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CDN Players Getting Squeezed by Margins & Telco Competition, Report Finds

Customer cutbacks and growing competition causes problems for CDN service providers and might lead to more market consolidation, says Light Reading's Insider

NEW YORK, Sept. 16 /PRNewswire/ -- The combination of spending cutbacks by customers and growing competition from telecom network operators is creating a big problem for content delivery network (CDN) service providers and is likely to lead to further market consolidation and buyouts, such as the recent acquisition of CDN player Velocix by telecom equipment giant Alcatel-Lucent, according to the latest report from Light Reading Insider (www.lightreading.com/insider), a paid research service of TechWeb's Light Reading (www.lightreading.com).

Shrinking Margins Bring Big Changes to the CDN Market analyzes the impact of emerging business trends on the CDN sector, focusing on the entrance of established telcos into the content delivery market. It identifies and evaluates how CDN operators are changing their infrastructure and business models in response to shifting usage and demand patterns, how they are trying to differentiate their offers, and their efforts to capture more value from their customers by developing value-added services appropriate to their target markets. The report profiles 11 of the leading players in the CDN market, focusing on those with the greatest scale, reach, and innovative business models.

For a list of companies covered in this report, please see: http://img.lightreading.com/lri/pdf/lri0909companies.pdf

"Until recently, CDNs have been a good business to be in with healthy margins," says Danny Dicks, research analyst with Light Reading Insider and author of the report. "But evidence such as reduced earnings growth from the top players and significantly falling prices shows that basic CDN services are becoming commoditized, which is bad for small CDN players."

An increasing number of telecom network operators are now offering CDN services, and more such service launches are expected in the near future, Dicks notes. "The motivations of the telcos -- particularly those with a major global IP network of their own -- are clear," he says. "Their customers are asking for CDN services, and telcos see it as a way to offset declining revenue from traditional connectivity-based enterprise services."

Key findings of Shrinking Margins Bring Big Changes to the CDN Market include the following:

  • Falling prices for basic CDN services, along with overcapacity and the global economic slump, is speeding a shakeout in the sector.
  • Carrier entry into the retail CDN market, particularly as resellers, is a growing trend, highlighting the overlap in service offerings between telcos and traditional CDNs.
  • CDNs are struggling to differentiate their offerings and are rapidly building additional value-added service portfolios to capture more of their clients' IT spending.
  • CDN performance is still a differentiator, but is difficult to measure; a mix of network metrics and user-experience measurement is important.
  • The impact of Alcatel-Lucent's move into the CDN business through its purchase of Velocix remains to be seen, but it opens the door to yet another shift in the underpinnings of the CDN sector.

Shrinking Margins Bring Big Changes to the CDN Market is available as part of an annual single-user subscription (12 monthly issues) to Light Reading Insider, priced at $1,595. Individual reports are available for $900 (single-user license).

To subscribe, or for more information, please visit: www.lightreading.com/insider. For more information on all of Light Reading's Insider services, please visit www.lightreading.com/research.

To request a free executive summary of the report, or for details on multi-user licensing options, please contact:

    Jeff Claudino
    Director of Sales
    Insider Research Services
    [email protected]

    Press/analyst contact:

    Dennis Mendyk
    Managing Director
    Insider Research Services
    [email protected]

About Light Reading

Founded in 2000, Light Reading (www.lightreading.com) is the leading online media, research, and focused event company serving the $3 trillion worldwide communications market. Lightreading.com is the ultimate source for technology and financial analysis of the communications industry, leading the media sector in terms of traffic, content, and reputation. Light Reading's research arms, Heavy Reading and Pyramid Research, provide the most comprehensive communications research, market data, and technology analysis in close to 100 markets around the world. Light Reading produces nearly 20 targeted communications events including TelcoTV, Ethernet Expo New York and Ethernet Expo London, The Tower Summit @ CTIA, and Optical Expo, as well as focused one-day events tailored for cable, mobile, and wireline executives. Light Reading was acquired by United Business Media in August 2005 and operates as a unit of TechWeb.

About TechWeb

TechWeb (techweb.com/aboutus), the global leader in business technology media, is an innovative business focused on serving the needs of technology decision-makers and marketers worldwide. TechWeb produces the most respected and consumed media brands in the business technology market. Today, more than 13.3 million* business technology professionals actively engage in our communities created around our global face-to-face events Interop, Web 2.0, Black Hat and VoiceCon; online resources such as the TechWeb Network, Light Reading, Intelligent Enterprise, InformationWeek.com, bMighty.com, and The Financial Technology Network; and the market leading, award-winning InformationWeek, TechNet Magazine, MSDN Magazine, Wall Street & Technology magazines. TechWeb also provides end-to-end services ranging from next-generation performance marketing, integrated media, research, and analyst services. TechWeb is a division of United Business Media, a global provider of news distribution and specialist information services with a market capitalization of more than $2.5 billion.

* 13.3 million business decision-makers: based on # of monthly connections

About United Business Media Limited

UBM (UBM.L) focuses on two principal activities: worldwide information distribution, targeting and monitoring; and, the development and monetization of B2B communities and markets. UBM's businesses inform markets and serve professional commercial communities -- from doctors to game developers, from journalists to jewelry traders, from farmers to pharmacists -- with integrated events, online, print and business information products. Our 6,500 staff in more than 30 countries are organized into specialist teams that serve these communities, bringing buyers and sellers together, helping them to do business and their markets to work effectively and efficiently. For more information, go to http://www.unitedbusinessmedia.com.

SOURCE Light Reading Insider

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