A new patent lawsuit has been filed against Google regarding caching and content delivery methods dating back to Sandpiper Networks. The lawsuit relates to how Google delivers content across its network for YouTube content and third-party content across Google’s Cloud CDN platform.

The patents in question were owned by Level 3 and were sold off by Lumen in March of this year to Sandpiper CDN, LLC. I don’t know who is behind the newly formed entity, which appears to have been incorporated solely to acquire the patents. Andrew Swart and David Farber are mentioned in the suit regarding the history of the patents, but I don’t have confirmation of their involvement in Sandpiper CDN, LLC. and the suit. I contacted them asking for clarification and will update this post if I get a response.

For those who don’t know the name Sandpiper Networks, the company is considered by most to have built the first public content delivery network. [See my vendor list at cdnlist.com]

They first offered their “Footprint” CDN services in September 1998, and their ‘598 patent was issued in February 2001. Sandpiper was acquired in a stock deal by Digital Island in October 1999, valuing the company at the time of the news at $630 million. After the news, Digital Island’s shares soared, and by the close of trade, Sandpiper was worth a billion dollars on paper. I don’t recall the final deal price and terms.

In the suit, Sandpiper CDN, LLC. claims that in 2023, Level 3 “decided to exit the CDN market and began selling off its CDN assets” due to the “rampant infringement of its patents, which depressed its revenue and profit.” That assertion is not accurate. Level 3 exited the market as some of its largest customers, including Apple and Disney, moved to other solutions, with Apple building its own CDN and Disney consolidating its traffic to just two third-party CDNs.

Lumen’s CDN revenue did not decline due to a lack of companies licensing their patents. Level 3/Lumen’s CDN business declined before 2023 due to less overall traffic growth in the market, lower pricing across the industry, and customers optimizing their video to deliver fewer bits. We’ve seen these trends across other CDNs, which are well documented with public data.

The patents in question are 478,903; 8,595,778; 8,645,517; 8,719,886; 9,021,112; and 10,924,573.

Disclaimer: Over the past twenty years, I have been paid to work on many patent suits tied to CDN patents, including those owned by Progressive Networks, Burst, Move Networks, Microsoft, Viatech and others. As of the publication of this post, I am not working on the Sandpiper CDN, LLC. case.

Note: The Sandpiper logo shown is the company logo from Sandpiper Networks and not of Sandpiper CDN LLC.

In Q1, Verizon, Comcast, Charter, Altice, EcoStar and WOW! lost 1.55 million pay TV subscribers, Hulu+ Live TV lost 100,000 subscribers, Sling TV lost 135,000 and Fubo lost 110,000 subscribers. Combined, that’s 1.89 million live TV losses in Q1. We don’t know how many subscribers YouTube TV gained or lost. But it’s a safe bet that YouTube didn’t make up the nearly 1.9 million difference.

While Peacock and Paramount+ don’t have a live linear channel lineup comparable to pay TV, they do have live content. Peacock gained 3 million subscribers in Q1, and Paramount+ added 3.7 million. Consumers are not tuning out live; they are just moving from a deep linear channel lineup to specific live content. Max gained 700,000 subscribers in the US in Q1, but we don’t know how many added the B/R Sports Add-On for live sports.

We all know sports content drives live TV viewing and keeps consumers from cutting pay TV services faster, but so far, vMVPDs are not benefiting from a steady stream of new sign-ups. Yet, some in the industry continue to want to imply that Hulu and other vMVPDs are doing better than they are. Someone who covers the streaming space recently said in a LinkedIn post, “…Hulu+ Live TV, in particular, is adding customers at a steady clip.” That’s simply not true.

Over the last three years and one quarter, Hulu+ Live TV has gone from a low of 3.7 million subscribers to a high of 4.6 million. In the previous two years, the number of total subscribers hasn’t deviated by more than 10% and in the past five quarters, that number dropped to 6.5%. Six quarters ago, Hulu+ Live TV had 4.5 million subscribers. Disney just reported the same 4.5 million subscribers at the end of Q1. These numbers tell the story; anything else is just hype and poorly worded-posts with vague references. Most often, the person writing the post doesn’t know the numbers.

Looking at pay TV cord cutting figures from last year and Q1 of this year, I estimate the pay TV market will lose about 5 million subs combined in 2024. That would be a loss of about 7% of total pay TV households in the US.

