The Dan Rayburn Podcast
The Dan Rayburn Podcast
Episode 73: Netflix’s AVOD Business; ESPN’s Balance Sheet; and Lumen Exits the CDN Market
This week we break down the numbers from Netflix’s Q3 earnings, their content spend for 2024, what their ad business looks like today and the reasons why many are undervaluing Netflix's prospects for AVOD in the coming years. We also talk about YouTube's statement indicating that they most likely won't participate in the upcoming round of bidding for NBA broadcast rights and we highlight ESPN's newly released revenue figures. In conclusion, we discuss Lumen's departure from the CDN sector and the recent patent litigation filed by Sling TV and Dish Network against BritBox.
Podcast produced by Security Halt Media
Welcome to this week's edition of the Dan Rayburn podcast, the show that curates the streaming media industry news that matters most, unvarnished, unscripted and providing you with the factual data you need to know, without any of the hype, the pulse of the streaming media industry.
Speaker 1:Welcome to the Dan Rayburn podcast. I am Dan Rayburn, along with co-host Mark Donaghan, who's back this week just in time, so we can review some Netflix numbers. Netflix had earnings yesterday. Now there's stock is up. What was it up to? Mark it's?
Speaker 3:closing today Kind of at the peak. It was like almost $60, but it's up a good solid $50. It's like 13%. Yeah, yeah, the market is Not surprising. Give me some more net players, clearly based on earnings.
Speaker 1:That's what investors are saying yeah, so we'll dig into that. We're also going to talk about some ESPN revenue numbers that they put out yesterday as well in a regulatory filing. We're going to talk about the NBA, because they have obviously licensing coming up and they're talking to a lot of folks. Now. Google actually made a comment about not bidding on that, so an official comment, so we're going to go through that. Talk a little bit about Amazon Prime Video.
Speaker 1:As far as ads being added, I put up a blog post about some of the largest events ever on the internet for streaming so hard to compare, though, apples to apples. Then we also have a few things involving the NFL. I'm also going to talk about Mark Alive. Zoom I'm going to do either at the end of this month or the beginning of November for those that are looking for a job in the space or looking to advance their career. Unfortunately, there's been a lot of layoffs, so I'm going to do something there and helping people with Resume LinkedIn. Now can they better effectively communicate with clarity, consistency and candor Definitely something that's needed.
Speaker 3:I think that's a great idea. We've talked about doing that before. I'm glad we're going to pick that up.
Speaker 1:Yeah, yeah, it's definitely time. So let's go into Netflix earnings. So they added 8.76 million paid subscribers.
Speaker 3:They now globally have 247.15 million subs Loosing on 200,000,000 subscribers Quarter of a billion.
Speaker 1:They'll have next quarter Now adding 8.76 million, they said for the fourth quarter they expect paid net additions will be similar to this quarter, plus or minus a few million. So they're still expecting more growth, which is amazing. They also expect freak cashflow of $6.5 billion this year, which is up from the $5 billion last quarter that they projected. Now bad for all of us, depending on what plan you're on.
Speaker 3:Well, that's true.
Speaker 1:They are going to raise pricing.
Speaker 3:It's going to cost us more.
Speaker 1:We knew it UK, us and France the basic plan will now be $12. Premium plan is now going to be $23. That's I think we're at a breaking point on the premium plan.
Speaker 3:You know, that's interesting. Like, and I'm just trying to, I guess we could go off and do research. I'm trying to remember, like HBO in a cable bundle, I think was always about $20, right? Was it ever $25 a month, you know?
Speaker 1:Not that I remember. I remember it around $17 to $18.
Speaker 3:Sometimes I think occasionally I got it for $15. There was some promotion or something, but and you know, I think the rack rate was 20, but that is fascinating. But it shows the pricing power, though, for a whole lot of reasons. And then you know, dan, I don't think you wrote about this, but it's not getting a whole lot of coverage but their cloud gaming platform, it is being built out and it's growing and it's expanding and they're making serious hires. You know, in that area, what's going to happen there.
Speaker 1:They are. The problem is, they haven't given us any metrics or data or insight into the business.
Speaker 3:Well, you know the announcement that came out now, I guess about six or seven weeks ago. You know they called it in fact I believe they use the word beta. It was in Canada and it was in vital, and it was Canada and the UK. They just opened it up in the US. So they're expanding. But yes, my point is is there a second revenue stream. Yeah, there's this whole new. You know content type and you know look, you know gaming is huge.
Speaker 1:So we just don't know what to agree. That's that's a problem. No degree is unknown. The other thing they didn't talk about they mentioned gaming a little bit, not much. What they didn't tell us was how many advertising subscribers they have. That's what I'm playing, which we really wanted to know. All they said was that ad subs increased 70% quarter over quarter. Yeah, great, but I don't know many last quarter, so that doesn't tell me anything. They also said the AVOD tier now accounts for 30% of all new signups in Netflix. 12 ad countries Okay, great again, but you know no number. Hard to decipher that. If we look at some of the other things they mentioned here.
Speaker 1:I thought it was interesting that they talked about again making it very clear. To Wall Street quote it's been less than a year since launch of advertising. It takes time to build a new business from scratch, which is why we have said ad revenue would not be material to our business in 2023. We're making good progress and laying the foundation for what we believe should it be a multi-billion dollar revenue stream over time, and yet you still have people in the market complaining their ad tier is being unsuccessful, it's not growing, they're not doing well, but they've been very clear here.
Speaker 1:Some other numbers here they gave out numbers when it ties to how much content they're spending, or sorry, how much money they're spending on content. I thought that was really interesting because they only give that every once in a while. So what they said was they disclose content spend for 2024. They expect that to be around $17 billion, but they said assuming the strike is resolved in the near future, to sag after a strike and for 2023, they expect their total content spend to be around $13 billion. So $13 billion going to $17 billion. The other thing they did not talk about is what does their release slate look like? If the strike continues, yeah what. If it continues into the new year and far into the new year, yeah what?
