Decisions by Cisco, Ericsson and Nokia to spin off video technology units represent an attempt to better compete with nimble startups, analysts say.
It’s indicative of transition in a competitive, confusing sector that provides myriad services to the consumer video market – from encryption to caching to streaming to storage.
“There are so many companies out there chasing too few dollars,” said London-based media and technology analyst Paolo Pescatore, noting “hundreds” of them at the latest NAB (National Association of Broadcasters) meeting occupying the entire upper South Hall. Many are small. To stand out, they advertise, but don’t always deliver on the hottest trends, from Artificial Intelligence to Blockchain.
“Now, everyone does Blockchain. But are they genuinely doing it? Are they genuinely doing Big Data? For many [customers], trying to work with them is tough,” he said. “There needs to be a reality check across the board.”
There is, and it started at the top for three big players whose corporate parents have not seen adequate returns. Executives at the new standalone companies—Synamedia (spun up from Cisco’s Service Provider Video Solutions business), Mediakind (the new Ericsson media solutions) and Velocix (the result of Nokia selling off its IP Video business)—insist that operating independently is key to performing better.
“As a private, independent company, Synamedia will live and breathe video and that single focus will benefit us and our customers,” said Yves Padrines, incoming CEO of Synamedia.
Cisco agreed to sell its Service Provider Video Software Solutions unit to U.K. private equity firm Permira in May for a reported $1 billion in a deal expected to close by early next year. Rebranded as Synamedia, it includes Cisco’s Infinite Video Platform, cloud digital video recording, video processing, video security, video middleware and other services. Many of the businesses were originally part of NDS, a video and security specialist Cisco acquired in 2012 for $5 billion.
Cisco will retain some video technology for networking like WebEx, which facilitates video and web conferencing, webinars, and screen sharing.
Padrines has three priorities: integrating broadband and broadcast so pay-TV operators can embrace IP and OTT; helping customers secure revenue through piracy prevention, rapid detection and response; and using data on viewer behavior and content to help clients generate fresh revenue through targeted advertising.
He said Synamedia’s “thousands” of employees worldwide will prioritize R&D and developing local solutions for local markets. London is the headquarters with staff in the U.S., Canada, the U.K., Belgium, Israel, India and China.
Cisco’s move followed Ericsson’s decision last January to sell a majority stake in its Media Solutions division to private equity firm One Equity Partners. The unit also got a snappier name, MediaKind, in July and a coming-out party at IBC last month. The deal hasn’t closed yet either as MediaKind carefully decouples from its parent company, market by market, said Arun Bhikshesvaran, chief marketing officer.
He said MediaKind staffers were in 120 of the 140 countries where Ericsson has “legal entities,” which the spinoff couldn’t replicate. In a complex process, the group narrowed the number of its legal entities to about 30 worldwide, with staffers reporting in from other areas.
“We had to figure out how to work in an agile manner, like a startup, but not [being] a startup,” Bhikshesvaran said. “What we consciously decided to do is to do this right from the beginning instead of creating an entity and fixing it later.” MediaKind will launch with 1,700 employees.
Bhikshesvaran said the relationship with Ericsson—which is retaining a hefty 49% interest in the business—will preserve the companies’ “combined heritage of video and mobility.”
Nokia is keeping an unspecified but smaller minority stake in Velocix. Cisco is selling Synamedia outright.
MediaKind, based in Plano, Texas, will be melding its businesses and focusing on R&D to address shifts in the media sector. Over the years, it has invested heavily in a collection of media properties, including Apex, Azuki Systems, Envivio, Fabrix, HyCGroup, Microsoft Mediaroom and Tandberg Television, but has acknowledged it did a poor job integrating them.
Bhikshesvaran described the current transition in the industry in part as moving to standalone software that can run on different kinds of commercial hardware, and helping clients migrate to the Cloud. MediaKind recently unveiled MediaKind Universe and announced a handful of global contracts with CogecoConnexion, Digicel, TotalPlay and TangerineGlobal.
Nokia’s IP video business, Velocix, the smallest of the three with about 300 employees, was sold in September to Volaris in a deal that will close by year end. It was the first media acquisition by the Toronto-based software company.
Nokia remains a Global Channel Partner for Velocix, which is focused on video and IP delivery and on storage technology. Velocix chief, Paul Larbey, said a core mission is to continue its work to make streaming video as smooth as broadcast.
He’s upbeat about shifts in the media industry, which he said have boosted business over the past six months. The group has added 12 new customers and increased traffic.
“Operators are starting to invest in new services—moving from analysis into the implementation phase,” he said. “There’s a nice head of steam in the development of product devices and services.”
As a standalone entity, Velocix can better hone its operations and sales. “Video is very specialized. It has a very technically oriented sales cycle. So being part of a big company” is not ideal, he said.
Larbey called Volaris “a nice, stable home,” noting that private equity firms like the ones that acquired Velocix’ larger rivals generally seek an exit in 3 to 5 years through an IPO or sale. Volaris is looking to expand and will be a buyer of assets, he predicted. The industry is still in flux, said Pescatore, but it could be worse.
“You would be worried if they [parent companies] had written them off and closed these businesses. But private investors have come in and believe they can make a success where the giants have failed,” he said.