While Netflix has always had a dual-vendor approach for their streaming delivery by using CDNs Limelight and Level 3, in the beginning of the year Netflix continues to move away from Level 3 and will be taking just over half of their traffic to Akamai. While this is clearly good news for Akamai, the price point at which Akamai is charging is the lowest price I have ever seen the company offer.
We've all known that for the past two quarters, Akamai has been getting aggressive on pricing with their M&E business and lowering pricing to win or retain customers. But this latest round of Akamai pricing shows just how much they are now willing to compete with Limelight and Level 3 and in many cases, are looking to price business at levels they know the other CDNs can't or won't match. While they are finally acting like they now want to own the CDN market outright and keep their competitors from growing, the flip side is they are now the single biggest company driving down CDN pricing in the market. What use to be Limelight and Level 3 driving pricing down, has now been replaced by Akamai offering pricing that is well below what the others offer, on many large deals.
Lately, Akamai has been giving some large companies like Netflix a very discounted rate if the customer agrees to give Akamai at least 51% of their traffic. In exchange, Akamai offers the content owner a highly discounted rate for three of four months as an incentive. In this case, Netflix is paying Akamai about one and half cents per GB delivered for a couple of months before Netflix's pricing goes back to about six cents per GB delivered.