The average pricing for high-volume content delivery network (CDN) services dipped slightly in the fourth quarter as startups offered deals to attract customers, according to Dan Rayburn at The Business of Online Video. Securities analysts tracking the publicly held CDN providers - which include Akamai (AKAM), Limelight Networks (LLNW), Internap (INAP) and Level 3 (LVLT) - have repeatedly expressed concerns about a pricing war in the CDN sector. But Rayburn says those fears are overblown, and predicts that the pricing climate will be very different in 2008.
Next year, pricing will be going up. When the new players in the market have been around for 6+ months, pricing will stabilize and many will realize they don't need to lower pricing to do a land grab. By then they should also have enough in place on their network to have an angle to up sell. We are at the point now where pricing has pretty much leveled off. Sure, there is always going to be a fluctuation in the market, but come 12 months from now, you won't see that much change in pricing at all from the established players. They won't give this stuff away at a lower price just to win business if they are going to lose money on the deal. Those days are over.
Dan emphasizes that the market is segmented by technologies, and that some providers will be able to command premium pricing for specific features and functionality. Check out CDNPricing.com for more details.