20 for 20: The Top Mergers and Acquisitions of the Past 20 Years
VP9 was released in December 2012, several months prior to the March 2013 licensing noted above, and it forms the basis for the emerging AV1 codec. Both are considered open source, royalty-free codecs, and both compete with H.265 (HEVC), the successor to the H.264 (AVC) codec that VP8 was intended to compete against.
4. & 5. Adobe-Macromedia-Aldus
Adobe, which had made a name in the desktop publishing space well before the advent of streaming, had also acquired industry-leading video (Premiere) and still photography (Photoshop) products to round out its creative-class creds.
But the acquisitions of Aldus (owner of FreeHand, PageMaker, and SuperCard) and Macromedia (owner of Director, Dreamweaver, Flash, and Shockwave) set Adobe on track to dominate top-of-the-line creative suites.
Dreamweaver, as one of the main HTML creation tools, provided Adobe with a chance to move into the web content creation space, and the Flash-Shockwave combination provided the company with a dominant online interactive toolset that still maintains a strong market share some 13 years after Adobe acquired Macromedia in 2005.
Adobe failed to acquire FreeHand in the Aldus acquisition, when the Federal Trade Commission ordered its return to Altsys, but was able to acquire it during the Macromedia acquisition, since Macromedia had subsequently acquired it from Altsys. One additional product that Adobe did not successfully keep from the Macromedia acquisition was the Final Cut non-linear editing application. Final Cut, in its Pro version, continues to compete with Adobe in the production and online video compression space, thanks to the acquisition of Final Cut by Apple and the subsequent addition of the Compressor transcoding program.
Adobe has also been on the leading edge of moving its software from perpetual-license model to subscription service. While it continues to have vocal critics, especially those who frequently travel abroad and face unnecessary re-authentication issues, the subscription model allows Adobe to normalize its revenue streams and rapidly offer updates to its customers who had traditionally relied on 18-month release cycles to gain access to new features.
The 2006 acquisition of Nine Systems’ StreamOS by Akamai Technologies made it into our Top 20 list of M&A activities over the past 20 years, courtesy of a number of survey respondents who felt this acquisition helped reshape the streaming media monetization landscape.
“Akamai’s goal is to provide customers worldwide with a unified solution for managing content and controlling delivery ...,” Akamai said in a press release on Nov. 20, 2006. “The acquisition of Nine Systems provides Akamai with a robust rich media management framework, upon which services can be built to enable customers to more effectively control and monetize their digital assets.”
The acquisition of Elemental, a privately held company in Portland, Oregon, was a bit of a surprise to the streaming industry. Elemental, led by the charismatic and always frugal Sam Blackman, never really had significant financial issues, and had a number of investors, ranging from traditional investors like Northwest Venture Partners and Steamboat Ventures to key customers like Sky and Telstra.
In September 2015, Amazon Web Services (AWS) announced that it was acquiring Elemental, whose dedicated customer base relied first on its GPU-based hardware transcoders and more recently on its move to a software-defined video (SDV) approach. While the new company is called AWS Elemental, it continues to be run as a wholly owned subsidiary. While initial valuation of the deal was a “reported $500 million” by the TechCrunch team, the final price in late October 2015 was $296 million.
With the sudden passing in 2017 of Blackman, one of the three founders, the company lost the most public face associated with its products and services, but a recent interview at Streaming Media West 2017 with Keith Wymbs went a long way to assuring the industry that Elemental remains focused on its customer-first approach.
From the humble beginnings of Justin.tv, the 2007-era brainchild of lifecaster Justin Kan, rose a formidable online platform for esports streaming. Kan, now a partner at Y Combinator, rapidly moved from broadcasting his own day-to-day life—a faddish trend at the advent of Web 2.0, before the explosion of social media sites—to a live-streaming video game play, which itself has rapidly risen in popularity as part of the overall esports movement.
The online gaming streaming was renamed Twitch.tv and was subject to a bidding war by a number of suitors, with Amazon ultimately winning with a $970 million offer.
High-flying online video and analytics platform Ooyala was able to make inroads into the Asia Pacific and Australian markets at a time when many other online video platforms (OVPs) were focused on North American and European customers.
Founded in 2007, Ooyala provided strong analytics for its media customers and won the attention of several companies, including Telstra, which invested in multiple funding rounds. One of the company’s founders, Bismarck Lepe, was a staple on the Streaming Media event circuit.
In August 2014, Telstra announced that it was upping its 23 percent shareholder stake (bought over 2 years at a total $61 million investment) by another $270 million, bringing Telstra to a 98 percent ownership stake in Ooyala. At the time, comparisons on valuation were made to Brightcove, another OVP competitor that had gone public in 2012, raising approximately $55 million in its IPO, on a valuation of approximately $290 million. With annual revenues of around $64 million, skeptics pointed out that Telstra’s valuation appeared to put it in a much stronger position, especially since Brightcove’s shares were trading at around $6.00 per share down from a high of $24.80 just after the IPO.
