Satellite and set top technology company EchoStar has bought the key adaptive streaming assets of Move Networks, the company widely understood to have invented what is a core technology to make streamed internet video a reality, offering high enough quality streams to be shown on a modern TV set.
EchoStar is the cousin of Dish Networks, and one of its main suppliers, with common shareholders and board members.
The purchase went to EchoStar Advanced Technologies, a subsidiary of EchoStar which talked in a brief release last week, about it buying the assets, not necessarily the people and ongoing businesses of Move.
Although there are very few factual details released and these may come in later quarterly filings, we think that the likely story is easy to tease out. Move has just been granted a patent for adaptive streaming and has at least four clear technology suppliers and many operators, which it can now chase for a license to this technology. But the chances are that this will take some time as they are Apple, Microsoft, Adobe and Google’s new acquisition Widevine. Other perpetrators of this technology include CDN players Akamai and Limelight and of course Netflix has its own version of adaptive streaming.
The patent covers the encoding and use of multiple bit rate “streamlets” with the same time index, such that the aggregate set of streamlets, stored on standard web servers, independently yield playback of the original full length video. This is accomplished through intelligent requests of successive unique optimal streamlets sent by a client device.
Microsoft, as a previous investor in Move, is likely to have acquired a long term license with that investment for the Move technology to be incorporated into its IIS smooth streaming, while Apple and Adobe both act like they invented streaming, when what they have can clearly trace their antecedents back to the approach Move widely publicized. Widevine has chased a ton of TV Everywhere contracts with pay TV operators, and says it invented its own version of the technology because it was clear that no-one was going to pay a premium for adaptive streaming.
The fact that Widevine is no longer independent, having been acquired by Google in December, means that Move’s new owner, EchoStar will be less interested in chasing it for royalties, given that it is currently best of friends with Google, being the only US pay TV service with Google TV already integrated with its conditional access systems and its EPG and set tops. The Google relationship might be the difference between Dish recovering or falling away over the next few years.
“We’re pleased to bring aboard the talents and proficiencies in adaptive streaming and IPTV from Move Networks which will enable us to expand our portfolio of advanced television technologies serving cable, satellite, telcos and IPTV video providers,” said Mike Dugan, president and CEO of EchoStar Corporation.
“TV providers are increasingly demanding the highest quality video delivery over normal Internet connections, and Move Network’s patent portfolio and proven customer experience allow us to give clients the core technology necessary to stream live and video-on-demand content,” said Roger Lynch, executive vice president of EchoStar Advanced Technologies.
We take those comments to mean that the streaming in its existing placeshifting brand which came out of Sling Media, could use improvement in order to force more sales of placeshifting product lines. Placeshifting is usually achieved by taken video content through the analog hole, and re-compressing and digitizing the video on the fly, and sending it out, encrypted, across the internet.
Back in August Dish Networks decided to introduce a sort of TV Everywhere service, very different to other cable and pay TV providers, using Placeshifting rather than streaming from a server over the internet. This is a smart move for a company that does not offer its own broadband lines, especially in an era when Network Neutrality is up for grabs, and video traffic originating from Dish might get blocked by rival pay TV players when it travels over their broadband lines. Now video traffic leaving one of its placeshifting customers appears as an uplink from a consumer, not as commercial traffic from Dish or its technology partner EchoStar
In order to satisfy content companies that the encryption was sound enough (when it was independent Sling Media had written its own) it embraced the Widevine DRM system and added its adaptive streaming technology. It’s easy to see that EchoStar will be able to cut a neat deal here, agreeing to continue and pay for the litigation managed by Move in suing others over its patents, agreeing a split on any proceeds, and paying virtually nothing for the company. It could then license the technology to Widevine in return for a lower fee on its TV Everywhere deal.
What Move is likely to have kept after this deal, are the businesses it acquired, most notably the IPTV services sold mostly to students, which came when it bought the UK’s Inuk Networks. That might well go back where it came from in a management buyout. Or with this business, and a small amount of cash from EchoStar it could continue as a much smaller business with far fewer staff. It is known to have cut staff down to what is estimated to be about 30 from over 100. The patents could be chased for royalty streams and if that worked out eventually, then the VCs could get the almost $100 million placed into Move during various rounds, or at least some portion of it. At least that’s how we picture the deal.
Widevine itself has its own patent available to license, relating to streaming, in particular the part of the process whereby video is transcoded from a broadcast stream to an Internet stream. This is probably technology at work at Dish, since its service could offer up a digital version of the file, decoded by its Nagravision conditional access system, instead of going through an analog playout, which was used in Sling Media’s early prototypes. This would then be transcoded, to retain far higher video quality on its TV Everywhere service.
In the end this is all about making the Sling investment pay out for EchoStar. It paid $380 million for the company and it appears to have only sold 1 million devices throughout its entire history, with perhaps a quarter of those sold through Dish, and the rest direct or overseas. If EchoStar can pile up sufficient technology to make the underlying Placeshifting patents more valuable or if it can help its customer Dish win many more new customers, using its major new ViP 922 SlingLoaded DVR, then it can start to see a return on that investment.
As for Move, we would expect it to disappear as a brand without visible trace, and if there is a stub of the company left, for it to change its name. If everyone refuses to pay EchoStar royalties, the Move name under EchoStar might be responsible for the same kind of litigation which EchoStar was on the end of in its fight with TiVo.
The problem with all of this is that neither Dish or EchoStar are popular with content suppliers or the pay TV rivals of Dish Networks. No-one is going to buy set tops with or without placeshifting capabilities from EchoStar in the US, unless it really is essential. That explains why it is driving sales in Latin America and Europe, where this technology may actually make a difference.
Financial terms of the transaction were not disclosed, but some clues must be in the quarterly EchoStar SEC filings next quarter.
Move managed to get some pretty impressive customer names early on in adaptive streaming including ABC, Fox, ESPN, Oprah Book Club, Televisa, Comcast and ProSieben in Germany. It has also integrated it into MoveTV, a white labeled end-to-end video services platform offering VoD, live events, network DVR and, as we says, has been trying to push it for 3 screen services and systems such as ‘TV Everywhere’ being deployed by pay other TV operators in the US.