Akamai to Bring Smoother Video, App Performance to AT&T Network

Akamai is joining forces with AT&T to help the telecom carrier better deliver Web and entertainment content to mobile consumers.

The two will team up over the next year, with AT&T folding much of Akamai’s content delivery platform into its IP network. The system will be jointly marketed, managed and supported by the duo.

The consolidation will allow AT&T to offer improved content delivery network services to its business customers. Ultimately, consumers will see speedier and higher-quality delivery of digital content, video and apps, the companies said.

The deal calls for Akamai to place servers at the edge of AT&T’s IP network and in other U.S. locations. AT&T will switch its current CDN services over to Akamai’s platform next year. The global strategic alliance kicks off first in North America at first and will expand worldwide within the next 12 months.

One investor concern about Akamai is that telecom companies will develop content delivery networks on their own, encroaching on Akamai’s long-term place in the industry. Those fears seemed to be momentarily appeased Thursday, with Akamai’s stock rising 8.5 percent on the news to close Thursday at $39.06 per share. AT&T remained relatively steady around $33.45 per share.

Neither company respond to our request for further details.

Looking to Consolidate

The rising popularity of smartphones and tablets is forcing carriers to find the best and fastest ways to deliver content, in addition to providing simple calling and message services.

Rather than let networks begin to develop those platforms on their own, Akamai is hoping it can capitalize on that demand. In addition to its deal with AT&T, the company forged a similar partnership last month with French telecom provider Orange. It also launched a service called Aura Networks Solutions that allows carriers to deliver licensed content to mobile devices.

“Akamai has had relationships with network operators since the beginning,” Frank Childs, director of product marketing and carrier products at Akamai, told the E-Commerce Times. “Now, with AT&T, we have a strong network relationship where we can put our technology deeper in the network to resell capacity to their enterprise customers. This is a part of a broad strategy of making CDN available to operators. It’s a good market not only to sell technology but to expand channel presence.”

That kind of consolidation is only likely to continue, said Rob Enderle, principal analyst at Enderle Group.

“I think telecom is coming to the conclusion that they need some connection to content, now that the content owners are starting to look at ways to get to the user directly,” Enderle told the E-Commerce Times.

Bigger Not Always Better

While Akamai and AT&T claim the move will directly benefit the consumer, sometimes the relationship between two interests within the same industry doesn’t always work out, Enderle pointed out. That could be especially true given AT&T’s issues with services and bandwidth.

“Telecom doesn’t really know how to manage content, and content companies are pretty much clueless about telecom. Some of these combinations are going to be ugly,” he observed. “The goal is to provide better services to the AT&T customer, but AT&T is a network that is over capacity at the moment.”

Akamai says it can help AT&T on that end, as well, however.

“One of the value propositions that Akamai brings is its mechanism to address bandwidth issues,” Childs said. “Operators always have to expand bandwidth. By putting in sources of where the content comes from deeper in the network, we have a more efficient way to deliver Internet services. That tends to be part of a broader bandwidth expansion strategy for many operators.”

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Walmart Announces Merchandise Hub for Netflix

Walmart and Netflix are teaming up to sell merchandise pegged to the streaming media provider’s content.

“Through this new partnership, Walmart will not only offer products that bring the imagination of Netflix creators into reality, but Walmart customers and Netflix superfans will also find a new, exciting entertainment destination,” Walmart Executive Vice President Jeff Evans wrote in a news release Monday.

“The Netflix Hub brings together some of its most popular shows in its first digital storefront with a national retailer,” he added.

Merchandise will be tied to such shows as “Stranger Things,” “Nailed It!,” “CoComelon” and “Ada Twist, Scientist.”

Among the items offered when the Hub opens this fall are the Ada Twist Cuddle Plush ($10.97), “Squid Game” t-shirts, the “Stranger Things” Bluetooth cassette player ($64.88) and the Witcher Netflix Transformed Geralt Dark Horse Collectible Statue ($59.88).

Evans also noted the Hub will also offer a feature called Netflix Fan Select. It offers fans of Netflix shows an opportunity to vote for merchandise they’d like to see from the service’s stable of favorites.

Competing With Amazon

The new partnership will have benefits for both Walmart and Netflix.

Walmart wants to compete with Amazon, and part of that competition includes streaming services, maintained Ross Rubin, the principal analyst with Reticle Research, a consumer technology advisory firm in New York City.

