Akamai Price Cuts: Bad News for CDN Rivals

For years, Akamai Technologies (AKAM) was the market share leader in the content delivery sector, and had a pricing premium built into many of its services. For many rivals, a key marketing pitch was being cheaper than Akamai. When the market was flooded with VC-backed startups, it was assumed that competition would eventually force Akamai to alter its pricing.

Those predictions went unfulfilled for several years. But the game has changed in recent months, according to Dan Rayburn, who tracks CDN pricing trends closely through regular market surveys.

"Over the past four weeks I have seen bids where Akamai has matched pricing from Limelight, Level 3 and EdgeCast or in some cases, undercut their pricing all together," Dan writes at The Business of Online Video. "I have seen fewer video contracts steer away from Akamai in December and January and it's clear the company is taking a serious pricing reduction strategy and applying it to a wide portion of their video business."

Dan doesn't believe this is a permanent change in pricing philosophy by Akamai, but rather a move to expand its strategic discounts, which were previously reserved for large customers. He notes that Akamai doesn't need to be cheaper at its rivals, and going forward will likely recalibrate its pricing to regain some margin. But the playing field has changed.

"For Akamai's competitors, this is not good news," Rayburn writes. "Speaking to a couple of them over the past few weeks it's clear that they are feeling the pricing pressure and they all acknowledged that Akamai is now getting very competitive on pricing. When Akamai's pricing was so out of whack, their job was a lot easier. But with Akamai now playing hardball, it makes their job that much tougher."

The big winner in this battle: the content delivery end users who will be paying less for these services.