Will the demand for CDNs remain the same post the pandemic too?
By Ashwin Rao
The coronavirus pandemic has pushed the operational capacities of all industries to the limit. Be it essential industries such as FMCG, transportation, supply chain & logistics, or even entertainment, perishable supplies and streaming services are being ordered from home. Online platforms and digital payment gateways are now being used more frequently for orders, as people maintain social distancing and indulge in work-from-home routines. Industries are also working extra hard to deliver goods and services under emergencies to ensure that stocks reach the neighborhoods and stores on time. Fortunately, after several months of widespread anxiety, countries across the world are finally coming to terms with the new reality and adjusting to the new normal.
Similarly, digital service providers find the need to facilitate infrastructure upgrades to match the increase in demand, which is likely to remain post-COVID-19. Entertainment habits of Indians are changing rapidly during the health crisis and more and more people are consuming content online as a substitute to other kinds of recreation, relying heavily on robust Content Delivery Networks (CDNs) for better quality. CDNs have played a significant role in creating a direct channel, by caching content in servers set up at locations distributed across the country. Instead of depending on the internet, which often accentuated latency issues, the growth of CDNs is indicative of the trust of video streaming services via CDNs to provide seamless experiences to the users.
US-based market intelligence services provider International Data Corporation published a report last August, and it forecasts a 35% CAGR globally in the next five years, most of which will take place in the Asia-Pacific region. Some of the largest CDN service providers are to carry high amounts of web traffic where OTT platforms take the largest chunk. Immaterial of COVID-19, the demand for CDNs will be on an upward trajectory with the their demand rising by more than 134% during April-July 2018 alone, as digitization spreads across different parts of tier II and III cities in India. This warrants better availability of credible network platforms that can enhance the viewing experiences for new users from points-of-presence (PoPs) in smaller towns.
As the customer base for services expands, it requires additional capital, manpower, tech innovation, and improvement in infrastructure. Additionally, content providers are likely to foray into creating their private CDNs, which shows the growth prospects in this space. Entertainment companies, video on demand (VOD), and other content providers started to bet big on the expansion of home-based services, owing to people staying at home for long durations. The phenomenon is not just confined to English, as inroads are being made in regional languages as well. This means that dependence on CDNs is only going to increase, as new players and OTT platforms vie for growth amidst high traffic volumes from small towns and cities, which are increasingly going for subscription based video on demand services.
However, CDN companies must be slightly cautious in choosing their investments. While resources need to be allocated for streaming in growth regions and improvement in quality, dynamics may change once the effects of lockdown begin to wear off and the growth stabilizes the world over. Once the restrictions are lifted, people will begin to spend more time in public as they yearn to go back to socializing. To keep up with audience behavior, streaming services will have to plan how to get customer retention, which in turn impacts how CDNs strategize their future. Beyond this concern, certain habits that people imbibed during the pandemic are here to stay, as they cater more time for themselves even in post-COVID times. Therefore, CDNs and the entertainment ecosystem shall continue to accelerate their growth and stay relevant.
(The author is Country Director, Limelight Networks India)
