Streamticker: The Biggest Streaming Media Mergers & Acquisitions of 2022
When it comes to mergers and acquisitions in the streaming industry in 2022, there’s only one place to start: with Warner Bros., which officially merged with Discovery in April and has been in restructure mode ever since.
Teething problems followed inevitably on the US$43 billion deal, as the media giants merged to form Warner Bros. Discovery (WBD). As 2023 begins, the company is under pressure to slash US$3.5 billion in cost and grow its global streaming business. On reporting its Q3 2022 figures in November, WBD’s stock had lost half its value since the merger closed.
The big plan is to merge HBO Max and Discovery+ streaming services into a single offering, which will launch first in the US this spring. WBD then plans to roll out the unified platform worldwide (with Europe/Asia Pacific pegged for 2024). The brand name and pricing have yet to be unveiled.
WBD expects to have 130 million global subscribers and its DTC business to generate US$1 billion by 2025. It reported a net loss of US$2.4 billion in Q3 2022, following a loss of US$3.4 billion in Q2, but added 2.8 million streaming customers (HBO Max, HBO, and Discovery+ subs combined) in the third quarter, bringing its total to 94.9 million globally. Revenue from streaming dropped 6% to US$2.3 billion, with decreases in licensing and distribution revenue.
Synergies have to be found in the content creation and distribution operations of legacy Discovery and Warner Bros. companies. While Discovery is still best known globally for its blue-chip factual programming, in Europe, its brand is increasingly synonymous with live sports. Squaring those two pipelines is a huge and possibly insurmountable task.
“We will start by tackling opportunities in standardisation,” explained Warner Bros. CIO Dave Duvall at IBC 2022. “There are more than 850 distributed linear feeds in the combined portfolio evenly balanced between the two legacy companies. Playout technologies is an area we are pushing to standardise and align.” He went on to explain, “In places where we duplicate, we need to rationalise. There’s no sense having different tech stacks or teams. We want to eliminate that and centralise where it makes sense.”
Duvall said the biggest challenge with live is needing to produce more content in support of the digital experience. “It’s not just linear output; it’s the every-minute-of-every-match promise. The volumetrics of how we do that is with more software and more capability. Live is very intensive from a human capital perspective. HBO Max has very limited live, but its efficiency versus that of Eurosport is night and day.”
Cost savings have also included restructuring at the top of many of the group’s divisions, content write-downs (including, controversially, the non-release of the feature Batgirl), and making 30% of the company’s ad sales staff redundant.
WBD CFO Gunnar Wiedenfels said in September that the company already achieved US$2–$3 billion of actual cost savings, with the rest due in 2023.
That hasn’t stopped questions from arising about whether this mega-merger is too big a tanker to equip with outboard motors. Rumours are circling that the merged company is already for sale, which couldn’t legally happen until Q2 2024.
“We are certainly not above this M&A speculation, and our corporate demand data shows the benefits of a future WBD merger or sale to fellow legacy media giants NBCUniversal or Paramount Global” is how Parrot Analytics assesses the situation. It adds, “A theoretical combination of WBD and Paramount Global would have a corporate demand share of 30.3%, which would lead Disney by a staggering 10.5%.” Parrot also speculates that a buy by NBCUniversal “would account for more than a quarter of US demand for TV content. Its 27.7% share would dwarf Disney’s 19.8%.”
According to Parrot, “Neither of these M&As would require the sale of a broadcast network, potentially making them more palatable to investors and regulators.”
Discovery and BT Sport
Discovery+ in Europe offers sports at a premium tier, and this will be further developed when the joint venture with BT Sport is fully online. Announced last February, sealed in May, and rubber-stamped by the UK regulator in July, the US$756 million deal is for a 50/50 joint venture between BT Group and WBD.
Discovery is the senior partner. The UK telco had entered the pay TV market in 2013, investing heavily in rights to English Premier League (EPL) football as a loss leader to upgrade subscribers to its broadband package. With its attention now on rolling out 5G, BT sought to divest a non-core and expensive asset that is dictated by bidding wars to UK football rights.
Although Discovery has made headway in the UK, particularly with Eurosport’s Olympics coverage, its alliance with BT Sport gives it instant access to mainstream sports fans in the country. With the deal comes a package of live EPL matches until 2025 (shared with Sky Sports and Amazon Prime) and exclusive rights to the UEFA Champions League in a deal worth US$1.5 billion for 3 years to 2024. Eurosport brings staples like winter sports world cups, cycling grand tours, and tennis Grand Slams.
BT Sport had successfully wrested the mantle of most innovative sports broadcaster—in Europe if not the world—from Sky. It pioneered live 4K UHD broadcast and regular 360-live video and has experimented in 8K broadcasts, data-centric apps, and augmented reality. It also pivoted to remote production and has stuck to this since the pandemic.
