The DVD and streaming video company Netflix Inc. (NFLX) announced that it has selected Akamai Technologies, Inc. (AKAM) as its primary content delivery network for movies and TV episodes streamed instantly over the Internet.
Netflix is the largest online movie rental subscription service in the United States providing subscribers access to more than 18,000 movies, television and other filmed entertainment titles.
Netflix has a strong subscriber base due to better subscription services. The company also has a larger number of customers signing up for its DVD-by-mail program. We believe the availability of Netflix rentals over the Internet has been the driving force behind its strong customer and earnings growth.
Further, growth at Netflix has been fueled by the increasing penetration of broadband and momentum in online media and entertainment. According to Netflix, by the end of 2009, almost half of the 12.3 million Netflix members had watched a movie or TV episode on either a computer or TV via a Netflix ready device. Netflix expects the number of users to increase in 2010 and beyond.
Netflix has plans for international expansion of its online streaming service to at least one country in the second half of 2010. Thus the company said that Akamai will provide a strong foundation for the continued growth of Netflix’s ability to stream.
Akamai is a global provider of distributed e-business infrastructure services and solutions. Its services include dynamic content and application delivery, application performance technologies, traffic management, identification of end-user location, online storage and load balancing.
Akamai’s solutions allow customers to improve user experience by addressing the challenges of bandwidth constraints and Internet traffic, while delivering content closer to the end-user. This reduces the need for additional hardware to manage the load of traffic and enables its customers to host more content rich sites than they would be able to with traditional delivery technologies.
Software distribution also remains a strong contributor to Akamai’s business, as the company has benefited from rapid growth in Internet-based distribution of applications and operating system software, as well as online game software. Akamai’s content distribution infrastructure was earlier adopted as the content delivery platform by larger firms such as Sony Corp. (SNE) for PlayStation network, Nintendo (NTDOY) for Wii, and Game Almighty for its website.
Thus, Netflix chose Akamai’s global distribution platform for its highly scalable performance and storage capacity to ensure uninterrupted streaming of hundreds of thousands of movies and TV episodes during peak times.
We believe that the High Definition (HD) quality video over the Internet should help drive bandwidth requirements through 2010, driving demand for Akamai’s services. This increase is expected based on the fact that overall online video revenue will grow as the number of U.S. online video viewers continues to expand.
We remain very positive on this win.
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