Content  Delivery  Networks  version  9  

Chris  Van  Noy  February  28,  2014  

Overview  

•  CDN  Landscape          Established  Players  in  CDN  Landscape    

         Emerging  /  DisrupHve  Players  in  CDN  Landscape    

•  Trends  /  Forecasts          Pricing  /  Revenue          Traffic  /  Video  Growth      

•  Threats      Caching  Video  CDNs    Large  Non-­‐CDN  Players    HVEC  H.265,  MPEG-­‐DASH  

 •  CDN  OpportuniHes    

 OpportuniHes  List                    Media  OpportuniHes  Example  Slides  

Chris  Van  Noy   2  

Key  Takeaways  Trends  •  Market  consensus  is  CDN  Delivery  Pricing  (StaHc  &  Video  Delivery)    will  decline  for  the  2-­‐3  years.    Our  

previous  view  was  the  pricing  would  decline  for  only  the  next  12-­‐18  mos.    However,  it  appears  prices  have  already  started  level  off  (Sept  ’13)  due  to  market  realiHes  and  customer  a^tudes  

•  Dynamic  Site  AcceleraHon  (DSA)  not  dropping  nearly  as  quickly  •  Traffic,  and  video  traffic  in  parHcular,  will  increase  substanHally  between  ‘13  –  ’17      

Threats  •  Telcos/MVPDs/3rd  ParHes  creaHng  caching  CDNs  –  Has  potenHal  to  take  away  significant  video  traffic    •  Large,  non-­‐CDN  players  are  real  threats  to  tradiHonal  CDNs  (Amazon,  Google,  MSFT,  Facebook?,  not  

Neflix)  •  New  streaming  standards/technologies  HVEC  H.265,  MPEG-­‐DASH  (a  couple  of  years)  

Opportuni0es  •  CDNs  must/will  diversify  into  other  services  or  have  the  CDN  business  serve  another  business  purpose    •  We  anHcipate  that  there  are  large  opportuniHes  for  CDN  and  other  “nexus”  players  (remove  the  

complexity)  •  InnovaHon  OpportuniHes  (moat  around  CDN  business)  –  transformaHon,  further  delivery  innovaHon,  

security  (content,  site,  commerce),  analyHcs,  internaHonal  •  Adjacent  Market  OpportuniHes  –  adverHsing,  data,  B2B  secure  transport,  media  warehouse  •  Expand  Further  InternaHonally   Chris  Van  Noy   3  

CDN  Landscape  Established  Companies    

Data  from  annual  reports  and  company  websites  Chris  Van  Noy   4  

*  Performance  Equity  Management  (PEM),  with  parHcipaHon  from  exisHng  investors  Menlo  Ventures  and  Steamboat  Ventures.  

Servers  /  POPs   ‘12  Revenue  /  Net   Rev  +-­‐  /  Net  +-­‐     Notes    

130,000/2,000   $1,300M/$230M   +16%  /  +1.5%  Good  Shape,  Media,  Finance,    Govnt  quickly  growing.    Old  Tech.      Poor  Cust  RelaHonships    

18,000/67  Debt,  CDN  loses  $  Expansion  in  Lat  Am,  EMEA,  Asia  (Nov  ’13),  Rev  +  37%  YoY  Q3  ‘13  

18,000/80   $180M/($33M)   +5%  /  -­‐23%   Losing  $,    ReinvesHng  in  CDN  

???/35   $100M-­‐$200M/(???)   +100%  /  ???  July  ’13    $54M  new    funding*.    AcquisiHon?  IPO?  

14,000/26  $205M  in  debt  refinancing  (Aug  ‘13)    

???/25   $100M/(???)  Growing  Quickly,  Scale,  Explode  DSA,  PotenHal  DSA  concerns  

???/24  Cloud  services  key,  CDN  not  much  focus.  Xbox  One  bump  not  coming  

AcquisiHon  By  Verizon  Announced  Q4  ’13,  finalized  Q1  ‘14  

CDN  Landscape    Emerging  Players  /  Disruptors    

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Founded   Descrip0on   Disrup0on   Customers  

2011  SSD  Based  CDN  Launched  Video  Streaming  CDN  Q3  ‘13  

Lowest  Latency,  Fewer  POPs  needed,  DSA  beuer,  Less  Cost.  Going  into  video  and  staHc  content    

Twiuer,  Vine,  Shazam,  Etsy,  Github  

2011  

MulH-­‐plaform  adapHve  video  streaming,  Video  encoding,  DRM  and  EncrypHon,  Content  Management,  AnalyHcs  and  ReporHng,  Dynamic  ad  inserHon  

Does  encoding  and  ad  inserHon  more  efficiently  taking  services  rev  from  CDNs  