Discovery is no slouch in the tech stakes either. Its flagship is the Cube virtual studio, but more significant is its pan-European operation, which sees tailored versions of the same event produced for different nationalities.
“The last thing we want to do is stop any of that innovation,” Scott Young, SVP of content and production at WBD, tells SportsPro. “I don’t mean just technological innovation but how we [innovate] in terms of the rights we acquire, how we deliver those rights to various platforms, and how we bring all this content together into one sports ecosystem. We want to build a sports platform that is premium for our audience.”
DAZN and ELEVEN
Sports streamer DAZN was at one point considered the favourite to land BT Sport. Having failed, it turned its attention to the ELEVEN Group, acquiring the global sports media business in September.
Global it may be, but 89% of ELEVEN’s revenue comes from Portugal and Belgium, according to Sportico, and the US$300 million in annual revenue ELEVEN generates does not appear to materially affect DAZN’s top or bottom line. For perspective, DAZN has committed to spending more than US$825 million per year on domestic Serie A rights in Italy alone.
The deal does, however, cement DAZN’s ambition to dominate European football streaming, which now includes the integration of ELEVENsports.com and the 40,000 games it streams each year. DAZN is now the OTT home of Liga Portugal and Belgium’s Jupiler Pro League. Crucially, it has no soccer presence in the UK but could be a strong bidder when Premier League rights are auctioned again in 2024.
The deal also saw DAZN take control of Team Whistle, ELEVEN’s dedicated social media unit, which is ranked within the top 10 US media sports properties on Comscore, with more than 700 million followers across its channels.
As Marc Watson, CEO of ELEVEN Group (and the former CEO of BT TV, where he helped establish BT Sport), says in a news release, “We see DAZN as the future of digital sports broadcasting and the ideal home for ELEVEN.”
DAZN chairman Kevin Mayer adds to Watson’s comments, noting, “This deal marks an acceleration of our strategy to diversify our offerings and leverage our fantastic sports properties and our platform into new markets and business models.”
DAZN seeks to create a single destination for global sports information, retail, ticket purchasing, sports betting, on-demand media, non-fungible tokens (NFTs), and Web 3.0 innovations. The company launched its NFT marketplace DAZNBOXING.io in July and DAZN Bet in August.
Interestingly, ELEVEN supports the production, delivery, and distribution of live games for FIFA’s OTT service, FIFA+. Notable too is that DAZN now holds the world’s biggest portfolio of women’s football content, which includes UEFA Women’s Champions League, Liga F in Spain, the English WSL, and the Japanese Yogibo WE League.
Microsoft and Activision
Microsoft dramatically added to its game studio portfolio when it acquired Activision Blizzard for US$95 per share in January 2022 in a transaction valued at US$68.7 billion.
With 3 billion people (half the world’s population) actively playing games today, and fuelled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment, according to a January 2022 Microsoft press release announcing the acquisition. The purchase is aimed at accelerating growth in the company’s gaming business across mobile, PC, console, and cloud, and it will provide building blocks for the metaverse.
If the deal passes the scrutiny of competition authorities in Europe and North America, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony. It already owns 23 game studios, including Minecraft maker Mojang and Bethesda, creator of Fallout and SkyRim. Activision Blizzard brings franchises like Halo, Warcraft, and Call of Duty to Microsoft, which plans to launch these games into its subscription service Game Pass (which has surpassed 25 million subs).
“They’re [Microsoft] buying Activision to put Activision titles and Blizzard titles on Game Pass and drive subscriptions without requiring people to buy a console or PC,” Michael Pachter, managing director of equity research at Wedbush, tells Yahoo! Finance. “They have aspirations to be like Netflix. They’re looking well beyond 25 million subscribers, and they’re looking at 200 million households who can play games and pay them $15 a month. And I think it really has a chance of happening if they close the deal with Activision.”
Microsoft maintains that its principal interest in the planned acquisition is Activision Blizzard’s expertise in mobile gaming. The firm’s head of gaming, Phil Spencer, tells Bloomberg that “the biggest gaming platform on the planet is mobile phones,” an area in which Microsoft lacked expertise. Activision happens to own Candy Crush Saga. The 10-year-old game remains one of the most popular mobile games of all time.
With processing speeds on phones about to go into overdrive with 5G chips and 5G connectivity, it won’t be long before console-quality games are available on-the-go.
“There are [3.5] billion active mobile gamers. … And easily, 10% of them spend money over the course of a year,” according to Pachter. “So, you’ve got 600 or 700 million people spending money, more likely 20% … in mobile games, as opposed to a couple hundred million people who buy console or PC games.”
