Submitted by Fox First at Ten on June 5th
NEW YORK (AP) - Online video company Netflix Inc.'s plan to build out its own content delivery network weighed on shares of Akamai Technologies Inc. and other companies that help deliver online content.
Netflix said on its official blog Monday that it plans to expand Open Connect, eventually replacing outside providers such as Akamai, making its own system the way customers get most of their streaming Netflix video.
"The world's other major Internet video provider, YouTube, has long had its own content delivery network," Ken Florance, the company's vice president of content delivery, said on the blog. "Given our size and growth, it now makes economic sense for Netflix to have one as well."
YouTube is owned by Google Inc.
Florance added that Netflix will continue to work with its commercial content delivery partners for the next few years, but said that Open Connect will eventually be used for most of the company's data.
Jefferies analyst Aaron Schwartz noted that this isn't Netflix's first attempt at a content delivery network, so there will be questions about its credibility. But the news will hurt commercial content delivery providers such as Akamai, Limelight Networks Inc. and Level 3 Communications Inc.
Akamai shares fell $1.51, or 5.3 percent, to $26.85 in premarket trading, while Limelight shares dropped 25 cents, or 9.3 percent, to $2.45 and Level 3 shares fell $1.41, or 7.2 percent, to $18.31.
Netflix shares rose 28 cents to $65.28.
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