Here’s this week’s bulleted list of key numbers and data points from Q1 earnings across WBD, Disney, FOX, EcoStar, Vizio, Akamai, Brightcove and Vimeo, including P&L, sub additions/losses, ARPU, and 2024 year-over-year projected growth:

• The Disney earnings deck said that a definitive agreement regarding the new JV sports streaming partnership hasn’t been signed yet with FOX and WDB.
• FOX said 90% of all viewing hours on Tubi come from AVOD content, not FAST channels. Tubi’s CEO confirmed in April 2024 that Tubi is not profitable. In Q3 of 2022, FOX said Tubi had $165 million in revenue for the quarter. Based on those numbers, Tubi’s annual run rate for 2023 should have generated over $700 million in revenue. More details here.
• In Q1, Warner Bros. Discovery added 2 million DTC subs (700,000 from the US) to end the quarter with 99.6 million. DTC revenue was $2.46 billion on a profit (Adjusted EBITDA) of $86 million. More details here.
• Sinclair is looking to sell more than 30% of its 185 owned or operated broadcast stations, including the Tennis Channel. Sinclair CEO Chris Ripley said the company is open to offloading parts of its business without giving specifics.
• AMC Networks added 100,000 DTC subscribers in Q1 to end the quarter with 11.5 million subscribers, up 300,000 YoY. Ad-supported versions of some of its DTC services will roll out in 2025.
• Disney’s DTC streaming business, Disney+ and Hulu, had an operating income profit of $47M in Q1, while ESPN+ lost $65 million. More details here.
• Vizio’s SmartCast Active Accounts growth is slowing. It added only 100,000 accounts to end Q1 with 18.6 million. More details here.
• Verizon, Comcast, Charter, Altice, EcoStar and WOW! have lost 1.55 million pay TV subscribers in Q1. Looking at figures from last year, I estimate they will lose about 5 million subs this year combined.
• Akamai expects to see $3 million—$4 million in revenue due to the Olympics. The impact of the Olympics on CDNs is never as significant as some suggest. Akamai also mentioned that their delivery business is “highly profitable” and that they have reduced their delivery capex costs to “low single digits,” a 50% reduction from a few years ago. More details here.
• Vimeo’s revenue in Q1 was $105 million, flat from Q4 revenue of $106 million and up 1% YoY. Net income in the quarter was $6 million. Keeping the 2024 revenue guidance of $385-$400 million would mean revenue would be down -8% to -4% YoY. More details here.
• Brightcove’s revenue was $50.5 million in Q1, flat from Q4 and up 3% YoY. Its net loss was $1.6 million. The 2024 revenue guidance stays the same and is expected to be in the range of $195M-$198M. More details here.
• Launching this August, Sky is bringing more sports to viewers with Sky Sports+ at no extra cost. This will give users over 50% more live sports this year and enable the capability to show “up to 100 live events via concurrent streams.”

On Akamai’s Q1 earnings call, the company gave details regarding their delivery business. Akamai expects to see $3 million – $4 million in revenue due to the Olympics. Due to a social media customer who has optimized their platform to save money, Akamai said it would take a hit of $40 million – $60 million in revenue for the year due to less traffic from this single customer. Akamai did not name the customer, but it is TikTok. They have been pre-fetching less content and optimizing their entire infrastructure stack for the past few quarters.

Outside of TikTok, Akamai said that due to “slowing traffic growth across the industry” (they highlighted gaming in particular), they expect to see $20M-$30M less delivery revenue for the year. The company said that by the end of the quarter, they will have repriced five of their seven largest delivery customers and expect the remaining two to reprice by Q3. Regarding the repricing, Akamai said the pricing they are seeing is in line with what they expected. For those who have suggested that Akamai is dropping their delivery pricing just to win business, they’re not. The company confirmed that there is delivery traffic that Akamai is not taking on as it’s not “profitable” or “strategic.” Akamai also mentioned that their delivery business is “highly profitable” and that they have reduced their delivery capex costs to “low single digits,” a 50% reduction from a few years ago.

Here’s a breakdown of Akamai’s delivery revenue over the past 13 quarters:

• • Q1 2024: $351,758
  • Q4 2023: $389,048
  • Q3 2023: $379,304
  • Q2 2023: $379,698
  • Q1 2023: $394,384
  • Q4 2022: $415,183
  • Q3 2022: $393,248
  • Q2 2022: $416,678
  • Q1 2022: $444,148
  • Q4 2021: $470,767
  • Q3 2021: $462,068
  • Q2 2021: $466,739
  • Q1 2021: $473,669

For those wondering why the overall traffic growth rate is down, just look at the subscriber numbers from OTT platforms. Some, like Sling TV, lost subs in Q1, and so did Hulu+ Live TV. Subscriber growth across the industry wasn’t strong in Q1. Akamai also noted that traffic growth in the gaming industry was lower.

Fubo’s Co-Founder and CEO, David Gandler, sat down down for an in-depth discussion about their lawsuit filed against Disney, FOX, and WBD, its Q1 earnings numbers, industry challenges around content licensing pricing and bundling and Fubo’s goal to get to profitability in 2025.

