NDS Leads $20M Bet on BlackArrow

NDS Ltd. is teaming up with BlackArrow Inc. to hawk advanced advertising products to cable programmers and operators, after taking the lead in a $20 million, Series C round of financing in the five-year-old firm.

Under a deal announced Monday, NDS will become a majority investor in BlackArrow, whose backers include Cisco Systems Inc. (Nasdaq: CSCO), Comcast Interactive Capital , Intel Capital , Mayfield , and Polaris Venture Partners .

NDS, a long-time supplier of conditional access and interactive TV software applications, is 49 percent owned by News Corp. (NYSE: NWS) and counts DirecTV Group Inc. (NYSE: DTV), Cablevision Systems Corp. (NYSE: CVC), and Cox Communications Inc. as customers. The agreement with BlackArrow, which Comcast is starting using to run ads on its free, ad-supported video-on-demand (VoD) platform, gives NDS a foothold in the largest US cable MSO at a time when operators are stepping up their focus on rolling out advanced advertising.

Executives at BlackArrow and NDS say they’ll unveil combined advanced advertising products for cable operators and programmers this year, and they may make some announcements next month at The Cable Show in Los Angeles.

“There is very little, and almost nothing that has been seriously discussed, that we can’t do technically,” says NDS vice president of new media Todd Narwid, pointing to the potential of combining NDS’s middleware, interactive program guides, and interactive TV applications with BlackArrow applications designed to help programmers manage advanced advertising inventory and target ads to audiences based on factors ranging from demographics to geography or programming time. “The world is an oyster in terms of technical options,” Narwid contends.

BlackArrow’s standing investors joined NDS in the company’s third round of financing (the startup has raised a total of $58 million so far). BlackArrow CEO Dean Denhart wouldn’t say how much of a stake NDS gets in the five-year-old firm, other than noting that it will become “one of our majority shareholders.”

“It gives us a very strong balance sheet to execute our product road map,” Denhart said of the NDS investment.

Among recent cable deals, BlackArrow announced in October that Comcast began using its platform to dynamically insert pre-roll, post-roll, and mid-roll ads into "free" VoD programming on systems in Florida. In January, Bresnan Communications LLC announced it was testing BlackArrow's dynamic ad insertion platform in the MSO's Rocky Mountain region. (See Comcast Gets Dynamic With VoD Ads , Comcast, BlackArrow Team on VoD Ads , and Bresnan Tests Dynamic VoD Ads.)

Narwid says one of the draws for NDS was the suite of advanced advertising products that BlackArrow has for programmers, including advertising decision-making applications.

BlackArrow announced a deal in March with Fox Cable Networks (another News Corp. sibling) that enabled channels such as FX, National Geographic Channel, and auto racing network Speed to use BlackArrow's advanced advertising platform in their VoD programming menus. (See BlackArrow Signs Fox for VoD).

NDS and BlackArrow are competing with several advanced advertising companies looking to tap the advanced ad sector, which is poised for growth thanks to the wide deployment of digital set-tops and the development of specifications such as Enhanced TV Binary Interchange Format (EBIF).

They’ll compete (and possibly cooperate) with several firms, including MSO-backed Canoe Ventures LLC , Invidi Technologies Corp. , Visible World , and Microsoft Corp. (Nasdaq: MSFT)'s Navic Networks . (See Cable Breaks Out the ITV Drano , Charter Gears Up for Interactive Ad Rollout, and TidalTV Targets Ads for Set-Tops, TV Everywhere .)

— Steve Donohue, Special to Light Reading Cable