Accustream Research
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July 9, 2008

ACCUSTREAM RESEARCH: CDN REVENUE CLIMBS TO $950 MILLION IN ’07, $1.25 BIL. FORECAST IN ’08; ENTERTAINMENT AT 44% SHARE

Salinas, CA, CDNs (Content Delivery Networks) generated $947 million in account revenue in 2007, forecast to grow by 32% in ‘08.

Commercial market value (transit, retail, self-hosted delivery) for audio, video, streaming advertising, progressive download, Podcasting and download entertainment was worth $589.1 million in 2007, according to the multi-year sector analytics report CDN Market Growth 2006 – 2009, published by AccuStream Research.

CDN delivery contracts for audio and video generated $404.1 million (retail and transit); media and entertainment captured 42.7% of that vertical.

CDNs handled 68.8% of total professional video in 2007, 28% of Internet music ratio listening hours and 40% of UGV.

Bandwidth related costs and charges are declining as a percent of total contract value (retail and wholesale), worth 60% of COGS for retail accounts in 2008, down from 65% in 2007, 70% in 2006, as CDNs blend in more value added services and sophisticated content management solutions.

Bandwidth pricing and associated costs are dynamic and elaborate. The market continues to exhibit downward pricing pressure at both retail and transit layers; bandwidth is becoming a more commoditized service component.
Some retail contract re-negotiations in 2007 and 2008 were finalized at more aggressive rates than those already factored into transit contracts, which had an impact on CDN margins, but there were also instances of lower transit pricing deals in advance of retail contract renewals.

Thirteen CDNs analyzed increased total accounts by 29% in ’07, ending the year at 6,772, and forecast to reach 8,402 in 2008.

MRR was $6,042 in 2007, up slightly from 2006, including CDNs with specialties in audio delivery. MRR is forecast to increase by 7.6% in 2008.

Servers in deployment (excluding storage) increased by 46.8% in 2007, forecast to increase by 37.1% in 2008. CDNs have focused R & D initiatives on getting more efficiency—upwards of 50%--from server infrastructure, indicating fewer boxes will be deployed going forward.

Windows Media and Flash are at media player share parity in 2008, following several years’ worth of rapid growth for the latter.

AccuStream Research is a publishing, research and consulting firm. Core areas of research include Internet audio, video, CDN telecom, advertising and download media.

Contact: Paul A. Palumbo, ppalumbo@accustreamresearch.com
(831) 757-2556

Accustream Research
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