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.