Telstra and Sky Buy Into Elemental Technologies

Elemental Technologies has announced its fourth round of funding totalling $14.5 million including over $7.3 million from Australian telco Telstra and $4 million from European pay TV giant Sky.

Telstra and Sky have taken an undisclosed minority stake in the Portland, Oregon firm and will look to gain expertise in software-based video processing. Neither investor will take a seat on the board.

The deal also extends the existing commercial relationship Telstra and Sky each have with the tech firm. Elemental processing is used to support Sky's OTT service Sky Go; Telstra is expanding its video over mobile services, and will use the entire range of Elemental products to do that.

“Pay TV is opening up to software-defined video,” explained Keith Wymbs, Elemental's chief marketing officer. “One of our ambitions is to capture additional pay TV business on a global scale. We already have fifty pay TV clients at various stages of deployment. There is a lot of market in the pay TV space.”

Wymbs adds: “2014 was our best year ever. We have more than 600 accounts in 55 countries and we added more than 100 customers in 2014. We feel that 2015 is an inflection point for software-defined video in which video infrastructure will move from a hardware-centric approach to IP. The trend toward mobility for video and IP for video overall is not stopping, and in fact fast becoming the cornerstone for media and entertainment. Typically, dedicated hardware has done the job of moving video around, but it is vital to the health of media businesses to be able to react to the pace of change. Hardware simply can't stand up to that pace.”

In Australia, Telstra provides has more than 16 million mobile customers, 7.5 million fixed voice customers, and 3 million retail fixed broadband customers. It has begun the deployment of 4G services, in addition to the wide-scale introduction of LTE Advanced technology. It has a particular focus on Elemental Delta for content delivery.

“Elemental Delta [introduced in September] is positioned just downstream of our core video processing technologies,” explains Wymbs. “It enables capabilities such as targeted advertising, intelligent caching and just-in-time packaging. This was the impetus for Telstra's investment. Whereas our compression products are mature, this is very early in Delta's product lifecycle. We want to have more relevance across the entire IP value chain, not just in content preparation but in delivery, too. That is the emphasis which we are placing on the investment going forward.”

Existing investors General Catalyst Partners, Norwest Venture Partners and Voyager Capital topped up the round, which was led by Telstra.

In a blog post, Sam Blackman, CEO and Co-founder, Elemental noted: “With an industry inflection point upon us, this alignment among market leaders will speed the transition to software-defined video architectures. For Telstra, Elemental’s video solutions are fundamental to its next-generation network strategy, which it is rapidly evolving to software, virtualization and cloud-based workflows. Telstra will use Elemental products across its large portfolio of media properties... [For Sky] as SDV architectures continue to mature, we believe there will be additional opportunities to collaborate in the future.”

Telstra claims to own one of the most technologically advanced IP backbone networks in the world, through a number of global subsidiaries. The company has licenses in Asia, Europe, and the U.S. and facilitates access to over 2,000 points of presence in 230 countries and territories across the globe.

In August this year Telstra acquired online video platform provider Ooyala. Prior to paying $270 million to build its stake to 98%, the telco had invested $61 million for an initial 23% share.

BSkyB (rebranded Sky since incorporating Sky D and Sky Italia) has been a serial investor in online video and new media related companies.