Speaker 1:do they do, they say I don't think really anyone wants to talk about it. Of course their stance on that was like, well, we want this strike to end. Yeah, that's a given.
Speaker 3:Yeah.
Speaker 1:We know that.
Speaker 3:I find that $17 billion number also interesting in a couple of ways and again it shows the power of they've been spending $17 billion for multiple years, you know give or take around that number.
Speaker 3:And my point is this is that you know, all of a sudden, you surpass a quarter of a billion subscribers. Your revenue, you know, is increasing and yet they're able to satisfy the market, you know, even as they're growing the subscriber base very significantly, without having to scale commensurately the content spent, which is, you know, for all those people. And there was a time when I at least thought it. I never said it out loud, but I thought, wow, how in the world can Netflix sustain $17 billion a year? You know, like, at some point it's got to end right. But guess what? You know. And now, with what? Five and a half $6 billion a free cash flow, all of a sudden, you know, are they going to be the studio that can make consistently either the best content or just have, you know, the widest variety? Or you know, there's a lot of ways that money can be spent, right. But it's true, and it all comes down to raising rates.
Speaker 1:Yeah, exactly, that's another thing.
Speaker 3:But I'm with you, though I just wonder, especially at the top end can you go to $25?
Speaker 1:Like, is there even something psychological about like well, here's the thing, though they don't break out for us what percentage of users are on which plan.
Speaker 3:That's very good point and for the premium plan.
Speaker 1:I guarantee you, that is the small subset of the region that's actually.
Speaker 3:That's a super good point, Very small.
Speaker 1:I don't. I don't know what that number is, but we know it's a small number because they've also come out and said, just like we heard from Hulu, that they think the AVOD plan will be taken by more than half their members. Yeah, yeah, interesting. And the non AVOD plan won't, which is the premium plan. So, yeah, you also mentioned Mark. You know just the content. I think I did a blog post six years ago where I said the current numbers that projected in the way Netflix is working, netflix will never get profitable.
Speaker 3:Yeah, you know, there's no chance.
Speaker 1:They're charging too little and they're spending too much. Well, to your point, they keep spending a lot, but the difference is just how much they've raised, pricing over time?
Speaker 3:Yeah, exactly.
Speaker 1:It's the only thing that is keeping that business afoot.
Speaker 3:Well, but raising pricing and raw subscriber numbers. So I mean, it's one thing to just continue to, you know, tax your customer base that's not getting larger, more and more and eventually they say, okay, you know this doesn't work for us, but you know they're also. They've gone from. You know wow, remember when it was like 150, 160 million look how huge Netflix is and now like call it 250 million subscribers, absolutely.
Speaker 1:Yeah, just about what skewing the numbers is. If they're bringing in a lot more people into $7 a month as opposed to $15, how long will it take to make up with ad revenue to get to the $15 ARPU? Or we've got to watch those numbers. But yeah, it's amazing the work that they're doing. A couple of other things that came out is they did talk about what being hearing about this live golf tournament they're going to stream. They did now come out and say it'll be November 14th at 6pm, so we'll see a little more information on that. They also announced that ad week this week in New York City a new feature to their standards with ads plan that allows users to watch one ad free episode once they've seen three ad supported ones, and the reason for that was really binge watching is what they talked about. So interesting. They're going to roll out a new format there.
Speaker 1:And then a final piece on Netflix antenna posted. Guys have put out some data. Antenna posted a blog post Day or two before the earnings. It said antenna counted a total of 6.7 million gross ads for Netflix in the US. For the third quarter, Netflix actually reported paid net ads of 1.75 million. That's a big difference. Now is it exactly the same methodology? Not sure, because antenna doesn't really break it out. But you know third party data. You've got a question because those numbers don't match. So moving on, Mark, to some Interesting numbers here from Disney. Disney, for the first time, has broken out ESPN revenue.
Speaker 1:You know regulatory filing this week. So this was, let's see, today's October 19. So it was yesterday, october 18. Disney has already announced that they're gonna showcase three new divisions in the company as they restructure, called sports, entertainment and experiences. So ESPN saw revenue of 13.2 billion in the first nine months of fiscal 2023. Eight billion of that little over that eight billion plus came from affiliate fees. Advertising was 3.2 billion and subscription fees of 1.1 billion.
Speaker 1:So it's it's making money, it's profitable, which, sorry, I shouldn't say it's making money. We all knew it was making money, but the fact it was profitable Really surprised a lot of people. So, fiscally, it's still Making money, but we obviously all know where that's going over time. But interesting to see them break that out in a regulatory file and we'd never seen that before. Moving on to MBA MBA Mark, correct me if I'm wrong here MBA is, I think, the only real outstanding Sports content coming up for licensing in the next few years, outside of Formula one, which will be in certain regions over the next few years. But MBA is the next big one.
Speaker 3:Yeah, that's my understanding as well.
Speaker 1:That's the only one I can think of. So it's the first time in ten years that the MBA yeah, it's going into negotiations over their content and it would go into effect after the 24 25 season. So super interesting to see what's gonna happen here. Wall Street Journal had a story about ESPN and TNT could buy fewer games, which would allow the lead to create a package for someone like Amazon or Apple. There's been rumors that everyone's involved in the NBA bidding and everybody wants it, but actually YouTube came out and said they don't want it. So this was pretty interesting.
Speaker 1:So YouTube CEO, who is speaking at a recent Bloomberg event called stream a screen time, said, even though the NBA has long had one of the most popular channels on YouTube, that YouTube is focused specifically on perfecting the viewing experience for Sunday ticket customers. So we say quote Sunday ticket is a big area of focus for us getting that viewer experience right, making that game day experience on Sunday flawless and seamless. You should expect more from us terms of innovation, in terms of product, greater integrations, all the things that our fans, especially younger fans of the NFL and YouTube, expect. So he was basically saying that that is our focus right now. We won't we likely won't be involved In the next round of bidding on the NBA broadcast rates.
