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Akamai Takes Over Majority of Netflix’s Streaming Business

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Netflix (s NFLX) confirmed today that it has picked Akamai (s AKAM) as its primary content delivery network in what looks like a move to lower its streaming costs. The decision could also help the subscription video company to expand into markets outside the U.S., something it plans to do later on this year.

According to a report on the Streaming Media blog earlier this month, Akamai was tapped by Netflix after the CDN offered a significant discount on its streaming delivery services. Netflix is reportedly paying Akamai just one and half cents per GB delivered for three to four months, before its pricing goes back to about six cents per GB delivered.

Akamai’s aggressive pricing has paid off, as it has captured the majority of Netflix’s streaming video delivery. Previously, Netflix was using a combination of Limelight (s LLNW) and Level 3 (s LVLT) to deliver streaming videos as part of its Watch Instantly service. But while Limelight will continue to maintain a portion of Netflix business, it appears that Level 3 will be the odd man out as Akamai becomes the primary CDN provider.

The Akamai pick comes as Netflix has rapidly grown the streaming portion of its business over the past year. Although subscribers continue to rent DVDs, Netflix reported that 48 percent of its subscribers streamed a movie or TV show in the fourth quarter 2009. That compares with 41 percent in the third quarter and 28 percent who watched streaming video in the fourth quarter of 2008.

The growth in streaming is expected to continue as the service is added to more consumer electronics devices. Since the service first showed up on Microsoft Xbox 360 gaming consoles two years ago, it has become nearly ubiquitous, with Netflix expecting to have the service on more than 100 different CE devices in 2010.

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