Fast forward a few years, though, and the Telstra deal hasn’t seemed to pan out for Telstra. In an Aug. 21, 2016 Financial Review article titled “How Telstra Blew its First Silicon Valley Deal,” Brightcove’s responsiveness to customer problems was praised over Ooyala’s responsiveness.
“Brightcove promised to respond to any glitches within two hours,” the article noted, citing an interview with Fairfax Media video manager, David McMillan. “In emergencies, someone would be available immediately. Its competitor, Ooyala, which was owned by Telstra, wasn’t so reliable. Emails sent to its Silicon Valley headquarters wouldn’t be returned for days, if at all.”
In fact, according to the article, Telstra’s CEO, Andy Penn “acknowledged that Ooyala’s video business isn’t succeeding and it is switching to a different way of making money” shortly after announcing that Telstra had written off a whopping $246 million Australian Dollars from Ooyala’s valuation.
In early 2018, just before the Sourcebookwent to press, Telstra announced “it expects to make a non-cash impairment and write down the carrying value of Ooyala, its US-based intelligent video business, to zero.”
10. AOL-Time Warner
This one is a cautionary tale, studied in a number of MBA courses on what not to do in an acquisition. But at the time it occurred, the thinking was that new media was going to swallow old media. American Online (AOL) represented new media, and Time-Warner (itself a merger in 1990 of magazine company Time Inc. and media company Warner Communications) represented old media.
The acquisition by AOL in 2001 even spawned a new name, AOL Time Warner, with AOL shareholders holding 55 percent of the company to Time Warner’s 45 percent stake. This was due to AOL’s outsized market capitalization as a new media darling. The sale price was $164 billion, the largest acquisition at the time.
Unfortunately, the AOL division stumbled, the company reported a $99 billion loss, and the valuation of the combined company plummeted from approximately $226 billion to around $20 billion. By 2003, the AOL name was jettisoned and the company became Time Warner, Inc.
In 2016, AT&T announced its plans to acquire Time Warner, Inc. for approximately $109 billion (including assumption of Time Warner’s debt), but the deal has yet to reach completion, complicated by the fact that the U.S. Justice Department stated in November 2017 that it opposes the deal.
Two other media and infrastructure giants also combined forces recently, with the traditional infrastructure company, Verizon, acquiring the once lofty new media company, Yahoo.
Yahoo had attempted multiple pivots and restarts, as it saw its valuation drop from a high of $110 billion to down into the single-digit billions, with the company even choosing in 2009 to join with search and advertising rival Microsoft in an effort to unite behind Bing to stave off Google’s rapid ascent to online search and advertising leader.
The misstep with Microsoft was front and center with former Googler Marissa Mayer joined Yahoo as its new CEO, and under Mayer’s leadership, the company began shifting away from Microsoft and toward partnering with Google, even going so far as to ask the courts to allow Yahoo to renegotiate and end its Microsoft deal.
A 2013 federal court ruling went against Yahoo with a U.S. District judge ruling that the company needed to proceed forward with its transition to the Bing search and advertising platform in select Asian markets, including Hong Kong and Taiwan.
Verizon Communications stepped in with an offer to buy Yahoo’s assets in 2016. In the middle of negotiations, tentatively valued at roughly $4.8 billion, Yahoo revealed that it had suffered two major cyberattacks that exposed over a billion of its Yahoo Mail customers’ user names and passwords. At that point, Verizon asked for a discount of almost $1 billion, but finally closed the deal in June 2017 to acquire Yahoo’s assets for $4.48 billion.
The new name for the Yahoo-Verizon assets merged into a new Verizon subsidiary? Oath.
And to make matters worse, in November 2017, Oath announced it was laying off approximately 500 employees from its AOL division. We can’t make this stuff up.
NINE MORE NOTABLE M&A ACTIVITIES
If you’ve made it this far, you’ve already read almost 4,000 words on the top 10 mergers and acquisitions over the past 2 decades of Streaming Media.
For brevity’s sake, we’ll close out the article with a brief highlight of one more acquisition, one that may pay dividends in the near term as the industry grapples with the AV1-HEVC debate and looks for additional gains by moving towards perceptual quality encoding solutions.
First, the rest of the best, in alphabetical order by acquirer or key investor:
12. AT&T’s acquisition of Quickplay Media
13. Beamr’s acquisition of Vanguard Video
14. BSkyB’s investment in Roku
15. CenturyLink’s acquisition of Level 3
16. Cisco’s acquisition of Inlet Technologies
17. Comcast’s acquisition of thePlatform
18. Google’s acquisition of Anvato
19. Telestream’s acquisition of Anystream
20. Verizon Digital Media Services’ formation, after Verizon acquired EdgeCast and Uplynk
Which one do we see as most interesting going forward? The Beamr-Vanguard tie-up caught my attention during an interview with Beamr’s CTO, Dror Gill, at the 2017 Streaming Media West show. I had the opportunity to ask about the company’s pivot from visual optimization to a pure codec company. It was clear that Beamr is potentially picking up the On2 mantle, that of an innovator willing to dive deep into research and development at the core codec level.
[This article appears in the 2018 Streaming Media Industry Sourcebook as "20 for 20: Top Mergers and Acquisitions of the Past 20 Years."]
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