Speaker 1:So right now they're owned by Disney. You see it on ABC and ESPN and Warner Bros discovery for TNT. But interesting to see what's gonna happen for that with, with the NBA and summer speculating that they're gonna get a three-time increase from what they had previously. Tripling the last agreement. So for the last agreement triples. Here's the number mark. That means a deal would be worth 78 billion dollars over the next decade.
Speaker 3:So my personal view. I think this consultant you know it just has no clue about the reality of the market. Bear in mind that he negotiated this deal in 2014, the current deal in 2014, streaming wasn't even a factor. I mean streaming in terms like Netflix, etc. But you know, live sports streaming like we have today, direct to consumer would didn't even exist around in 2014?
Speaker 1:who's the consultant you're talking?
Speaker 3:about when you say consultant.
Speaker 1:But what is that, david?
Speaker 3:Levy. So he's the guy who said pop culture, fashion relevancy. Why wouldn't? The number two get a 3x increase and that's where got it.
Speaker 1:So he's the one who's claiming that. You know that like it should.
Speaker 3:It should get three times increase. You know, let's be super clear here. The regional sports network, diamond sports, you know, which was, I guess a division of ballet Is, is broke. You know, it shut down All of so. You know Disney and ESPN are. I mean Disney through ESPN and then Warner Brothers through TNT, which in one article Wall Street Journal said that they pay 2.6 billion a year. Let me tell you they are not lining up to pay any increase, you know. So I see a potential scenario and I think this is a little bit interesting. You know, is this? Now? This is bad for consumers because again, we're going to hunt all over trying to find games.
Speaker 3:Sorry, but I'm sorry but, yeah but, you know, is a portion going to get sold off to, you know, to Amazon and Maybe even Apple. You know Apple TV. So I, I don't know, but I just I don't see a scenario.
Speaker 1:Well, I've seen numbers all over mark. I mean, I saw numbers higher than who? This person, yeah. So what this person projected at 78. I saw numbers at 85 billion. Also, you know, 2.6 billion a year is what ESPN and Warner Bros Are paying. But I also then heard the number was 1.9 billion. That was another number reported by another outlet. In 1.9 and 2.6. You're off by 600 million dollars.
Speaker 3:That's, that's sort of meaningful.
Speaker 1:Yeah, even to ESPN and Disney, yeah. So a little hard to believe the numbers, but the bottom line is they haven't negotiated a new deal in ten years exactly.
Speaker 3:So and yeah and I think the takeaway, you know, obviously we can sit here and, you know, be armchair deal makers all day long. It's not very useful, I don't think. But I think the takeaway is this, and maybe it's just that this, you know, what we're illustrating is potentially why Fragmentation is kind of here to stay. You know, look the NBA. The NBA should get as much as you know. They have a right to get as much as they can for their valuable content. And if that means having to sort of partition it out, you know, piece it out a little bit, well, that's what they're gonna do, right.
Speaker 1:Yeah, true, but what I wonder, mark, is the long term here. I feel some of these sports leads are playing checkers and not chess, because they're taking money and they're getting it for a bunch of years. But if you're eroding the fan, base and in the long term you're using direct.
Speaker 3:Now, like, why not figure out some way, you know, to start building now your direct to consumer experience, you know, and just go direct and have all the teams. I mean there there is a whole new business model that Ken and should be built. You know, and I know some people, by the way, who are working on this and you know, desperately trying, talking to the teams, talking to the leagues, about the fact, like, look, you know you're hanging on a little bit too long To the old business model.
Speaker 1:Well, it's the money. It's the money, though. Look at how much money is being thrown at them in seven to ten deals, of course of course so what they're thinking is well, we at least know the business is good for the next seven to ten years.
Speaker 3:We'll worry about it two years before it comes up. Yeah, we'll worry in six or five, six, seven years and we have to start talking renewals. You know it's a lot of money, yeah, no doubt.
Speaker 1:So, speaking of sports, I finally got up mark, had been working this for probably six months, finally got around to finishing a blog post which is the list of the top ten largest live streaming events in history and also how they're measured. So, for those that don't know, 2023 marks the 30th year of the first live events on the internet, back in 1993. Audio only, dial-up only, but for those youngsters listening, this industry is 30 years old. So I would really say the first 15 years of the industry, people really wanted to debate what was bigger when it was 4 million, 5 million simultaneous streams. So I thought two things I need to put out there. One here's a list and I'm going to continue to update. And then, second, I had to point out just all the different ways that these events Are measured, using different metrics and methodology and words. You know average minute on a simultaneous streams viewers None of them ever detail unique you viewers.
Speaker 1:Bitrate device usage is never released as far as which device is mobile, whatnot. So the example I gave is just last week, the Um Largest number we've ever seen to history, reported is 35 million concurrent On the disney plus hotstar platform. This is according to disney for ICC cricket world cup. The thing is that I know for a fact that that bit rate was under a meg, just like IPLs was of 32 million in may of 2023 for geos on geosinema. And then you look at something like the super bowl, which is much, much lower, but the average bit rate was around seven megs. So 2023 super bowl had average of seven million Streams in an AMA average minute audience so Much smaller than 35 million. But you're also talking Less than a meg versus one meg in streams. So I tried to make it as detailed as possible in terms of the differences here.
Speaker 1:Now, if we think about the top 10, uh, they're all cricket. No surprise. Uh, rye games, league of legend, it's two on the list. Now there is one on the list of nfl with amazon thursday night football, but with a huge caveat, and call out that maybe it shouldn't even be on the list Because the problem is amazon always pushes me over to nielsen. Of course, doesn't reply to anything, but nielsen just says viewers on prime video. That is their quote had. So, for instance, the vikings and eagles game on september 14th had 15.1 million viewers on prime video. Okay, but you didn't say concurrent and you didn't say average minute audience. He didn't say simultaneous. So Are those concurrent? Yeah, I'm not really sure. Now, talking to some of the cdn's involved, mark, I have some additional information which I won't go into. But let's just say that's why I still left them on the list.