Disney/ABC  

2008  Dynamic  CDN  Switching  and  AnalyHcs  

Allows  customers  to  pay  less  for  delivery,  avoid  exclusivity  and  have  delivery  fallback    

Many  -­‐  Neflix,  NFL,  ABC,    Univision  etc  

2010  

Third  Party  Caching  CDN  for  Video  

Allows  ISPs  to  disintermediate  CDNs    from  most  popular  video    

Mediacom,    (allegedly  negoHaHng  w/    2  Top  US  cable  companies)  

Acquired  By  Verizon  Q3  ‘13  

CDN  Landscape    

CDN  Market  Share,  2013    

Chris  Van  Noy   6  

CDN  Trends    

Pricing  /  Revenue  

Standard  Delivery  (Objects,  Video)  Customer  spending  more  than  $1M  (Sept  ’12)    Delivered    •  3PB/month,  $0.03/GB  High,  $0.01  Low  Sustained    •  400Mbps/month,  $4/Mbps  High,  $2/Mbps  Low  

Dynamic  Site  Delivery/Accelera0on  Pricing  Pricing  collected  from  mid-­‐size  to  large  customers,  2  yr  contracts  (May  ’13)  •  20  Mbps,  $150  high,  $110  low  •  100  Mbps,  $85  high,  $50  low  •  250  Mbps,  $40  high,  $25  low  •  500  Mbps,  $15  high,  $6  low  

CDN  Pricing  Decline  

Dan  Rayburn  (May  ’13)   CVN  Predic0on    (Aug  ’13)  

2009   2010   2011   2012   2013   2013  -­‐  45%   -­‐  25%   -­‐  20%   -­‐  15%   -­‐  25%   -­‐  5%-­‐10%  

Both  Standard  and  Dynamic    delivery  pricing  has  consistently  decreased  YoY.      

Previously  anHcipated  decline  to    conHnue  for  the  next  12-­‐18  mos.    but  CDNs  already  refusing  to    lower  prices  (Aug  ‘13)        

Causes  for  decline:  1.  Increased  volume  2.  Parity  of  quality  in  compeHHon  3.  Some  players  compete  on  price    

(Level3,  Edgecast)  4.  CDN  Switchers  (Conviva)  

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Note:    While  pricing  is  important,  it  appears  customers  aren’t  differenHaHng  on  price  anymore.        

 $-­‐        

 $2.0    

 $4.0    

 $6.0    

 $8.0    

2011   2012   2013   2014   2015   2016   2017  

Revenu

es  (U

S$  Bil)  

CDN  Revenues    Source:  (Market  and  Market)      

Global    

CDN  Trends    Forecasts:    CDNs  are  predicted  to  do  well  from  ‘13  –  ‘17  CDN  Revenues  ‘17:      NA:  $4.6B,  Global  $7.4B  CAGR:  24.6%  Source:  MarketandMarkets    

Video  CDN  Rev  ‘16:    $1.2B  CAGR:  15.2%  Source:  Frost  &  Sullivan    

By  ‘17  Over  50%  of  internet  traffic  through  a  CDN  Source:  Cisco  VNI  

           

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CVN  Note:    The  rev  and  CAGR  here    seem  very  low  

CDN  Threat    Caching  Video  CDNs  -­‐  Disintermediates  TradiHonal  CDN  Delivery  

Cached  CDNs  Advantages  for  ISP/MVPDs/Telcos    

1.  Frees  up  upstream  capacity    2.  Predictable  Neflix  flow  3.  Higher  QOS  4.  Higher  Content  Quality    5.  Saves  Costs  6.  Neflix  Open  Connect    

is  Free  

Results  in  lower  potenHal  traffic  for  CDN’s  which  is  not  always  bad  (Neflix)  Verizon,  Time  Warner  Cable,  Comcast,  Neflix,  Google  all  building.      Qwilt  is  third  party  service  aimed  at  MVPDs/ISPs  

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•  User  rouHng  is  done  by    control  servers,  not    dependent  on  client    DNS  configuraHon    

•  Request  is  routed  to  the    nearest  available    Cached  CDN  Server  

•  ISP  could  control  client    to  cache  server  config  

Video  Provider    Control  Servers  

3.  Client  connects  to  local    video  cache    4.  Local  cache  delivers    video  stream  

Cached  CDN    Server  

Broadband  ISP  

CDNs    Disintermediated  

CDN  Gap  

CDN  Threat  Caching  Video  CDNs  -­‐  Disintermediates  TradiHonal  CDN  Delivery  

Neflix  January,  2012    

Neflix  June,  2012    

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In  the  six  months  since  Neflix  launch  of  caching  CDN  (Open  Connect)    massive  traffic  rerouted  through  the  caching  CDN  

CDN  Threat  Large,  Non-­‐CDN  Players  Coming  Into  the  Space  

We  believe  these  are  big  technology  players  that  already  have  a  large  enough  internal  need  that    building  their  own  CDN  makes  sense.      

