Motorola this week bought IPTV DRM company SecureMedia, and it is a toss up whether this was an acquisition made because it brought a decent sized set top order on the back of it, or whether Motorola is really trying to commandeer a place at the global IPTV table, with a full suite of software and hardware offerings. On balance we think the history of SecureMedia says that it’s the former.
Conditional Access/DRM company SecureMedia has been on life support since 2007 and yet this week it is being paraded around as a strategic purchase by Motorola, as if the company was filling out its IPTV product suite offering and had chosen a major player in DRM for IPTV.
The company was at best a 30 man outfit and its largest customer Cavalier Telephone acquired the business in August 2007. Our take at the time was that this was cheaper for Cavalier than letting the company go bust and going out and buying and implementing a new DRM.
Cavalier is a US CLEC (unbundler) operating in 16 states in the eastern US, mostly bumping up against Verizon (it has unbundling equipment in Verizon exchanges). It also has lots of fiber within its footprint and runs an IPTV service over fiber to the home and offers fast broadband as well as reselling DirecTV.
Many news services didn’t bother with the Motorola SecureMedia news, probably wondering who SecureMedia is. Back in the golden days of IPTV there were many software only DRM systems built up around using a standard PC style encryption for conditional access, more sophisticated and versatile than older conditional access systems which were, for the most, part reliant on hardware assists, such as smart cards. Verimatrix and Widevine are the best of these, having picked up the bulk of major IPTV deals which didn’t go to Microsoft Mediaroom (which has its own DRM). But players like SecureMedia have done little more than survive, and Latens and a number of Korean and Chinese suppliers, live more or less hand to mouth.
DRM of course is a grudge purchase and even Widevine and Verimatrix have had to undergo repeated rounds of funding, never quite being able to shake off the need for more money. Verimatrix last took on board cash in September 2008, a while ago now, while Widevine took on another $15 million in December.
The truth is that DRM has promised much, but the most money made in DRM has been made by a company that has made quite a weak implementation ‘ Apple. The use of a DRM lock-in is of far more value to a supplier company, who can then ensure that it can continue to sell its equipment, often at inflated prices, for some years to come. Any number of people have broken Apple’s AES based Fairplay system, but Apple just refreshes it with an upload and carries on. Despite what everyone says about MP3 and DRM free tracks on iTunes, it is still very much alive and (un)well as a piece of software.
So each of these DRM companies needs to find some form of dominance to make them look worth their investments, and now that this has been more or less denied to them, purely in IPTV (due to Mediaroom having its own Windows Media DRM based protection), they have moved on to other markets, IPTV over cable, China, the new IPTV market in Korea (it was once streamed, but is now multicast), smaller US operator opportunities and of course TV to a PC, as well as protecting internet content which can now end up directly on a TV.
Cavalier even sold off the bulk of the SecureMedia staff when it sold of its Solutions subsidiary in April 2008 to a new US start up MediaXstream, a managed network service provider for media production. How many staff were left supporting the SecureMedia Encryptonite product line we don’t know, but it could be as few as a handful.
Originally SecureMedia was funded by a group of investors, which included Macrovision and Sony, but their ownership was eliminated with the sale to Cavalier and they never did have any reliance on the products.
One of the big differences about the SecureMedia technology is that it is a bit of an odd one out, being based on RC4 encryption, which it claims lowers the processing requirement at the set top, as opposed to the others which are all AES based systems.
We’re not sure that this technology differential creates any kind of value add for Motorola here, but Motorola’s set top and cable business, which also includes a slew of acquisitions in IPTV, and which sits inside the Home & Networks Mobility business, may be making another play for an IPTV lock-in.
Motorola bought the rump of General Instrument in 1999, and inherited a thriving set top business, built around a DRM lock-in that even today means that it controls 50% of the US cable market for set tops, but also on that back of that Motorola has become big in encoders, cable modem termination systems, cable modems and most forms of cable equipment supply. The GI lock-in meant free DRM, and expensive set tops for cablecos for over a decade, which was more than payback enough for the $11 billion of Motorola stock that was used in the acquisition.
That same division at Motorola has been trying to pull much the same trick in IPTV, and has for the past few years picked up more and more components for a full offering in IPTV.
Its latest acquisition was just in November, when it bought Bitband, the original Israeli start up which helped one of the oldest IPTVers in Europe, the massively successful Fastweb of Italy.
Bitband supplies VoD storage appliances and has been up for sale for as long as we can remember, certainly the past three, or possibly four years and it is the last in a long line of cheap, but pivotal IPTV technologies that Motorola has bought into, starting with the IPTV Scandinavian set top business Kreatel four years ago.
Since then there have been years more acquisitions which include VoD company Broadbus. Broadbus VoD is based on solid state memory and the market never really went that route because it was expensive. Instead Flash memory VoD servers from companies like Edgeware became the new frontier. So Motorola now has acquired two VoD businesses, both of them with issues as far as we can see.
Add to that encoder maker Modulus (who designed the Motorola supplied encoders to AT&T’s U-Verse), another encoder maker Tut Systems, DSL and gateway supplier Netopia, and you have a mish-mash of IPTV capable elements, many of them overlapping, which make little sense and which hardly appear in the current Motorola product line up. All of this and yet this week (see Worth Noting) Motorola is selling off its Euro DOCSIS cable business. Go figure?
It could be argued that Motorola is really buying SecureMedia to standardize DRM across its IPTV product lines, or even just to bring some significant intellect on the encryption front onto the Home Networks team, but we can’t see it because it’s four years too late. It might just as well go out and build its own DRM, same as Apple did or license one from Intertrust ready made.
In order to make money out of such a strategy, with an end to end IPTV service, it would need a fully fledged middleware offering, and yet any business in IPTV where Motorola has conducted significant business, has been on Mediaroom accounts, where it concedes much of the architecture to Microsoft, and has little or no opportunity to push anything other than its skills as a network or systems integrator.
And anyway Motorola has never put itself in the running for an acquisition of an IPTV middleware company such as Myrio, Minerva, Orca or Kasenna (yes it had middleware too). Instead is has let these to go to either tiny companies that cannot support them, or to vast conglomerates such as Nokia Siemens Networks, or to operators and in Minerva’s case it is still out there, doing nicely on its own.
No, there are two reasons for buying these companies, perhaps three. One they are cheap, two they were for sale and well marketed, but three is because when Home and Networks Mobility goes up for sale, its owners want to point to a bewildering array of IPTV customers around the world where it has one component or other supplied by a Motorola company. The suggestion is that Motorola therefore has its finger on the pulse of the IPTV revolution, which will see cable and satellite TV services go ex-growth while it gobbles up pay TV homes in Europe and Asia Pacific over the next five years.
Even better if all those customers were acquired as a favor to a new account or an existing favored customer, and no money changed hands hardly, at all.
If this had been a company experienced at getting the best out of acquisitions, which had fought hard to keep the best people and forged all these acquisitions together in a core strategy, then perhaps there would be the basis of a global IPTV strategy at Motorola, but we have seen no articulation of any kind of clear IPTV strategy, and this announcement offers little more than platitudes about having a security company onboard.
To the excited beginner in IPTV services, this may look like a product portfolio made in heaven, but to the established practitioner in IPTV, this adds yet another awkward child to the Motorola IPTV household, creating a tower of IPTV Babel, where few of the people speak the same dialect of pay TV, IPTV or technology.