Speaker 3:Because there was a lot of traffic.
Speaker 1:So people can read into that. However, when you have companies reporting different methodology, it is very hard to compare. But the bottom line is these are the types of numbers we're now looking at. It used to be that 7 million, 8 million was. 8 million was Was. I remember back in, not even that long ago, right, that was considered big, that was considered really big. Now some are probably like, hey, how come the world cup's not on here? I come the Super Bowl's not on here? Because it's.
Speaker 1:Super Bowl largest Super Bowl streamed was last year at 7 million average minute audience. That number comes directly from Fox in the US. Streaming of the 2022 World Cup Final between France and Argentina had 1.3 million Viewers AMA that's it 1.3 million in the US only. So the majority of the World Cup and Super Bowl is still viewed on TV pay TV. That's just the reality of it. But you can. You can check out the breakdown on my blog streaming your blog comm. You can see the list. I will update the list. I also included a source for every single one of these numbers. All the sources are Directly from the companies themselves.
Speaker 3:Yeah, this is a really great article and and I know how long it takes to pull All of this data together you know to do it right because you know that the data had always been collecting mark Kind of just here and there every time, but it was really how do I explain that?
Speaker 1:The events are so different that someone left a comment linked in wait a minute. Some of these events were free and some were behind a Paywall. They're absolutely right, like some were free but some were s-fab. But then I was thinking I Can't possibly break out every single difference between every event Because it got to just be too much. But the point is it's it's a little hard to do apples to apples here, with different methodology and different business models, different average bit rates, viewing times. But you know, at least we have something to work off of.
Speaker 3:That's good. It's really good.
Speaker 1:So mark Dish networks and sling TV have dropped another patent suit.
Speaker 1:Yes, they have this time on Brit box. So Brit box, for those that don't know, is a joint venture of BBC and the UK television network ITV. So this suit looks identical To the lawsuit dish recently filed against Fubo TV. Involves eight patents, all tied to adaptive bit rate. In the lawsuit filed in southern district of New York, dish says, quote After nearly five years of negotiation attempts to no avail, brit box continues to use dish-owned technology in its streaming services without a license.
Speaker 1:So here's another. Now. Why aren't they going after 500 other companies I can name? I have no idea. I don't know how they're doing this. Yeah, I really don't know. The other thing that we don't know, mark, is who's already licensed this? I Don't know, and dish, of course, is not commenting on this with the media of any kind, which is, I think, just kind of silly. But you know we got another suit, so does that mean you know we probably don't have more waiting in the wings? We probably do. Willing to bet we do Another one here.
Speaker 1:Another antenna thing. Antenna said that, based on their data NFL plus this top two million subscribers and that they have observed 1.3 million signups for NFL Sunday ticket Since April 2023 through October 1st. I can tell you. I'm not gonna tell you why, but I can tell you those NFL Sunday ticket numbers are wrong, that's for sure. Nfl plus I don't know.
Speaker 1:What really annoyed me mark, as usual, was the members of the media said NFL plus now has two million subscribers. No, that's not a fact. That is an estimate based on a third-party firm. So it's fascinating when you look through. It's just their FAQ and antennas page. The very first FAQ question is why do antenna subscriber numbers sometimes not line up with the numbers which services publicly report? Now, what I love here is I'm gonna read this, because it's just how crazy it is. So it says antenna Estimated additional subscribers represent an additional portion of subscribers who made an explicit paid purchase of a service through a distribution channel which is not covered by antenna's core methodology panel but for which we have developed an estimate estimate. Damn, for which we have developed an estimation through a alternative methodology. What is the alternative methodology? Well, they don't disclose that. So they're acknowledging their stuff doesn't match. They're saying they use a different methodology to do it, but then you don't disclose what the methodology is, and yet members of the media don't seem to care.
Speaker 3:It's okay, Dan. You know they can't get their copyright date correct on the website, so it's okay.
Speaker 1:Yeah, it's a great 2021.
Speaker 1:No, interesting, okay, he just you know they can put out what they want anyone can. But, man, people have to question this stuff before they Republish it. You know, mark, I had someone the other day who nicely wrote in Through LinkedIn messaging just hey, thank you for spending so much time correcting all these numbers, like we have to work off of real numbers. And Someone else wrote in. I was like why do you spend so much time doing that? Like no one's paying you to do this and I don't think what. Maybe what people understand is my job is I see it as an analyst, a member of the media, and I think Everybody has the same responsibility is to separate facts from opinions and to question the data you get. Like that is my responsibility as an analyst. If you're not doing that as an analyst, then you're not an analyst. So I take that seriously.
Speaker 3:I'll take that a step. I'll take that a step further, dan, and I know that we're gonna end up somehow touching on this point in our. When we talk about helping folks, you know, through job transitions etc. It's important as employees to do this. You know. What's shocking to me is how many people will join companies or just kind of pair it, you know, for their own company or others. You know what they hear and it's like it's not true. And then, of course, they're disappointed, you know, when things don't work out or you know whatever, and it's kind of like well, little research, you maybe would have found that yeah, you have to be more aware of what's going on the market.
Speaker 1:Yeah, but it's it's. You know, it's one thing, mark if it's an employee.
Speaker 3:But well, you call yourself an analyst and a journalist. Yeah, yeah, absolutely, it's a different standard.
Speaker 1:Have that responsibility right. You've got to separate facts from opinions, so I will continue to do that relentlessly, as much as I can, and just we need to work off of real information now, now, now, not putting you on the spot at all, but you put me on the spot mentioned that you know these numbers for the NFL are not correct.
Speaker 3:So Higher, lower, or can you comment?
Speaker 1:higher.
Speaker 3:Okay, higher Okay.
Speaker 1:Yeah, yeah. And, and just imagine, I mean you already know this mark, but Probably 90% of all the conversations I have every week with companies I can never disclose. I know, I know right and and it's a trust factor they give you that information?