Advantages:    1.  Since  already  

using  capacity  can  price  below  market  

2.  Can  take  Hme  to  iterate  and  launch  features  

3.  Unique  insight  into  needs  

4.  Scale    Rolling  out  Open  Connect  Caching  CDN.    Not  interested  in  commercializing  service  for  other  content  providers  

CloudFront    is  already  at  $100M  at  3yrs.    DSA  just  launched.    PotenHally  can  affect  ~75%  of  market  with  scale,  pricing  and  educaHon  of  market      

No  tradiHonal  external  CDN  service  but  has  the  infrastructure  and  business  reason  (gathering  data)  to  do  so.      

Less  than  2%  of  web  traffic  not  likely  to  move  in  to  the  CDN  space    FB  has  an  edge  network  to  push  photos      

Azure  the  Cloud  Plaform,  is  becoming  more  central  in  MSFT  but  the  CDN  is  not  a  focus.    Xbox  One  will  not  change  that.    

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•  In  our  view,  Amazon  Cloudfront  seems  expensive  •  Cloudfront  doesn't  do  true  DSA.    Only  pull,  not  post  •  Does  not  have  many  DSA  POPs.    Co-­‐lo'ed  on  some  EC3  servers  •  DSA  not  a  priority,  AMZN  has  very  few  resources  focused  on  it  (Aug  ‘13)  

CDN  Threat    New  Streaming  Technologies  

MPEG-­‐DASH  (Dynamic  AdapHve  Streaming  over  HTTP),  a  standard  for  adapHve  streaming  over  HTTP  can  potenHally  replace    Microso|  Smooth  Streaming,  Adobe  Dynamic  Streaming,  and  Apple  HTTP  Live  Streaming  (HLS).  A  unified  standard  would  be  a  boon  to  content  publishers,  who  could  produce  one  set  of  files  that  play  on  all  DASH-­‐compaHble  devices.  

HEVC  H.265  is  a  video  compression  standard,  a  successor  to  H.264/MPEG-­‐4  AVC  .  It  was  designed  to  substanHally  improve  coding  efficiency  i.e.  to  reduce  bitrate  requirements  by  half  with  comparable  image  quality,  at  the  expense  of  increased  computaHonal  complexity  

Reduce  Complexity   Compress  Bandwidth/Increase  Quality  

These  technologies  are  likely  to  take  effect  2-­‐3  years  out  and  not  really  threats  but  could    undermine  the  revenue  potenHal  of  CDNs.    Conversely,  the  technologies  will  likely    encourage  more  video  delivery  and  need  for  services  

Chris  Van  Noy   12  

CDN  OpportuniHes  

Chris  Van  Noy   13  

1.  Interna0onal  •  LaHn  America  –  Brazil,  ArgenHna,  Colombia,  Mexico    •  Asia  –  China  (difficult),  India  (difficult)  

3.  Quickly  Growing  Ver0cals  For  CDN  Services  •  Financial  Industry  •  Government  •  Enterprise  (Pharma  etc.)  •  Retail  

5.  Expanding  Past  CDN  Delivery                (Telco/Mobile,  MVPDs,  Private)  

4.  Expanding  More  Deeply  into  Media/                    Entertainment  Industry    

•  Back  into  content  creaHon  -­‐  B2B  i.e.  Media  Warehouse,  Secure  Media  Delivery  

•  Forward  with  services  -­‐  B2C  

(see  following  slides)  

2.  Con0nue  to  Develop  Value  Added              Services  on  CDN  Plaaorm  •  Security  (Content,  Site  and  Infrastructure)  •  Data  •  Commerce    •  Media  TransformaHon  •  Private  Cloud  CompuHng  

•  Cable  MPEG2  Delivery    •  Mobile  AcceleraHon  •  Massive  Content  Storage/TransformaHon  

Contact  InformaHon  

Chris  Van  Noy   14  

Chris  Van  Noy  chris.vannoy@gmail.com  @chrisvannoy  www.cvnnyc.com  

For  More  InformaHon:  

APPENDIX  

CDN  OpportuniHes  Media/Entertainment  Industry  

•   HTTP  Object  Delivery    

•  Large  File  Delivery  

•  AnalyHcs  •  Streaming  

•   MulHcast  support  

•  Stream  prioriHzaHon  

Site,  App  Accelera0on  

Cloud  Storage  

Mobile  Delivery  

Professional  Services    

Security  

Content  Management  

Core  +  Premium  

•  Cellular  Net  OpHmizaHon  

•  OpHcal  Network  OpHmizaHon  

•  MVPD  Capacity    

•  Streaming  

Network  Extension  

B2C  B2B  

Mone0za0on  

•  IdenHty  Layer  

•  AdverHsing  •  Payment  

ProtecHon/facilitaHon    

Licensed  CDN  

Content  Transforma0on  

Content  Crea0on/Commerce  

•  Secure  Transport  

•  Secure  Display  

•  CollaboraHon  •  AccounHng  

Data  

Security  –  Site,  Content,  Commerce  Tracking  –  Commerce,  AccounHng  etc.  