David defines antitrust, why Fubo believes the JV is anticompetitive and how the suit’s outcome could impact the entire industry. We also highlight why so many carriage disputes are happening, leading to a fragmentation of sports content and an unfriendly fan experience. We discuss the pricing and bundling of vMVPD services, including how Fubo picks RSNs to work with and why pricing for OTT services never goes down.

Finally, David recaps Fubo’s most recent earnings, including its subscriber growth numbers, lower net loss, the recent reduction of its debt, and Fubo’s operating plan as they work towards profitability.

Some important data points about CDN pricing, vendor consolidation and market sizing came from Fastly earnings call and earnings results. For the first time, Fastly is breaking out revenue into three product lines: “Network Services” (solutions designed to improve the performance of websites, apps, APIs, and digital media), “Security” (products designed to protect websites, apps, APIs, and users) and “other” (emerging products offering which includes compute and observability products). In Q1, Network Services comprised 79% of revenue, Security 18%, and Other 2.7%. For all the talk in the cloud computing industry, very little revenue is being generated today across the industry from compute services.

The company discussed the challenges in the CDN business, saying they saw a “slight uptick from the typical level of re-rates with our largest customers, but we have not yet seen the commensary traffic expansion usually associated with this motion.” In other words, pressure on CDN pricing is as bad as always, with the largest customers demanding lower pricing, even without offering more traffic or larger commits. This is no surprise to me since this has been the trend over the past twelve months. Talk to the largest customers; it’s the same trend.

And yet, most on Wall Street have no insight into CDN market drives and restraints. Three weeks ago, Piper Sandler upgraded Fastly stock, citing “multiple upside levers” across the CDN business, and Fastly’s stock rose by 7% in intraday trading. The analysts said that Fastly could benefit from new business strength and a “favorable competitive landscape,” noting the exit of some competitors could help drive opportunities and favorable pricing for Fastly. But of course, that’s not reality.

Regarding industry consolidation, Fastly said, “We also will not benefit in 2024 from the favorable impact of the CDN consolidation that occurred in early 2023 that drove favorable sequential growth in the prior year same period.” In other words, StackPath and Lumen exiting the market won’t benefit Fastly in 2024, which no one should have expected, considering both vendors had such a small number of customers with a meaningful MRR. Fastly also said that when it came to their largest accounts, they “saw more pricing pressure than they are used to.”

Akamai acquired around 100 enterprise customer contracts from StackPath and said it would add approximately $20 million in revenue by 2024. That’s it. From the deal with Lumen for the CDN contracts Akamai acquired, the company said it would add approximately $40 million to $50 million in revenue for the full year in 2024. No one should have thought the exit of StackPath and Lumen from the CDN space would drive meaningful revenue to Fastly or any other CDN. Fastly said their top 10 customers represented 38% of total revenue in Q1, so any further impact on pricing for their largest ten customers will have a negative impact on revenue growth.

If you listened to Fastly’s earnings call, no one from Wall Street understood Fastly’s answers to their questions, and I can see why. Fastly projected no confidence with their answers and used terms like “aggressive” when talking about their wrong projections and “volatility” regarding what they saw in the market, with customers adding multiple CDNs into their traffic delivery mix. I don’t know why the company didn’t see any of these data points earlier in the market and failed to understand what’s driving lower pricing with less traffic commits. I could name multiple large customers who have been shifting more traffic to AWS and other vendors over the past few months and lowering rates simultaneously. Multiple large customers started renewal conversations in January, expecting new pricing to be secured in Q2. Fastly said they are reacting to what they see in the market with these large customers by  “changing their engagement model,” but why are they just changing it now? Related to sales, Fastly mentioned they are still interviewing for a CRO and have now been five months without one.

In Q1 of this year, I completed my yearly CDN pricing survey of over 500 customers and saw the lowest pricing rates I have ever seen for the largest customers, as low as $0.00038 per GB delivered in the US. Blended pricing globally at $0.0006. (Please note, this doesn’t mean these are the prices you should be asking for or paying!) Lower pricing is okay if traffic and commits are growing, but they aren’t. Contact me if you want details on what I’ve collected and the cost of the raw data.

This special podcast takes you inside the NAB Show Streaming Summit with a preview of all the content, speakers and expert strategies you’ll learn at the event. Hear what the keynote fireside chats will cover with Paramount Global, Prime Video and NBCU. We also give an overview of the new AI Demo Track and break down all the sessions tied to sports, content bundling, churn and retention, and streamlining video workflow strategies. Finally, we highlight case studies from NFL, SiriusXM, Disney+ Hotstar, and Sinclair and detail why you can’t miss the day one Happy Hour event. And if you’re feeling the sting of recent layoffs or seeking career growth, join me for an empowering talk on how to find a job, advance your career, set yourself up for success and stand out amongst the crowd.