Speaker 1:on background. Yeah, so you have an understanding and they know you won't put out certain data, but that's, you know, that's the way this works. Is you got to have the trust. So let's move on, mark, to probably the last one here. Yeah, so, um, getting into the CDM business. So lumen has announced that they're exiting the CDM business. They're selling off select contracts to Akamai, comprised of Akamai said about 100 enterprise customers. Akamai expects the transaction will add about approximately, they said, 40 to 50 million dollars in revenue For the full year of 2024.
Speaker 1:So I'm on a Wall Street put out a note yesterday. I sent them an email correcting them on it. But incredible how they you know, even even those folks covering it you know put in the report. Well, you know Akamai is buying lumen's contracts. No, they're buying a hundred and yes, they previously did this for Stackpath, but Stackpath had thousands of customers, very small, and you have to point out they're buying only a hundred customers. It's a big deal.
Speaker 1:So I saw some people really surprised by this. It was to your point, mark, employees not understanding some things. I was surprised by the number of lumen employees on LinkedIn were like wow, I'm so shocked by this why you haven't had anyone from your company running your CDM product since Two years, right since Pierre left at stream route and Bill left, like you've had no one in charge of the business. There's literally no VP in charge of it, so clearly it's not a focus of the company. You've got a new CEO there who's looking to get rid of the business, so nobody should have been surprised.
Speaker 1:This was a long time in the coming. They've been trying to get rid of the business for some time. Their business is declining. At one point, lumen CDM business was just about 200 million dollars. This year it's about a hundred and fifty million dollar run rate. So it's a lot of money. So it's declining. Once they lost Disney and some other large customers they were, they were basically cooked. So I'm happy to see that Lumen and Akamai have come to terms.
Speaker 1:There's there was also some ridiculous talk mark online of like well, now Lumen will spin out the rest of the CDM business. They're gonna sell off the assets to an ISP or, you know, netflix combined like just just stop people, you have no idea what you're talking about. You're calling yourself an analyst. Lumen is gonna take the hardware from this. Of course they're gonna integrate it into their, their bed. Bear metal footprint, which is most common, bare metal footprint. That's or what they're gonna do. Some of the hardware has been refreshed as of late. Of course, they're gonna continue to depreciate it, this idea that they're now selling it off to Netflix, or they're gonna spin it out as a separate business.
Speaker 3:If you understand open connect, you know it wouldn't even be possible. Uh, it wouldn't even it wouldn't make sense, but it wouldn't even be possible. So you know, for Netflix, that is so yeah.
Speaker 1:Yeah, and yet I saw some debate online. I wasn't even gonna jump into it, but just it just shows how lack of understanding these analysts have, especially about the CDN space. The Wall Street report said that, with this deal happening, there's now only two CDNs left in the market. I'm thinking two CDNs.
Speaker 3:What about?
Speaker 1:I mean, there's still six or seven large.
Speaker 3:I see Amazon.
Speaker 1:Google and EGO and Akamai, and so it's just, it's incredible what people throw out there Now, on this Lumen deal in particular, many of the contracts are Overlay to Akamai, in the sense that Akamai already has a portion of this traffic for that customer. Yeah, that makes sense, but that's unique mark because the stack path one. There was almost no overlap. Interesting with the Lumen one there.
Speaker 3:So so, dan, you know you can do some very quick, easy math and you know the average value is about half a million. You know is. Is that do you Like if someone looks across their CDN business? Just curious what percentage of accounts are in that quantum of, say, half a million to a million dollars? Yeah, forget, forget the Uber, the huge guys, but you know kind of that half well.
Speaker 1:So it's a good question, but I think you actually have to reverse that mark, and the reason is that this there's a smaller percentage base of customers that make Up the largest percentage of revenue for all CDNs combined it's the long tail right and we don't have to look any further than limelight in 2022, who disclosed that 20 of their customers made up 78% of their revenue.
Speaker 1:That's right now. The other problem you have online is people talking about well, you know, cdn delivery so expensive and company is spending hundreds of millions of dollars a year. That is a thousand percent. There's literally a handful of companies spending over a hundred million dollars a year handful right.
Speaker 3:Disney's tired world.
Speaker 1:And Disney's not spending much more than a hundred million dollars a year combined. Now we're talking just video delivery, now everything else, but this idea that Disney's spending three, four hundred million dollars on delivery no, they're not. I know what their contracts are. I know what they pay per dig like. They're not even close to that. So the real question mark is how many customers are in the Call it 25 to a hundred million mark that are making up 80% of the market, because when their pricing changes, that impacts the CDN market more than the guys You're talking about we're spending a half a year.
Speaker 1:I think that's Wow, and if you're a customer that's spending half a million a year, you're not going to see as a larger pricing reduction every year because you don't have a good economic scale.
Speaker 3:That is interesting what you just said, and I hadn't thought about that, but it's the reality. That's why, like, when you publish, you know the lowest Pricing index. You know, like, what the very, very, very top customers are getting in terms of lowest price. If 78% of your user base fits largely into that category, well, you're yeah, you're yeah, you're totally screwed. You know now, if you're able to just, you know, sell the all the the long, long tail guys, you know the small guys, and you know you can charge kind of more reasonable, ie higher rates, you know then okay, you know you can probably make some money.
Speaker 1:But Otherwise, it's very well now what this does do and I'm working on a post about this and just an update in the CDN industry pricing, competitive growth or competitive land state escape growth this year is about 1% 2% max For the industry over a year. But what it does do here is it stabilizes pricing more of a time with larger customers because there are customers out there. I'll throw out Microsoft by name, you know, and some others who go to the CDNs and like this is what we're gonna pay. And when the CDNs push back it's like alright, well, like luminos, give that to us, stack path will give that to us. So they'll split up the traffic further with more CDNs. But now that they don't have places to go and the few CDNs left are like I'm not gonna take on that business, that price point, because it's just bad business.