Virtual worlds like Minecraft could be anchor tenants of the metaverse, but Microsoft may also have its eye on another content stream. Its ad sales and ad serve partnership for Netflix is seen by some as a prelude to eventually swallowing a company that had lost well over half its peak US$300 billion market cap at the beginning of 2022.
Tata and The Switch
At the end of 2022, Tata Communications outlaid US$58.8 million for New York-headquartered video services provider The Switch. The deal gives Tata a strong foothold in the US M&E market and extends its live sports transmission portfolio.
The Switch supports delivery of broadcast, streaming, and social media, including for events such as Wimbledon, the CONCACAF Gold Cup, and the Melbourne Cup, and operates a cloud video services platform called MIMiC, which supports live-distributed IP video production. It has deployed 100-gigabit connectivity to serve customers in Miami, Los Angeles, and New York, with links to other nodes across the US.
“The Switch production infrastructure as a service model will allow Tata Communications customers to accelerate adoption of remote production from any event around the world,” says Tri Pham, chief strategy officer at Tata Communications.
With that, we’ll move on from media content company, service, and platform acquisitions to the major tech M&As of 2022.
Limelight + Edgecast = Edgio
With all the attention focussed on streaming content from the cloud in recent years, the industry’s next evolution is to combine cloud compute with processing at the edge. In order for real-time interactive media applications like mobile multi-player gaming, VR 360, and Multiview video to take off, building out the network edge is a must.
Traditional CDNs are still large data centre-centric; hence, there is the need to add an edge to their portfolios. Limelight did this in March, acquiring Yahoo’s Edgecast service for US$300 million and rebranding the combined entity Edgio.
Formerly, the media network division of Verizon Media, Edgecast claims its global edge platform delivers a capacity of more than 200Tbps, more than 300 global points of presence (POPs), and more than 7,000 ISP connections. It also has natively integrated cloud security, an edge video platform, and web applications.
According to a June 2022 Business Wire article, “Edgio now delivers about 20% of the world’s internet traffic from instant-loading websites to high-demand content for 20,000 leading digital companies such as Amazon, Sony, Microsoft, Verizon, Disney, TikTok, and Twitter.”
The article quotes Edgio CEO Bob Lyons as saying, “In a world where digital workloads and their consumers are increasingly distributed, the ability for companies to deliver exceptional digital experiences requires them to more productively build faster and safer solutions for their customers at the edge.” Lyons adds, “Edgio now boasts the most complete edge-native web application and API solution, best-in-class streaming, and delivery capabilities – all running on the world’s most performant globally scaled edge network. These unique capabilities create a robust platform for growth and profitability.”
Devices and Xilinx
Announced in 2020 and completed in February 2022, Advanced Micro Devices’ (AMD) US$50 billion purchase of Xilinx gives it the firepower to compete with Intel and Nvidia. Together with the US$1.9 billion swoop for Pensando Systems in May, the chip maker hopes to grow its business in cloud, high-performance computing, and data centres. Notably, around the same time, Nvidia ducked out of its plan to take over UK chip giant ARM—an AMD partner—after failing to leap regulatory hurdles.
In a company press release from February 2022, AMD president and CEO Lisa Su notes, “Xilinx offers industry-leading FPGAs, adaptive SoCs, AI engines and software expertise that enable AMD to offer the strongest portfolio of high-performance and adaptive computing solutions in the industry and capture a larger share of the approximately $135 billion market opportunity we see across cloud, edge, and intelligent devices.”
The synergies between AMD and Xilinx are especially important in AI and the data centre. “Xilinx will also further AMD’s exposure to automotive, 5G infrastructure, and general embedded systems,” Forbes reports. “The Pensando acquisition gets AMD into the Data Processing Unit (DPU) market for networking and enhances AMD’s system expertise putting it on a more even footing with Intel and Nvidia.”
AMD still lags behind Nvidia with respect to AI software, the analysis reckons, adding, “but with the addition of Xilinx and other partnerships, such as Microsoft Azure, the company hopes to catch up.”
Dolby and Millicast
Also in February 2022, Dolby acquired video streaming tech firm Millicast to flesh out its developer platform, Dolby.io. The Millicast engineering team, which has developed standards such as WHIP, will bolster the WebRTC engineering expertise of Dolby.io. WHIP enables WebRTC interoperability, the company says.
In the press release announcing the acquisition, Marie Huwe, SVP at Dolby.io, notes, “There is a growing demand to make online events as lifelike and compelling as being there in person. … Together, we expand the Dolby.io platform to make it even easier for developers and businesses to stream real-time content and immersive, interactive experiences that look and sound incredible.”
With Millicast, developers can stream the interactive events they build with Dolby.io, such as conferences and concerts, to audiences of more than 60,000 people with delays of less than 500 ms, Dolby says.
