Level 3 Details CDN Revenue: $60M In 2010

I didn't get to listen to Level 3's fourth quarter earnings call live last week (transcript) and initially missed hearing them disclose, for the first time, actual revenue numbers for their CDN business. Level 3's CDN revenue grew 27% sequentially, compared to 11% in Q3 and the company said that their CDN services now represent about 2% of their total CNS revenue. That puts their total CDN revenue for 2010 at about $60M with another approximately $100M coming from their Vyvx broadcast services.

While we constantly hear about how much growth there is in video and the impact video traffic is having on last mile networks, the fact is that from a revenue stand point, the market for outsourced video delivery is still small. In a report that Frost & Sullivan will publish shortly, we estimate that the total worldwide size of the video delivery market was $545.5M last year. We expect to see a CAGR of about 38% this year, but even with that, the market is still just getting started.

That number does not include all of the different products in the video delivery ecosystem like video servers, hardware, P2P solutions or platforms sold to companies to build out their own CDN network. The estimates are revenue from third party CDNs who essentially rent out their networks for content owners.

While some might think Level 3's CDN number is small, it's easily large enough to make them one of the top five CDNs in the industry based on revenue. Potentially even the top three, but we don't know how much revenue Amazon's CloudFront CDN services has or how much revenue AT&T does. It's a safe bet to say that Level 3 is doing far more CDN revenue right now than AT&T, but Amazon CloudFront is the real question mark.

Level 3 is making video a long-term play for their business and when the industry turns into a billion dollar market, which I estimate to be in 2013, that's when this whole video delivery industry is going to get really interesting.

Added: I forgot to mention that in an era where most companies don't want to go into too many details on their revenue or break out numbers based on product lines, it's nice to see that Level 3 was willing to do it publicly. They didn't have to break out their CDN revenue and they did. Doing so really helps those who are trying to track and project growth in the CDN market and it helps the industry as a whole since it now serves as another data point we can use as a barometer for growth.