Speaker 1:Yeah some of these companies are gonna have to start paying a little bit more that's interesting.
Speaker 1:Yeah, they don't and they're not really thinking properly. Because what's the benefit to that company, that customer, basically forcing a CDN out of business? Yeah, why would you do that? Cuz you just want the lowest pricing. Not smart, and some of these folks too. They want that low pricing. But it's not off-peak on the network. If you're pushing that traffic at 2 am with software updates or whatnot, then CDNs will give you a little price. But the other thing I'm hearing, mark too, is some of them I won't mention who's the worst at this by name, but some of these customers also Then don't warn the CDNs that they push them two or three times what they agree to. And now you impact SLA for other customers on the network. So CDNs have gotten really good about putting rails against some customers so that if they try and push additional traffic it's like no good luck, buddy, that ain't gonna happen.
Speaker 1:But not everybody's done that, so it impacts some CDNs more than another. But I'm working on a really really really long, detailed blog postmark on CDN, separating all this nonsense out there. I'll give actual facts. Here's the numbers, you can go look them up and then maybe we'll have a whole whole conversation around. Yeah, I think that would be good.
Speaker 3:You know, one of the things, dan, I would love for you to cover is I've been a part of some recent conversations which are super fascinating, and it's all around the edge what CDNs are doing. To you know, I would say build out the edge. And Do you mean edge compute? Yeah, edge compute. But Because that's different? Yeah, but here's the context. And, of course, okay, akamai bought Linode, right?
Speaker 3:So you know, it's very public and they're out there trying to obviously build Linode out, but there's others too and it seems like they're starting to think like how can we? Maybe we don't need to go build video platforms just as an example, but what if? You know, what if we sort of gave building blocks at the edge? That would allow people to maybe more easily build a video streaming or video encoding workflow. So it's a different thing though, dan. It's like I've just heard some conversations and this is kind of more, I would say, in the I don't want to say brainstorming, but you know. So it's, you know, but I've heard some CDNs talk about this idea of like what if we brought some of the building blocks that people right now are getting on AWS and put it on our edge, made it easily accessible through APIs, etc. And, you know, would that allow us to add value both to our edge no for video noyou know and allow people to build video workflows.
Speaker 1:For video. No, mark, remember, let's you know. It's like people who said, well, you have to do transcoding at the edge. You got to move all transcoding to the edge Right. Why didn't that happen? Well, because there was no business benefit. It didn't improve the user experience, the cost was higher. Now, manifest manipulation at the edge there's definitely a benefit for it.
Speaker 3:You know that sort of thing.
Speaker 1:But the huge problem here, Mark, is let's just talk about this for a minute it's that many vendors are using the phrase edge-in-edge compute interchangeably.
Speaker 3:That's right.
Speaker 1:So let's just make this clear Edge is a location.
Speaker 3:That's right.
Speaker 1:It's the place in the network that is closest to where the end user device is and you know, this is a term Acoma has been using for forever, but in reference to a physical location in their network.
Speaker 3:Yeah, that's true.
Speaker 1:Right, so we agree on that. Now, edge compute refers to a compute model where the application workloads, whatever they are, are occurring at an edge of location, and the whole reason you do that is to move logic and intelligence to the edge. So it's a distributed approach that shifts the computing closer to the user or the device being used.
Speaker 3:Interesting.
Speaker 1:So that contrasts with more common scenarios that you know most people would know about where applications are running in a centralized data center or in the cloud, but that's just really a remote data center, usually run by a third party, someone like E-Club. Yeah, that's right. So edge compute is a service. The edge is it. Yeah, so you can't buy edge Like you're buying, to your point, cdn services that are leveraging an edge-based network architecture. That's right. So the problem with folks using edge and edge compute and all this stuff is they're not talking about real world use cases. And so, mark, I wrote a blog post in 2021, very detailed, titled Real World Use Cases for Edge Computing Explained, and what we're seeing right now is A-B testing, personalization, privacy. None of them are tied to video.
Speaker 3:Yeah, that's true, and you know I just came back from OCP. You know the open computing forum quite interesting, very, very, very, very geeky. If you want to know all about how to cool a data center, that's the place to be Dan. Oh, wow.
Speaker 3:Okay. But you know, it's just super fascinating to think about how much conversation around AI you know, generative AI is happening. The problem is people kind of wave their hand, they talk about AI, but all of it is basically chat GPT. It's generative AI, it's like text and in the context of video. I was in, you know, multiple conversations over the last couple of weeks where it's like oh, yeah, yeah, ai, ai is driving our business. And then they're referencing chat GPT and I'm like how in the world is chat GPT driving your encoding business? So, like you know, your streaming platform, like it, just it.
Speaker 1:Well, think of two, how the Edge was going to do blockchain enabled encoding. I still don't understand what the hell that was even being pitched. I still don't get it to this day what what they were actually pitching. Or some of these companies that are still in the market who will not survive. They will not last. Encoding is not that hard to do, but yeah, we can talk more about the edge, and we will during CBN.
Speaker 3:I actually think there is. You know, like it's interesting what live peer is doing. But but your point is still valid. I think part of what also you're hitting on is there's a lot of sort of waving of the hand, you know, like like secret sauce. You know, hey, let's sprinkle a little AI, let's sprinkle a little web three, let's sprinkle a little, you know, and we're going to have this new thing and it's like, well, you know.
Speaker 1:See, so I take a completely different approach, Mark Live peer to me is absolute, 100% nonsense. Oh really, First and foremost, we'll think about it. You tell me in in six words, seven words, what does live peer do? What are?
Speaker 3:they offering. Live peer taps into the latent capacity of of GPU video blocks that are largely sitting dormant. That's that's what they do, you know, meaning that you have an NVIDIA GPU that was set up for crypto mining, but it has a whole video IP function that's totally not being utilized. So while it's doing crypto mining, it can also be trans coding video. That's that's really what live peer does.
