Focus!
The CDN industry is still very young. It is an immature industry. Technology is advancing. New players enter the market and existing players keep changing their proposition. They are in trouble.
Lack of focus is killing. I’ve been around 15 years in this industry and I have seen so many companies come and go. Their problem was lack of focus.
RealNetworks is a great example. They had a rock solid product. They were ahead of Microsoft and Apple. But their server products were way overpriced. So they started to lose market. Instead of sticking to their core (developing kick-ass streaming technology) they shifted to paid client software. No consumer would pay for a client. So they kept a free client and it was horrible adware / spyware. Consumers got scared and turned to Windows Media Player and QuickTime. RealNetworks then decided that they were a CDN. Instead of selling software, they would use the software to build and rent infrastructure. And when that didn’t work, they decided to use the CDN to become a music service. And then Real was dead. OK, they are still a bit active in the mobile segment, but on the web: Real killed itself by having lack of focus.
Other examples
I have seen other examples as well. Companies start as an appliance vendor. Found an investor. But no success. So they became a CDN. More investors. No success. Then they had a lucky shot in building a CDN for a telecom operator and immediately claimed to have invented this market. But they still burned a lot of money. The investors wanted their money back and forced to sell company. $25m was invested. The company managed to get $10m from the market. And was sold for less than $15m. That is loss. The company already alienated two markets. What are they going to do with their newly adopted market?
Companies start as a software development company. They are great in media asset management. But instead of focussing and diving into this niche to become the best, they want it all. If a customer asks, they will do it. So today they produce webcasts. They host their own streams. They do encoding. Web portals. Custom players. Concepting. Ad management. So they are now a full service bureau, but their quality sucks. They are not good at one of the many things they do. Lack of focus. Customers are leaving them.
If I were an investor I would look at the management team. My first question to them would be: do you really, personally believe that your strategy and focus will work? Are you willing to put years and all your money on that strategy and focus? And then of course I would ask myself the same. If the answer is yes: let’s prove it. Stick to the plan. Focus until you are the very best in the industry.
Telecom operators
Another great example are telecom operators. They lost their control over distribution. Access and distribution are their core activities. Telecom operators need a CDN to get back in business. But some telecom operators lack focus. Suddenly they become a content aggregator. Heck, even a content producer. Everyone knows the examples of telecom operators who invest millions in mobile and web portals, IPTV channels, magazines, newspapers. They even launched production houses. And everyone knows what happened. Broadcasters angry, producers angry and the customers ignored the new services. Back to the core activities.
Content owners
Since when are broadcasters responsible for distribution? Many broadcasters still believe that they can research and develop their own CDN or streaming infrastructure. If you look at how much money and time they invest, and how they start lagging behind the CDN’s, you wonder why they don’t pull the plug and outsource. In Europe there are many state owned broadcasters who have enormous budgets. People work there and want to protect their job. Not invented here is a huge problem. If these broadcasters would only spend half of their budget in the market, then local CDN’s could flourish, invest deeper. By spending tax money into their own platform, and not sharing their resources, they slow down innovation.
Value chain
You can’t dominate the entire value chain. You can’t be the best in everything. Everyone has a unique role in the value chain. Stick to the plan. Play your role well. Make sure that your partners add value to your proposition.
So you need to partner. The worst partner is a partner that keeps changing it’s business perspective. You can’t rely on a partner that may try to compete with you.
Fear and Ego
So why does it happen so much? It is fear. Fear of losing market. Fear of losing customers. Fear of losing their job. Fear lets people make bad decisions. And sometimes it also is arrogance. Ego’s. “Sure we can do this too”. Well, no you can’t. Fortunately for humanity, cable diggers are not responsible for tv-formats and tv-format producers are not responsible for operating a telecom network.
Partnering
A last, positive example. StreamZilla was entering a European country. Two regional streaming providers were active there. Both offered streaming hosting, encoding and video management services. Their streaming platform was no good. High costs, limited features, low performance, no scale. But their encoding and video management services were very good. And both companies had a great network. We contacted both.
And I said: sorry to be so bold, but why not outsource the streaming hosting to StreamZilla? Your customers will get better performance, more features. You can get a nice margin on the service. You don’t have to worry about 24*7 monitoring and CDN development. Let us take that part of the value chain. You can focus on you core activity: building the best video management platform in your market. We will NEVER offer anything that comes close to what you do because we focus.
The CEO of the first company saw us as a threat. Fear. He convinced himself that they could do better. Ego.
The CEO of the other company saw this as an opportunity. Trust. He was convinced that he could beat competition. Realism. They now dominate their market.
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