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Media  Warehouse  

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Accelerated,  Secure  Media  Delivery  

 

564  Broadcast  Partners  TV  

SyndicaHon  HE  VOD  

The  Managed  CDN  SoluHon  Pre-­‐configured  servers  or  so|ware  deployed  that  would  include  the  automated  workflow  so|ware,  opHmized  for  the  Akamai  network  and  security  services  –  WAF,  IPA  etc.  The  network  would  be  maintained  by  Akamai  –  Maximizing  Efficiency  and  Minimizing  Complexity    

Workflow  Tools   CDN  File  AcceleraHon  Management  Security    

1   +   1   =   3  

Scale    Reliability  Infrastructure  Mgmt    

One  Network  Removes  Complexity  Lower  Cost  

MCDN  

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Studios  (Theatrical,  HE  Combined)  

Metadata    File  

Mezzanine    File  

 Supplemental  

Material    

Enhanced  Services,    Fulfillment  &  DistribuHon  

Theaters  InternaHonal  DistribuHon  

     

Display  

   Sy

stem

s   Contract  Management  Business  Intelligence  Product  Metadata  Rights  &  Avails  

Fulfillment  Metadata  Mgmt  Transcoding  

EncrypHon/DRM  Storage    

Enhanced  Services  Packaging  SubHtling  

Dubbing,  etc.  QC      

DistribuHon  Fast  Transfer  Physical  Satellite    

Billing  &  Finance  OperaHons/ReporHng  Digital  Asset    Management  

Theatrical  Workflow  -­‐  Physical  

 ProducHon  

File    

Archive  Long  Term  Archive  Disaster  Recovery  

 

Retailers          Cable  /  

Broadcasters  /  Satellite    

       

Digital  Cinema          

Closed  Networks            

DVD  Distributors  

 

Film    Asset  

DVD  /  Blu-­‐Ray  

MPEG  2  

Development  Pre-­‐ProducHon  

                                       

Sales  Manufacturing  

 

MarkeHng  Stream  Screeners  Ancillary  Media  AdverHsing    

Measurement        

Post-­‐ProducHon  Transport  Mezz  Enhance  Video  

     

OperaHons  Archive  

Transport  Mezz  Externally  

   

ProducHon  Transport  Video  Stream  Dailies  

     

AccounHng  Asset  Tracking  Royalty/Rights  

Tracking      

Tape  Asset  

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Development  Pre-­‐ProducHon  

                                       

Sales  Manufacturing  

 

Studios  (Theatrical,  HE    Combined)  

Metadata    File  

Mezzanine    File  

 Supplemental  

Material    

Enhanced  Services,    Fulfillment  &  DistribuHon  

Intermediary  

Display  AdverHsing  Payment    

Authen/Author  Metadata  MGMT  

DRM  RecommendaHons  Asset  Rights  Data  

     

E-­‐Retailers  E-­‐Retailer  Servicing  

Storefront/  Inventory  Storage  CMS  

Media  ID  Media  

Recommend  Secure  CE  delivery  Ad  MGMT  

 

Cloud  

POS  Royalty  Statements  Intermediaries  

Contract  Terms  Pricing  Promos  DistribuHon  Availability  

   Sy

stem

s   Contract  Management  Business  Intelligence  Product  Metadata  Rights  &  Avails  

Audience  Measurement  

Royalty/Revenue  Tracking  &  Fulfillment  

Asset  profitability  Measurement  

Fulfillment  Metadata  Mgmt  Transcoding  

EncrypHon/DRM  Watermarking    

Storage  

Enhanced  Services  Packaging  SubHtling  

Dubbing,  etc.  QC      

DistribuHon  Fast  Transfer  Physical  Satellite    

MarkeHng  Stream  Screeners  Ancillary  Media  AdverHsing    

Measurement        

Post-­‐ProducHon  Transport  Mezz  Enhance  Video  

     

OperaHons  Archive  

Transport  Mezz  Externally  

   

ProducHon  Transport  Video  Stream  Dailies  

     

AccounHng  Asset  Tracking  Royalty/Rights  

Tracking      

Billing  &  Finance  OperaHons/ReporHng  Digital  Asset    Management  

Theatrical  Workflow  -­‐  Digital  

 ProducHon  

File    

Archive  Long  Term  Archive  Disaster  Recovery  

 

Mezzanine    or  Display  

File  

Metadata    File  

 Supplemental  

Material    

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