Speaker 1:So that sounds great, but the problem is, even when you go to their website, you got developer home, you've got network and you've got ecosystem. There's no service, there's no product, there's no. This is what we sell.
Speaker 3:And that's a market. There's no customers. 100% of marketing issue they have because if you go to live peerorg it's a different website than live peercom.
Speaker 1:But of course you wouldn't know that Right. It's maintained by other organizations.
Speaker 3:Yeah, one is the project, you know, one is, you know, one is the token, and it's the project. And then the other is, you know, like, hey, I'm interested in very, very low cost trans coding, you know. So you're like an end user.
Speaker 1:So yeah, yeah, and so there you go. So now it's also a token and now it's a completely different thing that they're selling. This is all the confusion around it. The other thing I always call out to people, mark, all the time, is when you go to the company you click on about right, yeah, why is there no information about who's running this place? Why you got to get six clicks in to find something that finally goes to live notion, who also says what they're doing is they're building open source video infrastructure.
Speaker 1:Yeah Well, it's not open source. I don't understand how it's classified as open source. Nobody would think of that as open source. So live peer is one of these companies where to me, mark who is using them? I don't know if a single customer. They don't have a single case study online. And the other thing is this idea that they and others have that they're democratizing, as they call it, the internet because they're allowing independent content creators to go direct. You know, make money. What they're missing is mostly independent content creators that have content will never make money because they're content stinks. Sorry to be the one to tell you that, but it seems everyone who makes a piece of content now is like, well, my content's worth a lot of money.
Speaker 3:My content.
Speaker 1:Well, the reason you can't license it or sell it to anyone is because nobody wants it. So now, if you're gonna go direct to consumers, how are you planning to make money on that? You're not True. So you'll notice that none of these companies like LivePeer are talking about sports, dnfl, the NPA. They're not talking about OTT services Under use cases. You know what they list Creator economy. But who is actually making money in the creator economy? Tiktok? I don't know of anybody, right?
Speaker 3:but that's owned by TikTok. That's my point. The platform is.
Speaker 1:So it's so pod me, and.
Speaker 3:Mr Beast is making money.
Speaker 1:Mr Beast, yes, yes, but that's YouTube.
Speaker 3:Yeah, Mr Beast. Youtube and TikTok, that seems to make a lot of money.
Speaker 1:And then you go to their pricing. Here's the other thing that's a dead giveaway mark for me. For pricing, you can sign up for free. You can be a $100 a month customer, you can be a $500 a month customer or you can be an enterprise customer if you contact them for pricing. So it's this idea of we are everything to everybody, no matter your size or scale. We can handle it. And yet what's their QOE? How come they're not in Conviva? Where are they in MPOL? How do they compare in terms of startup time, latency, rebuffering? Well, you don't know, you'll never know?
Speaker 3:Obviously I would and, by the way, I have apps. I am not affiliated in any way with lipo, so this whole conversation is not, but I would not disagree at all with your observations and it would seem like there's some work that could be done on the marketing side.
Speaker 1:Yeah, I think it's less than that. I think it's a product that doesn't exist, doesn't exist at scale. I have talked to a couple of companies who've looked at them and like so that stuff.
Speaker 3:after a week I have seen it work so I know it does exist from that perspective. So I can say that. But you know.
Speaker 1:But with performance and scale.
Speaker 3:I have not tested it personally you know I have performance or scale.
Speaker 1:Well, that's the only thing that matters, but I've seen it work and also you know, mark, when they're saying it's supposed to replace the current internet infrastructure for video, you know, at a price point and at a performance that others can't match right. This is their wording on their website, but you don't have a single customer by name who's ever quantified your solution. That's the other thing that I'm going to waste the hell out of me. It's like you can't come out and say this is the best thing ever and we'll replace how we're doing video today.
Speaker 3:Hey, it's more. It's more Because hey.
Speaker 1:Netflix just put out their earnings 247 million subs. Yeah, that's Making money. And, by the way, they're not using your technology.
Speaker 3:Yeah, yeah. Well, we're going to have a lot of really good things to talk about, because there's also this super interesting trend which I know you flagged down, and it was when API video announced that they're offering free encoding, and now Mux.
Speaker 1:Yeah, and Mux just announces this week too. Yeah, I'm not even going to get into free encoding.
Speaker 3:To me, it's just there's a whole other interesting trend, so.
Speaker 1:I view that, as Mark, like companies giving away free storage, that they can get delivered Well, of course You're giving away free encoding to get other services, of course, Anybody yeah, I mean anybody who thinks like, well, wait, I just want my free encoding.
Speaker 3:What do you mean? You have to deliver my traffic? Yeah, of course you know, that's.
Speaker 1:Yeah, there's a cache. But the other thing is people tend to think, mark, that's a trend. And I'll tell you right now, the guys at Peacock are now not all of a sudden now signing up for free encoding.
Speaker 3:That's not the size customer that's being targeted, of course, absolutely. Yeah, that's true.
Speaker 1:But to your point. Some of these companies are like we're revolutionizing the transcoding market. No, you're really not. You're helping smaller customers where transcoding might be a cost. That's keeping them from doing video. Great, I think more flexibility for their size customers is a good thing, but you have to know who it's targeting.
Speaker 1:Also, how come, mark, none of them talk about the size of the market? Hey, by the way, we have free encoding and here's the right target customer. Like, if you're a customer of this size with this many hours, you're a perfect fit for that, but none of them ever do that. I hate all that marketing stuff. Be clear, be concise, be focused. We're going to have a, we should. People don't know who you are and what you do.
Speaker 3:We should do a session. It should be the analyst versus the marketer, and you and I will find something to debate. That would be fun. Who's the marketer? You, yeah, ok, I'm a marketer.
Speaker 1:Yeah, but you don't use high level generic words crammed into one sentence, right? So I don't think of you that way.
