CommScope’s completed acquisition of Arris for $7.4 billion in cash appears to confound the industry trend towards major groups divesting their video operations, but this is not really the case. CommScope was drawn to Arris by the desire for a quick fix for revenue growth without much product overlap and the biggest attraction was Ruckus Wireless, which has little to do with video.
Arris itself acquired Ruckus for $800m from Broadcom in 2017, highlighting the lack of overlap with existing products on the video side at the time. So CommScope’s move does not really contradict the narrative of big companies divesting themselves of their core video businesses, as Ericsson did in the creation of MediaKind, Cisco by selling its Service Provider Video Software Solutions (SPVSS) to form Synamedia and Nokia in handing its Velocix group over to Canadian private equity group Volaris.
It is true that all three groups have so far retained interests or investments in video, with Ericsson still owning 49% of MediaKind, while also retaining video assets under RedBeeMedia, which as a result is still draining the company financially. Cisco has retained video technology related to its core networking business, while Nokia has taken a similar line to Ericsson in retaining a minority stake in Velocix while also acting as a channel partner.
But all three have essentially quit video after rapidly losing faith in it as a profitable core business in the face of rapid disruption and change with the stampede towards streaming. With primary focus on communications and networking in each case they were unable to adapt to change quickly enough such that the video business fell behind the curve. The field had become congested with too many vendors scrambling for declining revenues in traditional pay TV, facing similar issues to some of their service provider customers.
But while operators have been consolidating to align distribution with content, the infrastructure providers have been divesting to regain the heightened focus they once had. It is too early to judge how successful these moves have been but it is clear the independence has instilled a new lease of life and enthusiasm, especially for MediaKind and Synamedia, which has been evident at the NAB Show 2019 this week. This is the first show where the three have been fully open for business and able to demonstrate products or services developed under independence.
MediaKind in particular has been hyperactive in its announcements, unleashing a wave of product and partnership announcements. Noteworthy on the product front is a move into wholesale Conditional Access (CA) with the launch of its Cygnus Primary Distribution package enabling broadcasters and content owners to secure and manage primary distribution of their content to secondary broadcast operators. It combines 128-bit encryption with forensic watermarking technology to help prevent piracy of high value content from the broadcaster/content owner’s distribution network, with the ability to trace subsequent copies or streams.
Among the announcements is evidence that MediaKind is at least regaining ground with existing major customers, such as Vodafone and Deutsche Telekom. Vodafone, which as we reported 10 years ago first deployed the original Microsoft Mediaroom IPTV platform in Portugal in 2009, has now gone to MediaKind for a multiscreen platform in Qatar to deliver content to both OTT and IPTV devices.
Then Deutsche Telekom has extended an existing partnership with MediaKind to deploy and operate a multi-tenant cloud TV platform for its subsidiaries, with Magyar Telekom in Hungary first to migrate most of its subscribers to it over the next two years. This is designed to reuse existing hardware and software infrastructures and combines MediaKind’s MediaFirst TV Platform with storage and a content management system.
This would probably not have happened if Ericsson had still been at the helm, because the migration path to MediaFirst had not been clearly defined or articulated. Originally Mediaroom had stagnated during the last two or three years under Microsoft’s ownership before the sale of the division to Ericsson completed in September 2013. Ericsson was then slow to resuscitate the platform before emerging with MediaFirst as the OTT successor, incorporating additional components, from encoding elements dating back to Ericsson’s original Tandberg TV purchase in 2007 to adaptive bit rate streaming and other multiscreen technologies gained by buying Azuki Systems in February 2014.
A key move came shortly after MediaKind’s birth in 2018 with development of a client enabling the 36 million Mediaroom set tops still deployed around the world to be managed by the MediaFirst TV platform. Then the company reached a partnership with video software vendor Zodiac to enable other legacy set tops to run MediaFirst via just a software upgrade. These have helped persuade customers to stay on board and may even have helped entice the few new ones, such as Canada’s Cogeco, which is using MediaFirst for its IPTV service.
It is though through extracting more life out of longstanding Mediaroom deployments where MediaKind is likely to salvage what had looked like a dying business. A good example is Telefonica, whose Brazilian operation has just integrated Netflix into its ageing base of Mediaroom set tops, using a connector that MediaKind says it has developed using a new microservices architecture.
Meanwhile Synamedia has also emerged from the ashes of a stagnating business that had lost a lot of value. The saga began when Cisco acquired NDS for $5 billion in 2012, only for this to be disgorged for just $1 billion minus some components to Permira Funds last year. However with the former NDS founder and industry heavyweight Abe Peled at the helm Synamedia has also regained its mojo, leading Sky to come in with an undisclosed minority stake in January 2019 after already being acquired by Comcast.
Synamedia has singled out security and revenue protection as early targets for product development and has already launched its Credentials Sharing Insight software to help streaming providers address account sharing between friends and families by turning a growing source of loss into a new revenue-generating opportunity. The idea is to detect such sharing activity so that operators can exert gentle pressure to convert this into multiple accounts with some enticement offered. This fits with Peled’s philosophy that pay TV security is about making it inconvenient for people who can afford to pay for content to resort to piracy.
At NAB 2019 Synamedia has also majored on automated and efficient quality control with its Virtual Digital Content Manager (DCM), which it says uses machine learning to help operators reduce bandwidth and storage costs without compromising on the experience. This seems to involve real time adaptation to the content, in the spirit of content aware encoding but instead adjusting the adaptive bit rate as picture complexity varies. So the bit rate would be raised when showing a fast-moving sports scene and then reduced for a talking head. Normally Adaptive Bit Rate implementations use output profiles set to constant bit rates, which means either that quality deteriorates unacceptably or the bit rate has to be overprovisioned to cater for more complex content.
As with MediaKind, the impact of its divestiture from Cisco has so far been to shore up the customer base and prepare the ground for hoped for advances. Of the three, Velocix has had the lowest profile at NAB 2019, but then that was also the case when Nokia was at the helm and the acquisition by Volaris was last of the three to complete in February 2019.
The name dates back before Nokia’s $16.6 billion acquisition of Alcatel-Lucent in April 2015. Velocix was the name of a deep packet inspection (DPI) and content delivery networking (CDN) specialist that Alcatel acquired in 2009 and which initially spearheaded Nokia’s video platform development. While Nokia’s video systems integration business still provides an outlet for Velocix, MediaKind and Synamedia are more intent on exploiting and developing their technology base. Synamedia at least is focused on an IPO exit inside a few years, acknowledging that big tech companies are unlikely to turn around and come knocking on its door again.