Streamticker 2008: The Year in Mergers, Acquisitions, and Investments
On the smaller side, in July, Google acquired Omnisio, Inc. for a widely reported $15 million. Google was expected to integrate Omnisio’s technology into YouTube, giving users the capability to annotate and mash up videos as well as to add comments within videos.
In May, Accenture surprisingly acquired Origin Digital, which created web-based management tools to help facilitate the workflow required to get content from its original form to one required for online distribution. "The addition of Origin Digital video capabilities to Accenture’s Digital Media Services group will complement the experience we developed in music through our acquisition of Digiplug last year," says Richard Cottrell, managing director of Accenture Digital Media Services group. "Creating a full suite of managed services will accelerate the availability of digital media services to businesses globally."
Another interesting deal was Best Buy’s acquisition of Napster, LLC. In September, the big-box retailer paid $121 million for the second-largest online subscription music service, behind Rhapsody. Although not directly related to the streaming/online video industry, Best Buy intends to use the company to access the emerging industry of digital entertainment. It remains unknown if product companies such as Best Buy will be successful selling a service, but the acquisition is certainly telling of where the company believes the distribution of entertainment-oriented content is heading. If you back out the $67 million in cash Napster had at the time of the acquisition, Best Buy garnered access to a potentially large opportunity for almost nothing.
Figure 2. In a surprising move, Best Buy invested $121 million to purchase Napster.
Amazon.com, Inc. also made an interesting acquisition when it acquired online social-gaming company Reflexive Entertainment, Inc. in October. The deal was one of many initiatives that the web conglomerate took last year to bolster its involvement in digital entertainment, including launching a VOD service in July and its CDN service in September, complementing its S3 storage service and EC2 on-demand computing solution. Over the past few years, Amazon has quickly moved to leverage the infrastructure it has already built to manage its core business to launch both direct and indirect businesses. With a significant amount of cash and the value of technology companies decreasing, it is likely that Amazon will become an even bigger player in all stages of digital content, from infrastructure to the content itself, via M&A.
Seeking Complete Experiences
Transactions also appeared to encompass a more holistic approach. Providers sought out not only transactions that better positioned them for where they believed the market was going but also deals that they could get more from. Perhaps it was the perfect storm: As companies reached points of saturation within their own markets, the economy slowed, forcing them to expand their universe. Words such as ecosystem and suite began showing up in industry reports and company presentations. By broadening its opportunities, the industry, similar to those before it, started to mature. And it wasn’t because large conglomerates were acquiring companies; small companies, many still venture-owned, were making their own moves.
In May, internet video services provider Onstream Media Corp. acquired IPTV platform company Narrowstep for approximately $19 million. "Since the founding of Onstream Media our strategic direction has been predicated on capitalizing on the integration of video-on-the-web and broadcast television, making web-based programming indistinguishable from over-the-air, cable or satellite-originated programming," says Randy Selman, president and CEO of Onstream Media. "With the addition of Narrowstep, we now have a full suite of enabling technologies to address this emerging market requirement."
Also in May, CDN provider CDNetworks acquired the Hit Pops Division of Japan’s Space Communications Corp. The acquisition expanded the company’s product portfolio so that it could provide a video production solution. It also gave the company access to a high-profile group of customers already working with Hit Pops.
Finally, in July, video services provider thePlatform for Media, Inc. (owned by Comcast) acquired some of the assets of social media applications developer Chirp Interactive. Although Chirp’s core Chirpscreen service was closed down, thePlatform integrated the company’s community and content discovery features into its own solution.
In 2009, it is almost certain that the industry will mature further. Companies such as Akamai and Google that have already taken leads in their respective subsectors of the streaming/online video space will not only add to their product portfolios, expanding their revenue opportunities, but they will also help video become a standard offering for industries ranging from entertainment to corporate learning. We could also see companies that have traditionally played a large part in the streaming/online video industry move further into neighboring industries, such as advertising. In November, for example, Akamai closed its $95 million acquisition of acerno, Inc., an online cooperative of shopping and purchase data for enabling more relevant online advertising. Utilizing Akamai’s data (i.e., detailed IP address information) and acerno’s platform, software, and relationships, you could see Akamai completely change the definition of targeted advertising.
It’s also possible that if the market worsens and the venture funding that was present in 2008 is not available, you could see some companies run out of money. According to Heesen, "Should the current situation be prolonged into 2009, we can expect fewer new investments by the venture industry as they will need to spend their time with these later stage companies that are waiting to go public or be acquired." This would create fire sales and mergers that were once unimaginable. At the Streaming Media West conference last September, I spoke with several CDN providers that were already preparing low-ball bids for the assets and customer bases of other providers that they expected would run out of money in the coming months.
Streaming Media has been around for 20 years, and has seen a lot of interesting technologies, opportunities, and business acumen come together.
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From A(OL) to V(erizon) we look at the mergers and acquisitions that mattered in the last year. Here's a look back, with an eye toward what they portend for the future.
A look back on the past year's mergers and acquisitions, with an eye toward what they portend for the future.