At this week’s NAB Show in Las Vegas, Verizon launched Verizon Digital Media Services (VDMS), a network-based product that it is trumpeting as the first content-to-consumer digital media utility.
After two plus years of work, Verizon has created what Yankee Group believes is a new product with a scope that has never before been attempted. The advent of 4G is stoking consumers’ demand for viewing content on multiple devices. While companies have been helping deliver movies, TV, video games and books to different devices, Verizon’s product will do the job for all types of content for all kinds of devices.
Verizon is targeting VDMS for content providers, retailers and advertisers. One unique element of VDMS is that Verizon will not be a licensee or a licenser of content. Instead, it will focus solely on providing QoS for the content it delivers. The move means Verizon is removing itself from the political and commercial tensions that have made the distribution of premium digital content across multiple screens so difficult.
Network Considerations
Verizon is taking into account the added traffic VDMS will create by setting up an infrastructure specifically for it: 30 different edge nodes throughout the U.S., along with two mirrored data centers: Data Core West in California and Data Core East in Virginia. Content from these data centers is pushed out to the edge nodes and then to consumers, leveraging Verizon’s global IP network to limit latency.
Content will be delivered primarily using peer-assisted content delivery network (CDN) technology, and since Verizon has set up this separate VDMS infrastructure, it will be unencumbered by additional traffic from the public Internet. The edge node system also allows for local ad insertion, making VDMS attractive to potential advertising customers.
The Strategic and Go-to-Market Challenge
The earliest beneficiaries of the platform are likely to be content producers that face the cost-consuming task of creating multiple versions of the same product for multiple devices. Content providers will be attracted to the idea of a one-stop product that can make content available for any device and deliver it with high quality, improving the experience for the consumer.
Verizon’s greatest challenge, however, will be dealing with existing distribution channels in general and cable operators in particular. The reality is there is strategic incentive for cable operators to avoid funding operation of a company that at the retail level is trying to kill them off. Equally important, cable operators have been putting significant resources into building their own content delivery offerings.
Verizon has created the rarely achieved "market of one" by bringing together all the elements that form VDMS by itself. While some parts of the solution are offered by others, including some of the key asset management elements, we have yet to see quite the same comprehensive solution combining everything in this way.
Given the growing need to support multi-screen, multi-format digital media flows, however, we don’t expect VDMS to be the lone option for long. We fully anticipate competitors will set a goal of building similar networks that provide similar service at a slightly lower price. Among the potential competitors we see emerging with an alternative to VDMS are Comcast Media Center, Level 3 and AT&T.
Being the first to offer a product with the breadth of VDMS, however, gives Verizon a huge time-to-market advantage. The key will be if Verizon can leverage that advantage once the inevitable competitive offers come to market.
