Making Sense of the Google/Widevine Deal

In the annals of the streaming media and online video industries, there are a number of companies that have been around for at least a decade: Apple, Microsoft, and Real are just a few that have remained undaunted by the ups-and-downs of technology and fiscal landscapes. Others, like Adobe, have entered the market through acquisition, as it did when it acquired Macromedia in 2005.

This weekend, Widevine, another company that's been in the industry since the late 1990s, announced that it has been acquired by Google, a company that itself has been around since 1998, but has only in the past few years entered the online video market.

Widevine, which was one of the founding members of the Internet Streaming Media Alliance (ISMA), has morphed itself from its roots in IPTV controlled access to a more strategic role, straddling the worlds of digital rights management (DRM) and delivery optimization.

Terms of the deal were not announced, but the company has raised $50 million in venture financing since 2002, with its most recent round-earlier this year-of $15 million from Liberty Global, Samsung, and EchoStar. EchoStar and Samsung joined Liberty Global and previous funders, including Cisco, Telus, Rovi, JP Morgan and VantagePoint Ventures.

To get a sense of where Widevine started, and where the most recent growth has been, consider these facts, current as of earlier this year: While the company's pay TV target market has seen its controlled access technology deployed at hundreds of operators and approximately 5 million deployed clients, its internet video optimization and DRM solutions cover almost 50 million deployed clients.

Widevine has had several major wins over the past year, including recent announcements with Blockbuster, Panasonic, and Netflix. The latter is a client that has been making significant waves in the mainstream media, and may be a potential competitor to Google, although it's more likely that Google and Netflix will continue to partner as they have on the nascent Google TV application front.

Several theories have been proposed as to why Google purchased Widevine, ranging from the ability for Google to ingratiate itself with the studios and pay TV operators to the need to control the DRM for Netflix.

I think it's as much a Google TV play as anything else, though, based on a conversation I had back in March with a few of Widevine's executives.

In that conversation, which we published in April, Amanda Burrows, Widevine's product marketing manager, talked about the inclusion of Widevine in the Digital Entertainment Content Ecosystem (DECE) lineup.

"DECE chose five DRMs as approved for delivery," said Burrows, noting that Widevine is one of the five. "The benefit of DECE-approved DRM delivery for CE devices is that you can get a single code from the digital video rental company for a variety of devices. While the code is initially for a particular device, if you purchase a new Blu-ray player-which will have a different device ID-you can still use the code to watch the program, as long as you are within the limit of devices that rental company allows. Even if you reach the limit, deauthorizing of one device allows authorization of another."

As mentioned in that article, video optimization is, perhaps, the key differentiator between Widevine and other DRM providers.

"Your question about whether we are a DRM company expanding into other parts of the supply chain is valid," said Burrows, responding to a query about overlap between DRM and delivery. "We decided that we wanted to expand on a trend of consumers wanting to watch TV on PCs (such as Hulu)."

"We knew we could secure it, and our customers wanted to deliver content across the internet (best-effort) alongside what they'd done in the MSO," she continued, "but the MSOs didn't want to go to the PC, because of fear of what happened with the music industry (everything being given away for free). So Widevine saw this optimization service as a growth opportunity to move beyond just DRM."

As of this week, the company moves well beyond DRM, into the world of controlled access for any number of over-the-top and mobile devices that are-or soon will be-a part of the Android ecosystem.