Discussion Papers

Christin-Isabel Gries, Imme Philbeck

Market developments in Content Delivery Networks

No. 376 / April 2013

(full version only available in German)

Summary

A CDN is a software solution that is situated as an overlay to the Internet. It optimizes content delivery based on a globally distributed cache-server network. Cache-servers are placed in geographically strategic locations and are, but do not have to be, connected by dedicated transport links. The technical design of CDNs as well as the architecture of the server networks can take very different forms. CDNs have been in the market for more than 10 years and are subject to significant dynamic change in relation to their capabilities, functions and services offered.

It is challenging to determine an exact market volume for the CDN market, given the difficulties of identifying CDN activities and corresponding revenue streams only. However, the total world-wide revenue-based market volume is estimated to be relatively small at about €2 billion (2011). Competition in the CDN market has intensified over the last few years. Price has crystallized to be the main competitive variable. However, innovative capability, flexibility and quality are gaining a more prevalent role in competition.

CDN providers are part of a complex ‘Internet-Ecosystem’, which entails a myriad of different actors and relationships between them (e.g. ISPs, end-customers). Direct customers of CDNs are content providers, who generate a significant amount of data that needs to be carried over the Internet. The demand for CDN solutions is mainly driven by the dynamically increasing amount of data traffic. A number of different CDN business models and strategies have manifested themselves in the market. Providers like Akamai, who are ‘CDN Specialists’ with a sole focus on CDN provision, have shaped the CDN market since its infancy and throughout its development and have maintained a significant market position. Later market entrants are mainly characterized by offering CDN solutions in addition to an existing product portfolio. These providers are either ‘Integrated CDN’ providers, who own internet access infrastructure or who simply resell CDN services (‘CDN Resellers’). The demand-side can be segmented into Video/Media & Entertainment and Non-Video/Enterprises, which differ with respect to the amount of data traffic carried and different value-added services offered. Large content providers also set up their own CDNs.

The future development of the CDN market will depend on a number of different factors and variables whose development is difficult to predict today; nonetheless, most market experts expect that CDN market revenues will continue to grow over the coming years. The significance of CDNs for internet-based content delivery will depend on how data traffic will evolve and how the relationship between content providers and network providers will develop.

Discussion Paper is availbale for download.

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