Level 3 Wins At Icarus, but Akamai Wins At Netflix

Level 3 Communications (NYSE:LVLT, news, filings) added a new gaming client for its CDN business with a win at Icarus Studios.  They are providing caching and download services for the game Fallen Earth, a MMOG or massively multiplayer online game, scaling the available capacity by a factor of twenty and supporting peak usage of 4Gbps so far.  The gaming industry has long been one of the CDN sector’s best clients, and doesn’t seem to be slowing down.

But the price war brought on by Akamai’s pricing cuts in the Fall of 2009 continues to roil the sector overall.  According to Dan Rayburn, Akamai’s new found aggression has landed it the lion’s share of Netflix’s business. Apparently they are getting a few months at just a penny and a half per Gigabyte transferred, followed by 6 cents thereafter.  At that pricing, it’s no wonder Netflix (NASDAQ:NFLX, news, filings) jumped at the deal.  This case probably comes at the expense of Level 3, but it is symptomatic of the sector overall – CDN pricing looks to be a real battlefield this year.  The sector remains overcrowded, and hence there will probably be casualties amongst the smaller players.

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Categories: Content Distribution