Why Netflix's CDN Is Good For Consumers

Netflix’s formal announcement last week that it is creating a content delivery network signals a massive change in the way video and other bandwidth-hogging content is delivered to consumers, and it’s mostly change for the better, analysts say.

A content delivery network (CDN) is a network of computers that duplicates content across multiple servers and then directs that content to users based on proximity, thereby allowing the content to be delivered more rapidly. Internet service providers and massive content providers like Google, Apple, Microsoft and Facebook have their own CDNs, while third parties like Akamai, Level 3 and Limelight deliver traffic for smaller Web sites.

Netflix, whose estimated demand during peak hours accounts for 20-30 percent of Internet traffic, now joins the likes of Google and Facebook in delivering traffic through its own CDN instead of using a third-party provider.

Analysts say the move will save both Netflix and ISPs like Comcast and Time Warner Cable a lot of money, while improving the end-user experience for subscribers that stream movies via its service.

In a column for Streaming Media, analyst Dan Rayburn points out there are maybe only a “half-dozen” content providers that have the scale, the technical expertise, and the cash to build their own CDN. Rayburn says Netflix would not reveal how much money they would save by building their own CDN, “but even a small fraction of savings per Mbps would be substantial” to a company that generates as much traffic as Netflix.

Craig Labovitz, founder of network analysis company Deepfield Networks, tells Wired that building their own CDN will help Netflix get high-definition content to consumers and may also result in lower subscription rates for high-speed Internet access, as the burden of delivering content to consumers at high cost shifts from ISPs to major content providers. We’re at “a real inflection point not only in the way the networks are built but also the way they are monetized,” he says.

Labovitz expects the CDN trend among major content providers (which he calls “hyper-giants”) to continue. According to Deepfield data, more than 70 percent of all Internet traffic on average comes from just 150 sources. At the same time, traffic to those sources is growing astronomically -- especially video, Labovitz says, which means that “hyper-giants” will need to invest in their own CDNs to ensure content is delivered as swiftly and efficiently as possible to consumers. 

2 comments about "Why Netflix's CDN Is Good For Consumers".
Check to receive email when comments are posted.
  1. Steve Symonds from Symonds Associates, LLC, June 11, 2012 at 12:42 p.m.

    The notion Netflix's internalizing some content distribution costs will result in power subscription rates is ridiculous. Netflix's business model is notoriously broken. Starz cancelled its contract with Netflix in the face of enormous pressure from the MSO's to end that highly favorable deal (in which Netflix by my accounting was paying about 90% less than the giant MSO's for the same Starz content). The resulting inventory that's on offer is a mere shadow of its former self. There is simply not enough ARPU in SVOD for Netflix to stock the shelves with "A" and "B" titles. Given how low costs per Gbps are these days for CDN's, I don't see Netflix saving big money thru this move...but any they do save will either go to shoring up their sad library or adding more promotions. As for improving the QoE/QoS for consumers through a CDN, anyone who believes this is also a believer in the Tooth Fairy.

  2. Steve Symonds from Symonds Associates, LLC, June 11, 2012 at 12:44 p.m.

    First sentence should have read: The notion Netflix's internalizing some content distribution costs will result in LOWER subscription rates is ridiculous.

Next story loading loading..