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Cable Technology Feature Article

December 09, 2013

Verizon to Acquire EdgeCast to Beef Up CDN Capabilities

By Tara Seals, TMCnet Contributor

Verizon (News - Alert) Digital Media Services is deepening its content delivery network (CDN) expertise with the acquisition of EdgeCast, which specializes in digital content and site acceleration services to customers that include studios, broadcasters, retailers and enterprises. Terms of the deal were not disclosed but reports have pegged it at $350 million—and it promises to shake up the landscape in that space.

It’s the second recent acquisition for Verizon in the distribution arena: it said last month that it was acquiring upLynk, which handles the uploading and encoding of TV Everywhere to multiple devices, for $75 million. That deal gives Verizon a bigger foothold in the over-the-top (OTT) business model and the ability to woo service providers looking to gain control over unmanaged digital distribution to find new monetization options.

Verizon has tried to roll out its own CDN offering but has relied on both sector leader Akamai (News - Alert) as well as EdgeCast to provide underlying services to its customers. This move essentially allows the telco to bring those assets in-house. And, it gives EdgeCast a suddenly large scale on which to expand its sites.

"The combination of EdgeCast and Verizon Digital Media Services will allow us to fully exploit and accelerate growth in Internet media consumption and online business performance," said Bob Toohey, president of Verizon Digital Media Services. "EdgeCast's industry-leading technology and strategically placed assets, combined with Verizon Digital Media Services' video solutions, improves our ability to deliver the rich, reliable and quality digital media services that our customers have come to expect."

The CDN market has been exploding (15+ percent annual growth) as content providers have looked to boost the quality of service and experience by caching content closer to customers to shorten the unmanaged delivery links that those packets must ride. And CDN providers themselves are looking to add scale and broaden their functionality via consolidation and acquisition, according to ABI Research (News - Alert).

The primary driver for that is the dominance of Akamai, which has increased its market share of the media and entertainment-focused cloud video service market to nearly 30 percent this year, up from about 27 percent in 2012, according to ABI:  The other companies competing in the market all have less than approximately 5 percent market share, ABI said.

“The CDN and related markets are poised for a round of consolidation,” said Sam Rosen, practice director for ABI Research. “We expect horizontal consolidation – where rival CDNs combine to gain scale in their competition with Akamai – as well as horizontal consolidation – where CDNs bring in functions, especially from OVPs, to compete for the largest content producers.”

EdgeCast, which counts heavy hitters like Deutsche Telekom, Google (News - Alert), Pacnet, PCCW and Telus, recently closed $54 million in private equity funding. It has rolled out a handful of new services this year, including a CDN offering aimed at e-commerce companies, and a DNS routing service unveiled in October.

"Having journeyed from startup to technology leader in a short seven years, the time is right for EdgeCast to elevate itself again by joining Verizon to continue our innovation and growth," said Alex Kazerani, EdgeCast chairman and CEO.

The Verizon and EdgeCast boards of directors have approved this acquisition and Verizon hopes to finalize it in early 2014. Verizon's financial adviser for this acquisition was LionTree Advisors LLC.

EdgeCast has more than 6,000 accounts and serves some of the world's leading Web brands for global media delivery and acceleration services.

Edited by Cassandra Tucker

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