Speaker 1:Well, all right. So calling yourself or talking about marketing will end on this mark. So I did do a webinar, a live Zoom, I think a year and a half ago, and there are a lot of layoffs for free, just trying to help people. I'm going to continue to do that more going forward. There have been a lot of layoffs as of late.
Speaker 1:So here's the thing I am looking at so many LinkedIn profiles that stink, and by stink I mean the link to your company is broken. It's not there. You don't have a photo up. Every single person is calling themselves a highly motivated and results driven Wrong. Stop saying that. Right, results driven. Your results could be terrible and everybody's highly motivated, but you didn't tell me what you're highly motivated to do. That is the wrong terminology. You can't be saying that you should be swapping that out with positive performance based, something that talks about the results of what you're getting.
Speaker 1:So the goal of this Zoom mark is going to be to help people speak intelligently and intelligibly, to make them understand that words have meanings, to talk about what you should be referencing on a resume. People say to me all the time Mark, oh, one of my strengths is I'm great at communicating and I just pause and wait and when they stop there, I say no, you're actually terrible. And they're like no, no, I just told you I'm good. I said no, here's why you're not. You didn't tell me how you communicate. If I were to say I'm good at communicating, I wouldn't say that I would say I strive to communicate with clarity, consistency and candor. Now, I've told you how I communicate, so people need help out there.
Speaker 3:I can sit here and complain that LinkedIn profiles aren't great, or I can do something that I'm going to help people Because we don't want to see anybody that's someone to work on, needing work and can't find it.
Speaker 1:Yes. At the same time, though, mark, like man, if you want help, you've got to set yourself up for help.
Speaker 3:That's right.
Speaker 1:When your email doesn't work, when your links don't work, when you have the wrong companies listed. You're highly detailed. I love this one, Highly detailed and yet you didn't take 10 seconds to swap out the default gray image that comes with your LinkedIn profile. Well, you're not very detailed in this case.
Speaker 3:Or there's an obvious misspelling.
Speaker 1:I see misspellings all the time. I also love top performing Top performing compared to whom? The other weird thing is I see so many people calling themselves a coach and mentor and then I look at their title and you're an account manager. I'm not sure who you're mentoring Like. That's not part of your job in a sales organization. At that level, People list things out like you know I have product and service expertise. Ok, which products and which services? I don't know.
Speaker 1:I would say a close to a third of all LinkedIn profiles Mark that I see are broken in terms of links, Even one's looking for jobs. I saw one the other day. Here's an example. It says there are sales executive but then their skills they lifted listed were workers compensation, evaluation, what, and budget control, and I was like something doesn't add up here. This is a new job I've never heard of. I see a lot of skill sets and selling unique, customized services. Again, I don't know what services you sell, or to whom, or to what size, or what's the monthly recurring revenue.
Speaker 1:It is so generic the stuff that people put out there, so I'm going to hold an open Zoom. I'm going to take questions live via chat. I think if I open up the video. It'll be kind of a free for all. And just so people know, I've been helping place people in this industry at companies for almost 20 years free of charge. I've placed people at multiple people at Disney, NBC Sports, Akamai, Comcast, EGO, Amazon, Oracle. Those companies will reach out to me and others all the time saying we're looking for good talent.
Speaker 1:Who do you know? I do it for free. I will continue to. I take no kickback. People are like well, you must get some money from me. I don't get any money from them. I will review your resume. I'll look at your LinkedIn profile. The industry's taking great care of me over 25 years.
Speaker 1:If I help, do that for others. That's how this industry grows and people reach out every week asking for me to review resumes or LinkedIn. So I'm happy to do it. But I'm just telling you you got to set yourself up for success. Before you contact someone asking for help, Make sure you're at least you don't have any misspellings on there. But I'll give details out on that mark soon, once I get through the streaming summit next week in New York City. But it'll be a free Zoom, open to everybody. I'm happy to help people as much as I can. Also, for anyone who's listening, do not now send me an email saying can you get me a job? I get those emails as well. I will not reply to those. I don't know who you are. There's no resume, there's no LinkedIn profile. It's incredible how many of those I get.
Speaker 3:I'm looking for a good company, Dan. Do you know any?
Speaker 1:Yeah, that's another one. What companies do you like? For what reason? Balance sheet, like what they're selling, like competitive landscape Management team.
Speaker 3:For the listeners, just so they don't think like there's two different classes. I've sent you emails asking questions and you've responded in a similar manner. Well, mark, what are you asking? What are you asking?
Speaker 1:It's like Right, well, of course.
Speaker 3:Well, usually I reply to a question with a question Like what do you want to know If I don't get any details? You want an intro for what? Why?
Speaker 1:Right to whom, so I will help you. I'm going to try and do more to help people as far as on a live Zoom, so details to come. Mark, we're good, we're over time here.
Speaker 3:Ranting and raving. Yeah, we went almost an hour. 12 more 12 months.
Speaker 1:No, we took that little break that Danny's going to have to edit. Yeah, this will get cut down, yeah, yeah, yeah, yeah, we'll be at 40 minutes probably, but we'll also talk a little bit about the NAB streaming summit when I come back. Since I'm sitting with Disney, I also just announced today I'm going to sit with Fubu as well on day two for Fireside, so that'll be interesting.
Speaker 1:So, a lot more coming up. And then, just finally, for listeners, we're hot in earnings seasons. Next week is Google and Microsoft, meta, verizon, amazon, comcast and the week after that. I won't even read them because we've got 14 companies the week of the 30th, not a number's coming Good. So with that, reach out to Mark and I if we have any questions. If you do have a question, send us as much information as you can so we can reply intelligently. All the numbers on Netflix and everything we talked about today are up on my LinkedIn page. Any questions, hit us up anytime. Thanks for everyone listening. Hope you have a great week, mark, and I will talk to you in the next episode.
Speaker 2:If you enjoyed the show, send it to a friend, have questions for Dan or Mark, connect with them on LinkedIn at any time, and be sure to check out Dan's blog at streamingmediablogcom.