“A partnership with Netflix could be used for further collaboration. Walmart might start offering select content from Netflix, for example,” he told the E-Commerce Times.

“There’s a lot of ways it could work without Walmart offering the full-blown Netflix service,” he added.

Zain Akbari, the equity analyst for Walmart at Morningstar, an investment research company in Chicago, noted that the partnership allows the retailer to capitalize on media-linked commerce without making the kind of investment Amazon made to do it.

Although Walmart sold its Vudu streaming service in 2020, its interest in interactive and shoppable media remains, he explained.

“From its standpoint a deal like this allows Walmart to focus on what it does best while leaving the content side of the equation to an established leading player,” Akbari told the E-Commerce Times. “Ultimately, it’s another avenue by which Walmart can expand its building e-commerce footprint.”

Good Business Move

“Allying itself with one of the two streaming market leaders — Netflix and YouTube both capture about six percent of total TV time — makes good business sense for Walmart,” added Charles King, the principal analyst at Pund-IT, a technology advisory firm in Hayward, Calif.

“The new storefront should please the company’s existing clients and attract new customers, and also provide a point of competitive differentiation from Amazon,” he told the E-Commerce Times.

Having exclusivity on products from Netflix’s hit shows is another benefit of its new partnership.

“Squid Game is a perfect example,” noted Michael Inouye, a principal analyst atABI Research.

“You can imagine what the opportunity would look like if this partnership was already in place and Walmart was the only place for official Squid Game Halloween costumes,” he told the E-Commerce Times.

He added that there is a lot of value but also a lot of cost in original programming, but to date, no one has done as well as Netflix with it.

“This allows Walmart to generate some of the same benefits to their core operations of an in-house streaming service without having to make those investments in original content,” he said.

Bricks and Mortar Prize

Netflix, too, benefits from the new arrangement.

“Walmart’s massive size and geographic reach make it a great partner for Netflix to reach shoppers,” King observed. “The new store should help drive sales during the upcoming holiday shopping season.”

“Netflix has tried for a while to monetize its content other ways. Selling merchandise is one of them,” added Morningstar Netflix equity analyst Neil Macker.

“Netflix is not an e-commerce company,” he continued. “It’s a streaming company. It has a different business model than a pure e-commerce company. By working with Walmart, they can get help with building a site, fulfillment, shipping and things like that.”

Netflix is also looking to diversify beyond subscriptions for its streaming service.

“It’s already announced its movement into games,” Rubin noted. “This is a way to take a page from Disney’s playbook.”

“Disney is very skilled at driving merchandise from characters in its franchises,” he continued. “Walmart offers a strong retail presence from which Netflix could potentially build that and realize more revenue from its original content and franchises.”

Netflix may also be looking beyond online involvement with Walmart.

“If Netflix could get into Walmart’s brick and mortar stores, that would be the bigger prize for Netflix,” he said. “To have a section of the stores promoting its properties would be a big win for Netflix.”

Crucial Channel

Inouye believes that in time, Walmart will become a crucial distribution channel for Netflix.

“Since many of Netflix’s shows are launched all at once — although there are a growing number that launch on a timed schedule — it can be extra challenging for Netflix to keep excitement up around a TV series when the next launch may be more than a year away,” he explained.

“Having merchandise and content to keep fans invested and engaged in this popular IP is massive for Netflix,” he said.

Creating original content can be a hit or miss proposition, he noted. Selling merchandise can help offset the cost of the misses.

Like Disney, Netflix would like to leverage its IP well beyond the video content itself, he maintained.

“Netflix is still in its early days here,” he said, “but it is starting to expand into new territories and opportunities and the Walmart deal could become a key piece to that strategy.”

“This is particularly critical in those markets, like North America, where future subscription growth is limited,” Inouye added.

“In these more mature markets revenue growth has to come from price increases or these alternate channels,” he continued. “The latter allows them to keep engagement higher, bring additional revenue, while ideally slowing the rate of subscription price hikes, which helps maintain — and slowly grow — the installed base.”

“Other content companies have looked to marketing and selling merchandise to bring additional revenue by capitalizing on hot IP — Rovio for example has done this with its “Angry Birds” IP — but with Netflix, this could be on another scale,” he concluded.

John P. Mello Jr.

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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