Google Video a Bonanza for Data Center Operators (AKAM, DLR, EQIX, GOOG, SVVS)

Data center owners should be giddy about the launch of Google Video and imminent arrival of similar services providing online video. It's clear that in coming years, television and movie content will become widely available for download across IP networks. An enormous volume of digital files will need to be stored in data centers for delivery via the Internet.

Think about it. Most major network TV shows, and eventually movies as well, will be digitized and reside on a server. Even in the age of blade servers, the companies that succeed in selling and delivering online video will require large amounts of data center space. This content will need to be stored in facilities offering high reliability and redundancy, ensuring that consumers will have uninterrupted, around-the-clock access to downloads. This is a dream scenario for companies that own or operate quality data centers, particularly those that already have tenant relationships with the providers positioning themselves for leadership roles in this business. Keep in mind that any demand generated by online video comes on top of an already rosy outlook for data center space.

So who are these data center operators poised to benefit from the online video boom? They're the companies we track here at Data Center Knowledge. Here are some of the industry players we believe are best positioned to benefit from Google Video and similar services:

1. Digital Realty Trust: As the largest owner of data center and interconnection facilities, Digital Realty Trust (Ticker: DLR) is in an enviable position. Digital Realty is an REIT that is the successor to GI Partners, which went on a shopping spree as the data center market hit bottom in 2002-03, backed by $500 million in capital from CalPERS and CBRE Investors. In Nov. 2004 GI's holdings were converted to an REIT, and has continued buying as the sector has recovered. In 2005, the renamed Digital Realty bought 14 properties, and now has 38 properties spanning 7.8 million square feet of space, with a 93 percent occupancy rate. DLR owns another 732,000 square feet of undeveloped space than can be quickly converted to raised-floor data center.

2. Akamai: As the best-known content distribution network, Akamai (AKAM) is already a market leader in optimizing streaming media files for mass consumption (see a description of their service) and its shares gained 4 percent Friday as Google Video was announced. Akamai’s network spans more than 13,500 servers in 66 countries. Other content distribution providers that may benefit from video-over-IP include SAVVIS Communications (SVVS), which acquired the former Cable & Wireless/Digital Island, and the privately held Mirror Image.

3. Equinix: Many of the world's major networks connect with one another in data centers operated by Equinix (EQIX), which in 2003 became the sector's first major turnaround story. With a customer list including Google, Yahoo and Akamai, Equinix could see a pass-through benefit from video-driven growth at those companies. Equinix is currently seeking to acquire additional data center facilities to accommodate growth. In September it spend $35 million to acquire a data center in Los Angeles, citing anticipated growth from digital media.

365 Main: Some privately-held data center operators also should be helped by increased demand due to online video. Among them is 365 Main, another company which bought premium centers at discount prices. The company's flagship San Francisco data center was acquired from Metromedia Fiber out of bankruptcy, and has been a huge success. 365 Main just bought a large data center in Los Angeles, and is looking for additional expansion opportunities. The new LA center gives the company 130,000 SF of quality space in El Segundo, a stone's throw from the new Equinix site. Other private technology landlords who are positioned to benefit from the online video boom include DuPont Fabros Development, CRG West (the technology real estate unit of The Carlyle Group), and interconnection provider telx, which owns major carrier hotels in New York and Atlanta.

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Comments

[Michael]

I am not sure I 100% agree or follow thiis argument. Also, I think GOOG will build their own peering points.