Accustream Research
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November 3rd, 2010

ACCUSTREAM RESEARCH: CDN SECTOR RETURNS TO DOUBLE-DIGIT GROWTH IN ’10; REVENUE UP BY 18.5%, ACCOUNTS INCREASE 26.7%

Seaside, Calif. CDNs (Content Delivery Networks) are generating double-digit top line revenue growth in 2010, a convincing turnaround from the single-digit increase in 2009.

CDNs are writing new contracts at a 26.7% annualized pace, and poised to produce $1.5 billion in 2010 revenue, according to a comprehensive industry report by Accustream Research

The report, CDN 2011, shows 8.2% revenue growth in 2009 was accompanied by 25% account expansion, though not sufficient to overcome sharp declines in retail bandwidth pricing.

The U.S. market currently accounts for 55.6% of the $2.7 billion global CDN revenue total. Major providers like Akamai and Limelight Networks generate up to 30% of revenue through international contracts.

Additional CDNs analyzed in the report include Abacast, BitGravity, CDNetworks, CacheFly, Edgecast, Internap, Level 3, Cotendo, Mirror Image and Highwinds, among others.

Wholesale bandwidth costs continue to decline as a percentage of COGs, while retail prices are stabilizing. Moreover, considerably more bytes are being delivered to an expanding universe of fixed and mobile devices.

Combined, those market trends are expected to improve both CDN gross margins and produce double-digit top line increases through 2012.

MRR across the sector is forecast to decline by 8% in 2010 (to $8,108), however, following a 13.6% drop in 2009. Bandwidth, co-location and power continue to make up the largest COGS components and each retail contract dollar.

Solutions diversification (including site acceleration, adaptive bit rate streaming--which increases viewing time, combined with less emphasis on bandwidth overage fees billed by CDNs--plus tighter integration with OVPs for publishing standardization, automation and monetization support) are expected to beneficially impact MRR.

The report’s analytics and extensive Q & A’s focus on transit and retail pricing, underlying market forces, billing models by content vertical (i.e. pro and UGC video), account type (including audio, video, dynamic site acceleration, advertising and download media), CAP EX (up 24.8% in ‘10), servers deployed, R & D, mobile initiatives, strategic imperatives, partnerships, and the impact of cloud computing.

CDN market penetration of each key content vertical is supported by AccuStream’s extensive media consumption databases.

AccuStream Research is an online, mobile, video, audio, download, subscription, OVP, video advertising network, CDN and broadband advertising research firm.

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

Accustream Research
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