Brightcove Buys a Streaming Rival for $15M

Brightcove and Ooyala, online video tech rivals that were used to throwing fists, are now joining hands.

Love was in the air on Valentine's Day eve as Brightcove Inc. on Wednesday announced a deal to acquire the online video platform (OVP) business of Ooyala Inc. for about $15 million -- $6.25 million in cash and the remainder in Brightcove shares. (See Brightcove Deals for Ooyala's Online Video Platform .)

The deal for Ooyala's OVP technology includes Backlot (video content management and publishing), its Analytics and Live products, and underlying intellectual property and associated patents. "Substantial portions" of Ooyala's engineering, support and sales staff, including its operations in Guadalajara, Mexico, will also become part of Brightcove. The companies didn't say how many Ooyala people will be coming on board.

In addition to fighting for customers in the online video space, Brightcove and Ooyala also fought a brief battle in the courts. In 2017, Ooyala hit Brightcove with allegations that two Brightcove employees formerly with Ooyala had willfully misappropriated proprietary trade secrets, including customer contact lists, confidential sales pitches, pricing and marketing plans, for use in the Latin American market. Per a Brightcove 10-Q filing, the companies settled the matter in October 2018 "for an immaterial amount" and the case was dismissed.

That's all water under the bridge now. "Ooyala has tremendous global customers who understand the power of video and its ability to transform business and reach new customers," Brightcove CEO Jeff Ray said on the company's Q4 earnings call, according to this Seeking Alpha transcript.

Ray later declined to say how many customers Ooyala has for its OVP products, holding that Ooyala's customer base is "solid and strong," and pointed the questioner to Brightcove's customer page, which lists examples such as StarHub, Arsenal Media Group, Zone TV, NOS, Tribune Media and Turner Asia Pacific.

The sale of its OVP business ends a long and sometimes torturous road for Ooyala, which was acquired by Telstra through separate investments that totaled about $500 million, including a final $270 million deal announced in 2014. The results were disastrous, as Telstra's plans for Ooyala did not pan out as it struggled to hit growth goals and its ad-tech business struggled. In early 2018, Telstra wrote down its investment and absorbed an impairment charge of about $215 million. (See Telstra Acquires Ooyala.)

Last October, Telstra sold Ooyala in a management buyout led by Jonathan Huberman, who was named CEO of Ooyala in April 2017, replacing Ramesh Srinivasan. (See Management Acquires Ooyala From Telstra .)

Even after that transaction, Telstra remained as an Ooyala reseller, and that agreement remains intact, Ray said. "We're thrilled about having more access to Telstra and the community that Telstra serves," he said.

The Brightcove-Ooyala deal is fairly straight -- Brightcove is getting assets and some intellectual property, access to some new customers and some talent. And the combination should help them compete in an OVP market that includes companies such as Comcast Technology Solutions, Kaltura, and Piksel. SeaChange, which recently picked up Xstreme for $5.5 million, is more focused on the pay-TV and service provider sector. (See SeaChange Buys Xstream for $5.5M .)

"I think it's a fair deal for Brightcove," Dan Rayburn, principal analyst at Frost & Sullivan and chairman of the NAB Show's Streaming Summit, said. "They get value from the deal."

He also believes this will be good for Ooyala's customers, given that Ooyala had curtailed investment in its OVP technology.

Ray, meanwhile, believes that the acquisition will help Brightcove accelerate its global expansion plans. "They've got some geographies, some great well-known customers in geographies where we aren't very strong or not present at all," he said.

Brightcove has not baked Ooyala's OVP business into 2019 revenue guidance of $168 million to $172 million, but expects the deal will be accretive on an adjusted EBITDA basis this year. Brightcove generated Q4 revenues of $40.9 million, up 2% year-on-year, but slightly below guidance due in part to lower-than-expected service revenues. About 54% of Brightcove's Q4 sales came from North America.

— Jeff Baumgartner, Senior Editor, Light Reading