.S. or remote operator.
The CDN market in Europe is clearly a jigsaw puzzle of services divided by language; it’s a market with clear national boundaries and demand for local service providers.