How can CDNs secure customer loyalty and gain more competitive edge?
Our reliance on seamless content delivery for applications such as gaming platforms, streaming services, and online media consumption is driving exponential growth in the content delivery network (CDN) industry. This is estimated at $23.5 Billion in 2024 and projected to increase to $71.7 Billion by 2034[1].
Contributing to this phenomenal growth is continued strong demand in Western Europe for Media Distribution/Delivery. Streaming of entertainment is a key driver in overall CDN market growth in the region, evidenced by the compound annual growth (CAGR) forecasted for these services between 2024 and 2034[2] across Germany (10.3%), France (8.4%) UK (7.4%) and The Netherlands (6.9%).
Consumers are demanding more and more choice and have a seemingly insatiable appetite for streaming content.
This is not only from the likes of Netflix, Amazon, Paramount+, Disney +, Apple TV, but also the many domestic services produced by, for example, the BBC, NPO Start, Canal Plus, ARD, Arte, ZDF…to name but a few.
Furthermore, escalating demand for fast, secure, and reliable dynamic content delivery cuts across various other industries, not just video streaming: Online gaming and mobile app delivery for example.
The underlying delivery network must be optimised and robust.
But this is not always the case. Many of us, for instance, will have experienced the infamous ‘frozen screen’ which is due to bottlenecks in the local delivery service. Adding to consumer frustration, is the availability of 4K and 8K Ultra High Definition TV devices and the knowledge that 8K films and TV programs are already being made.
However, many consumers can’t count on experiencing the superior viewing features these latest technologies offer due to broadband services and bandwidth not measuring up. 4K typically needs about 25Mbps with an extra 25% recommended to compensate for any speed drops. 8K, on the other hand, needs 100Mbps and 120 FPS compared to 4K’s 60 FPS.
Cloud gaming is another bug bear of consumers and a growing challenge for CDNs: Fast PC’s and 4K monitors require better broadband and low latency to give the best end user experience. Just imagine the pressure on a CDN serving a home with 1GB of broadband watching 8K TV and Cloud gaming all at the same time!
Broadcasting of live events in 8K will only serve to compound the problem for CDNs. Many are already looking to increase profitability by focusing on higher revenues from fees charged on so-called ‘RSVP’ traffic.
The CDN business is characterised by high capex costs, low margins, competitive pricing and achieving economies of scale.
Clearly, the highly competitive nature of the market, the falling prices of 4K and 8K TVs, plus increasingly savvy customers optimising the video encoding on their devices – meaning fewer bits delivery is required – all adds up to growing pressure on CDNs.
Furthermore, as CDN’s eye the future possibilities of artificial intelligence (AI) and machine learning (ML) for maximising engagement through more personalised and predictive content delivery, their network speeds will become all the more critical. After all, to do this effectively will require analysis of large volumes of user data in real-time.
Customer engagement and differentiation are vital to CDNs’ future success.
With the ongoing roll out of Fibre To The Premises (FTTP) in Europe, insufficient broadband bandwidth availability can no longer be held responsible as the ‘chokepoint’ in content delivery performance. CDNs need to look further upstream to the large central data centers which traditionally house their content servers. This is becoming the real source of viewer experience issues due to the effects of distance related latency.
The solution is to deploy the most popular content at the edge of the network in ‘edge’ colocation data centers located much closer to dense population areas than is achievable through the more typical centralised approach. This approach allows CDNs to serve content from the nearest edge server to the user – significantly reducing delays and enhancing the overall user experience.
The integration of edge computing with CDN networks is crucial as immediacy and real-time interactions become the norm.
Akamai, one of the largest CDN providers if not the largest, is planning to do just this by pushing generalised compute out to the edge in their ‘Gecko’ edge computing initiative.
Apart from giving a faster service with the lowest latency, this strategy also reduces the cost of IP transit backhaul. And of course, a superior viewer experience will maximise viewer loyalty and reduce customer churn. There are further benefits: By distributing data across multiple edge locations, CDN networks can mitigate the risks associated with centralised data storage, such as DDoS attacks and data breaches. Being more agile in detecting threats in real-time ensures a safer environment for users.
However, when moving to the edge to maximise speed and viewer experience, CDNs would be wise to not to accept any compromise in the quality of the services available from their edge data center providers. These should be as good as experienced in a hyperscale facility. Their sustainability credentials should also be a major consideration as with a growing consumption of content comes an increasing carbon footprint. Apart from a strategic location, sufficient power and fit for purpose cooling, CDNs should therefore scrutinise their data center providers’ carbon free energy initiatives such as renewably sourced and on-site generated power, heat re-use and local grid stabilisation.
With so much at stake can your CDN business truly deliver without edge centers?
[1] Fact.MR
[2] Future Market Insights