With Kaltura being whisked up by the M&A rumor mill (see separate story in this issue), a prime opportunity presented itself to investigate the strategies and finances of a key rival, Brightcove, with results season in full swing.
The two US video streaming specialists have oscillated and evolved since the early days of obtuse online video players and rudimentary content management systems. Brightcove has expanded from encoding provider to video communications platform underpinned by a marketing machine with more moving parts than we care to count, while Kaltura is thriving in supplying video tools for education.
On this week’s earnings call, new Brightcove CEO Marc DeBevoise bragged about developing a “comprehensive plan” during his first 100 days at the helm, one that aims to use the vendor’s established position to add new features allowing any company, brand or creator to “own their digital future.”
To us, that reads as a plan to harden up its vendor lock-in potential, which would align with what Faultline has heard about clients taking tools in-house and competitors like JW Player poaching business from Brightcove, with claims that Brightcove is slacking on analytics.
Again, Faultline’s finger was on the pulse, as Brightcove took steps to rectify this in February 2022 with the acquisition of OTT video audience analytics vendor Wicket Labs for $13.2 million. Wicket Labs has injected the Brightcove video platform with machine learning models to help predict viewer behavior and customer lifetime values, plus recommendations, subscriber cohort analytics, content analysis, and personalized playlists.
Addressing the loss of customers to in-house tools, DeBevoise claims times are changing. “Customers see the potential of our platform to solve a problem. Rather than a technology to graduate out of, I think you graduate into our technology,” he claims.
After half an hour on the earnings call, we left with a slightly better sense of where Brightcove wants to be, and how it plans to prevent the likes of the faster-growing Kaltura from stealing market share – in the guise of a goal to become “completely aligned.”
While Kaltura takes a segmented approach to business – splitting customers into the two camps of Education and Enterprise, and Media and Telecoms – Brightcove prefers to take a holistic approach to streaming media.
“Almost every entertainment source has moved to streaming,” emphasized DeBevoise. “The future is not just for entertainment. Every organization needs to think and act like a media company. All companies will use video to monetize and engage.”
We need some convincing that this is the right strategy for Brightcove, just as the non-media customers that Brightcove is targeting for new business will need convincing that video embodies the future of their enterprises. As a company with more variability in its media product portfolio compared to its enterprise suite, any plan needs a clear path into the enterprise and education sectors, as Brightcove’s traditional media business approaches saturation.
As a former customer of the Brightcove video platform around a decade ago, DeBevoise claims his own due diligence confirms the core platform is strong and can handle “practically anything out there on the internet.” A lot has changed at Brightcove over the last ten years, and DeBevoise has not been in the CEO hot seat long enough to spot holes, one of which being that Brightcove doesn’t scale as well as others, according to our sources.
On the technology side, DeBevoise sees the tools provided by Brightcove as being different for different end users and different markets, but not the platform as a whole. This is why he wants to instill a mantra that is based on the same core and same principles of the platform, whether serving media or enterprise.
“I say it’s a media and enterprise focus. We want to focus on being a primary winner in the streaming market overall, not limited to one or another customer base,” he continued.
The strange thing is, separating enterprise from media has worked wonders for Kaltura. Sure, there are overlaps in terms of tools, but different industries require clearly-defined video tools across content management, monetization, distribution, sharing, and communications.
That said, Kaltura’s Enterprise, Education and Technology segment revenue increased by 47.8% from 2020 to 2021, while Media and Telecom increased by 15.2% for the full-year period. Enterprise and Education has grown from accounting for 66.8% of Kaltura’s total annual revenue in 2020, to 72%, in the space of twelve months.
Unfortunately, Brightcove does not break out revenue by segment, but instead splits it into two revenue streams – subscription and support revenue, and professional services and other revenue. Naturally, subscription and support revenue is Brightcove’s bread winner, bringing in $53 million in revenue for Q2 2022, up 8.3% year on year and accounting for 97.3% of total revenue.
Meanwhile, Brightcove has just reported revenue growth of 5.8% to $54.4 million for the second quarter 2022 – steady, not scintillating. Unfortunately, we have to wait a few more days until Kaltura’s Q2 2022 results arrive for a comparison (which we’ll dive into next week), but for quick context, Kaltura reported Q1 2022 revenue of $41.7 million, and Q2 2021 revenue of $41.6 million.
On an annual basis, Brightcove reported full year 2021 revenue of $211.1 million, up 7% year on year, while Kaltura hit total revenue of $165 million in 2021, up 37%.
So, while there is not a huge gulf in terms of revenue between the two long-standing video rivals, Brightcove remains the largest of the two in revenue terms. However, the momentum is on the side of Kaltura, which goes some way to explaining why Brightcove’s market cap ($255 million) is lower than Kaltura’s ($330 million), as of writing.
It was interesting therefore to hear DeBevoise denounce Brightcove’s market undervaluation, in his frustrated view, during the earnings call. He hopes to drive up Brightcove’s market value through new enterprise customers and becoming a business that is less vulnerable to customer churn by locking customers into tools and feature in the video platform.
The latter point can often mean offering additional tools for free, effectively commoditizing some of your own technologies just to prevent customers jumping ship to develop their own tools in-house or – worse – jumping into bed with a more specialized vendor.
Despite the enterprise emphasis, it’s worth noting that Brightcove is pulling in plenty of new business from sports organizations and online music events.