To hear the operators of content-delivery networks — and their investors — tell it, you’d think that high-definition TV (HDTV) and video ruled the Internet. While they may in a few years, only those who survive a coming market shakeout will benefit. For consumers, meanwhile, online high definition video is more science fiction than reality television.
In the broadcast world, HDTV is a precisely defined standard, the best of three picture-quality levels possible with digital television. Internet content-delivery networks (CDNs) use the term loosely, leaving most of us with the impression that HD video online is widely available. But the reality is only a few publishers post the more expensive HD format online.
“I have a 20 meg connection at home, and I can’t find HD content,” said Dan Rayburn, a principal analyst covering content delivery networks for Frost & Sullivan in New York.
But that doesn’t stop CDNs from touting their “HDTV” quality, even though “the vast majority don’t do high-definition video,” said Scott Monson, general manager of CDN business development and sales at Digital Fountain Inc. (DEMOfall 07) of Fremont, CA. “They buffer the video, or the quality is simply lower than HD.”
Other HDTV challenges rest with consumers. Many don’t have a n Internet connection sufficient to watch video at HDTV speeds, and if they do, they rarely have enough computer horsepower to display it properly.
Rayburn’s home computer, for example, is only one year old but still “is not fast enough” for HDTV. “The bottom line,” Rayburn said, “is that HD video on the Web is not a reality.”
“There are a lot of people making pretty outrageous claims around HD video,” agreed Scott Ryan, president and chief executive officer at Asankya Inc. (DEMO 08) in Atlanta. “HD video is completely overhyped.”
With video on its way to dominating the Web, HD no doubt will be part of its is future.
“The Internet will be the mechanism of choice for delivering HD video,” Ryan said. “It’s going to drive spending from an infrastructure perspective — this is why so many people are focused on this area. HD is what everyone wants.”
Today, however, HD accounts for less than one percent of all CDN-hosted video, Rayburn estimated. But because CDNs can charge more for bandwidth-greedy HD video, HD currently makes up as much as three to four percent of revenues of the $400 million worldwide CDN market, Rayburn estimated.
Berge Avayzian, chief strategy officer of Yankee Group, said "Carriers without a CDN strategy will inevitably become insignificant and will lose the economy of scale required to be competitive."
With market analysts expecting the CDN market to more than triple to $2 billion by 2013, the interest in online HDTV is growing quickly and providers are taking different technology paths to grab their share.
BitGravity Inc. (DEMO 08), a CDN in Burlingame, CA, for example, eschews proxy servers that cache video. On its distributed origin-based network, every network node is an origin — rather than a cache — for video. That means, for instance, that the videos it transmits play instantly without buffering time.
“That enables us to route more quickly from the server to the end user,” said Perry Wu, BitGravity's co-founder and chief executive officer. Having recently raised $14 million in a combination of venture and debt financing, BitGravity has fewer than 50 employees, but sells its services to a wide variety of clients including India-based giant Tata Communications, Sling Media Inc., EchoStar Technologies LLC., and Getty Images Inc.
Focusing more on domestic content providers as customers, Digital Fountain uses its Splash network (rather than the end-user’s application) to repair any errors that video experiences while in transit. As one of the oldest CDN startups, Digital Fountain has about 50 employees, but won’t say how much it has raised from its many investors (including Matrix Partners, Granite Ventures, Cisco Systems Inc. and Adobe Systems Inc.) since its founding in 1998.
While Asankya runs its Hypermesh CDN to compete against Move Networks, BitGravity, BitTorrent, Digital Fountain, Pando, Swarmcast and other, the start-up also sells its Parallel Networking “kit” that companies can use to run their own CDNs. Still in a pilot phase, Asankya does not use TCP as its protocol for transporting video, but instead uses two-way traffic and a technology called UDP that avoids network congestion. With a staff of 10 in the U.S. and 10 in India, Asankya raised $2.5 million from Veritas Venture Partners of Israel; In-Q-Tel, a Washington, D.C.-based fund; the Seraph Group, an Atlanta venture fund; and angels investors including Steve Chaddick, a co-founder of CIENA Corp., and Frank Bonsal, a co-founder of NEA.
Well-funded or otherwise, startups like tese face serious challenges. Giants CDN companies Akami, Limelight, and Level 3 dominate, collectively accounting for about 75 percent of CDN-sector revenue, Rayburn said. Start-up companies also face an inevitible market consolidation. The 60 content delivery networks that were operating in 2000 dwindled to six by 2004. Today's number hovers at 50 of which 17 have attracted $350 million in venture financing during the past 18 months.
“We know what’s coming — we’ve seen it happen before,” Rayburn said. “They can’t all survive.”
