2011 Streamticker: Online Video Mergers, Acquisitions, and Investments
2010 brought a significant number of mergers and acquisitions, including several European-based firms that went on a shopping binge, with at least one grabbing up more than one company.
Even for those companies that chose to order up a single acquisition, the proper fit took a bit of time to coalesce. The end result, however, appears satisfactory.
Here are a few highlights of what happened when European companies decided to belly up to the acquisition bar in 2010.
Vitec Multimedia Orders a Double, Consolidating Focus and Optibase
Vitec Multimedia, based near Paris, took the lead in ordering up not just one, but two, acquisitions. The company first announced in March that it had acquired Optibase's video technology assets in a deal valued at $8 million.
Vitec agreed to pay publicly traded Optibase Ltd, which has a business that includes both real estate and professional video transcoding solutions, $8 million in cash "of which US $1 million will be deposited in escrow for a 2-year period as a security, inter alia, for breach or material inaccuracy relating to Optibase's representations and warranties."
Tom Wyler, CEO of Optibase, which makes carrier-grade and high-availability transcoding solutions, said his company was approached by Vitec. "Vitec is the right company to ensure the continuity of the business in its existing markets," said Wyler, "as well as maintaining the Optibase brand."
The deal also had an earn-out structure: for a single year after closing the transaction, any revenues from the Optibase business in excess of $14 million would be split between the companies, with 45% for Optibase and 55% remaining within Vitec.
Vitec very rapidly ordered up a second acquisition following the Optibase deal, with a mid-2010 acquisition of Focus Enhancements' video technology assets.
Focus was a publicly traded company whose video recording, asset management, and live production equipment had a solid base of customers, ranging from prosumer to broadcast professionals. The company also had a semiconductor division that had done chipsets for the original Xbox and other consumer electronic devices, but it had stumbled badly trying to get into ultra-wideband (UWB) wireless delivery of HD signals between household consumer video devices.
As a result, the company's stock was delisted. The company was ultimately taken private in 2009, but it continued to search for a strategy that allowed both divisions of the company to move forward. The Vitec acquisition of the Focus line of video products allowed such a strategy.
"Focus has partnered with Vitec Multimedia in the past," said Brett Moyer, Focus Enhancements' CEO, "and given our successful history, we concluded that sale of Focus' Systems Group to Vitec was the right decision. ... We wanted to be sure that current Focus Enhancements video customers and partners would be well taken care of, while Focus' Semiconductor Group continues to develop solutions for the wireless audio distribution and the TV-out video encoder markets."
The Focus Enhancements name remained with the semiconductor group, so the new companies-Optibase, Focus, and German-based Como-are now referred to by their name followed by "A Vitec Company." The companies also merged their offices in Silicon Valley to a single Sunnyvale, Calif., location and began to market joint product lines at the December 2010 Government Video Expo.
Extron Cautiously Samples a Recommendation and Acquires Electrosonic Product Line
In March 2010, Extron Electronics moved beyond its traditional base of converting video and audio signals from one type of cabling to another and moved into the world of packetised video delivery.
The company is known primarily for its video and graphics converters, whether they're analogue or digital signals from S-video to HDMI, and has a strong following for local transmission use in classrooms, corporate boardrooms, and command-and-control installations.
Still, the company lacked an effective streaming solution whereby the video and graphics signals could be packetised and sent across unlimited distances. To remedy that, the company announced it was acquiring the products portion of 45-year-old U.K.-based integrator Electrosonic Group.
We've covered the VN Matrix and a few other high-end graphics streaming appliances that Electrosonic has sold since February 2009: the products use a proprietary, low-latency codec called Pure3, requiring both the encoder and decoder to be purchased from Extron, which acquired "all current products designed and manufactured by Electrosonic as well as the IP for the underlying technology."
Extron brought in key Electrosonic staff and has begun moving toward an H.264 version of the graphics streaming appliances, which it demonstrated at Infocomm 2010.
Meanwhile, Jim Bowie, president of Electrosonic Group, looks forward to focussing on its core competency as a systems integrator. "These current products have developed to the point that we as a systems integrator cannot take them to their full potential," Bowie stated at the time of the sale, adding, "Extron is exactly the right company to take these products forward worldwide. Electrosonic can now concentrate on its main business activity: the design, supply and support of audio-visual systems."
To that end, the services division of Electrosonic has already bought up two more U.K.-based systems integrators.
Google Gets Into a Spat, Pays Out, and Finally Leaves With On2
This acquisition was contentious enough to get several mainstream press mentions, both for it being the first public-company acquisition that Google made as well as for the strong shareholder discontent
Google faced.
Ultimately, Google raised its offering price, and the deal was sealed in February, almost 7 months after Google announced its intent to acquire On2, makers of the VP6, VP7, and nascent VP8 codecs.
Google immediately took the assets of the $133 million acquisition and gave them away, making the VP8 codec open source under its new WebM strategy. At the same time, the company began shutting down the product lines, working to move its cloud-based Flix Cloud to Zencoder, shuttering Flix Pro-which Wildform then picked up-and finally killing off its Flix Engine.
It might seem like an expensive charity case to appease the open source and free software crowd, but it may be more than just a stop-gap to bring open source video closer to H.264 quality parity. Google's use of the VP8 codec is growing. It first started with YouTube-which dominates the online video platform market-but many viewed that as merely Google choosing to flex its own internal muscle, as YouTube also still supports H.264.
Then, in early 2011, Google announced it was dumping native support for VP8 as part of its Chrome browser. The percentage of Chrome users is growing overall, often at the expense of Internet Explorer. This move is a bit befuddling, and perhaps disingenuous, as the company claimed VP8 support in Chrome would champion the open source cause, since H.264 is a "patent pool" codec, even though the licensing pool announced it had indefinitely suspended royalties for video that's offered to viewers free of charge. To make the move even odder, Google had announced a few months earlier that it would support another proprietary technology-Adobe's Flash-perhaps as a reciprocal way to have VP8 considered for native support in the Adobe Flash Player, something that has not occurred as of the time of this writing.
In the next year, given Google's muscle, expect to see the codec emerge in a variety of locations, including hardware chipsets, although the question still being asked around the industry has yet to be answered: "Where is the customer demand?"
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