Adobe's New Flash Server Pricing Improves CDNs P&L, Lowers License Fee For Customers

Implications: While Adobe has gotten a lot of traction in the market with their Flash video platform, many content companies have not adopted Flash streaming due to the server license costs or the license fee that CDNs are required to charge for Flash streaming. With today's announcement by Adobe of Flash Media Server 3 and the new Flash Media Interactive Server, those licensing costs have now been drastically reduced.

Analysis:

As was expected, Adobe cut the cost of the Flash Media Streaming Server which is now priced at $995 for an unlimited connection license. And the newly announced Flash Media Interactive Server, which is geared towards customizable streaming solutions, multi-way social applications, content protection and allows for more server side customization is priced at $4,500. (For technical details about the functions of each server read Stefan and Ryan's blogs)

For some time now, Adobe has known that price has been the biggest hurdle for many customers to overcome in the adoption of the Flash platform. With the new pricing, Adobe has essentially removed the number one barrier to entry and while not discussed in the press release, has also reduced the cost that CDNs need to charge customers for Flash streaming delivery.

By reducing the costs that CDNs need to charge customers for Flash streaming, Adobe is making it a lot easier for customers to use CDNs  and enabling the content delivery networks to increase their margins. While the Adobe streaming license fee that most CDNs have been charging averages around $0.05 per GB delivered, the new Adobe streaming pricing is somewhere between $0.01 - $0.025 cents per GB depending on the CDN and the volume of Flash streaming they are pushing. Some CDNs have a better rate based on the volume they push and some CDNs include the price into their overall cost and reduce the price even further. The bottom line is that the average price per GB Flash streaming fee that the CDNs are now charging is at least 50% cheaper than what it was a few weeks ago. Within the past 2-3 weeks, quotes from many of the major CDNs have already shown lower license fees.

This is good news for the industry as a whole and for Adobe as the best way we can all truly benefit in the market is by having more widespread adoption, with a lower barrier to entry.