Telestream and Encoding.com
In September, Telestream claimed that adding Encoding.com to its portfolio would revolutionise cloud media processing workflows for M&E. Encoding.com tech powers VOD workflows for ingesting mezzanine source video, transcoding, adaptive bitrate (ABR) packaging, DRM, and DAI triggers and caption conversions for clients, including Hollywood studios. Encoding.com claims to be the fastest cloud encoding platform available and even guarantees it with queue-time SLAs. So why sell?
“At Encoding.com we are at the orchestration level,” Jeff Malkin, former Encoding.com president and now VP of cloud revenue at Telestream, told Streaming Media last August. “We developed the engines ourselves to operate in the cloud but we were not operating at the data layer. Telestream operates at the data layer with proven tools that customers are already comfortable with. Vantage was already being used by the customers I was going after."
“I was selling against Vantage on-prem to customers. While customers understand the value of cloud—ease of deployment, efficiency of dynamically spinning up and down instances, SaaS cost models—they were weighing that versus all the powerful features that Vantage had that weren’t in the cloud,” Malkin said.
By adding Telestream Media Framework engines into the Encoding.com platform, Telestream hopes to offer more complex broadcast and post OTT workflows, both cloud and on-prem.
Look out for new technology Broadcast HLS in early 2023 that will help remove duplicate processes in broadcast workflows.
IMAX and SSIMWAVE
In October 2022, according to IMAX Corp., it acquired SSIMWAVE for US$21 million to “drive new, recurring revenue and grow its global leadership in entertainment technology.”
SSIMWAVE technology “optimises” live and VOD for clients, including Disney, Paramount Global, and WBD. It has mapped the human visual system to patent “one of the most accurate measures of perceptual quality, which its AI-driven software applies to enhance video streams and files in real time.”
The purchase adds to a portfolio of non-box-office-related assets, including IMAX Enhanced, a remastering service to optimise films for at-home streaming viewing, and IMAX AI, a joint venture with visual effects firm Maximus that develops high-resolution video tech for streaming services.
In an interview with The Hollywood Reporter, IMAX CEO Richard Gelfond says SSIMWAVE gets the large-format exhibitor deeper into TV and streaming content. “Many of our prior business efforts were to enter new markets on our own. With this one, we’ve acquired first-in-class technology with world-class clients, revenues, [and] proprietary technology [that] leverages our brand and our core business.”
Vbrick and Ramp
The enterprise CDN (eCDN) market consolidated in December when two of the biggest vendors became one. Virginia-based enterprise video firm Vbrick announced the takeover of rival provider Ramp. According to Vbrick’s announcement, the two vendors intend to offer “multiple video distribution modalities,” assisting with different types of network setups and delivering bespoke options and enterprise use cases.
Without an eCDN, every request for a video stream across an enterprise network will result in a unique session. In a scenario in which a CEO streams a live broadcast to a 10,000-person company, this could result in potentially as many as 10,000 unique sessions traversing the network. The job of the eCDN is to optimise these streams to minimise network impact and optimise video performance.
Boston-based Ramp claims its eCDN delivers bandwidth savings of up to 99.9%. An eCDN may also cache video content, again further reducing bandwidth consumption.
Paul Sparta, chairman and CEO of Vbrick, explains in a press release, “As video becomes more pervasive in the workplace, large organizations need proven and reliable enterprise video solutions with an eCDN that can optimize corporate network utilization and ensure great viewer experiences. Vbrick’s acquisition of Ramp consolidates the eCDN market’s best features and capabilities into a unified edge caching and multicast solution.”
Both companies experienced rapid growth after COVID restrictions as the corporate world adopted a hybrid return-to-office strategy. In August 2021, Ramp hit a record quarter, introduced new updates in the form of enhanced analytics, and announced a new Microsoft Teams integration.
In August 2022, Vbrick launched video platform as a service (VPaaS) for developers to utilise its cloud-native enterprise video platform. In November, it partnered with Pexip to offer a solution for securely managing and storing video content.
Enghouse and Qumu
Also in the enterprise video segment, in December, Canada’s Enghouse Systems announced that it is buying Minneapolis-based Qumu for US$18 million. The transaction was expected to close in February.
“The combination of Qumu’s video creation, management and delivery solutions with Enghouse’s video collaboration and streaming products strengthens the position of both companies in a competitive space,” says Steve Sadler, CEO of Enghouse Systems, in a news release.
Qumu makes live and VOD software for the enterprise and was previously known as Rimage. According to reports, the company has not posted an annual profit since 2011, and in 2021, lost US$16.4 million.
Among Enghouse’s clients is Americable International, which holds a contract to stream video to US military personnel serving in Japan.
Enghouse also acquired Espial Group, maker of a cloud-based video software platform, in 2019 and media processing developer Dialogic Group for US$52 million in 2020.
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