Akamai Adds Media Management Tools With Purchase of Nine Systems

It's like 1999 all over again, minus the Y2K craze and millennium parties. As 2006 comes to a close and business is winding down for the holiday season, someone forgot to inform the mergers and acquisitions departments of the nation's biggest content delivery networks that they can turn the afterburners off.

"The marketplace for content delivery services is rapidly expanding as the needs for companies to integrate streaming audio and video into their web presence become even more critical and more complex," said Internap CEO James P. DeBlasio when the company announced its acquisition of VitalStream in October. "Together we expect to become a formidable force in the rapidly growing streaming media and content delivery market."

The Internap-Vitalstream deal should be complete by early 2007. Before that, though, Akamai will have completed its acquisition of Nine Systems in yet another consolidation of streaming media players.

According to a press release announcing the deal just before Thanksgiving, Akamai intends to integrate StreamOS-Nine Systems' streaming management tool into the Akamai framework. Akamai had tried for years to put together such a tool, but the market was not as potentially lucrative as it is rapidly becoming.

"We are excited about offering a new and comprehensive solution for the delivery, management, and control of online media assets," said Paul Sagan, president and CEO of Akamai, in the press release. "Nine Systems has established itself as a leader in the creation of powerful web-based tools for businesses to easily produce, publish, and distribute their streaming and downloadable media. Integrating Stream OS into our delivery network will allow Akamai to more fully support asset control, rights management, and media reporting to better enable our customers' digital media businesses."

This acquisition announcement comes on the heels of the funding of another large-scale CDN-Limelight Networks—that bills itself as an alternative to Akamai and is facing lawsuit filed by Akamai several days prior to Limelight closing a $130 million funding round led by Goldman Sachs, first announced in July. The lawsuit states that Limelight infringes on Akamai's patents with "malicious intent." Goldman Sachs gained approximately 53% of the company for its part in the funding deal and moved in late October to place Jeff Lunsford in the CEO's position and chairman's role.

Industry pundits had posited that an acquisition of Limelight by Akamai was possible, but the news of the Nine Systems acquisition casts doubt on the likelihood of Akamai buying a system that closely mimics its own edge-caching delivery model for on-demand content, now that Akamai has a streaming media content management system almost within the fold.

"This is a big win for our customers, and for companies requiring rich media management, publishing, and robust delivery," said Troy Snyder, president and CEO of Nine Systems. "Nine Systems' rich media publishing and management tools already power the online media experience for some of today's best-known companies in the music, broadcast, sports, entertainment, inspirational, advertising, education, and government markets. By joining forces with Akamai, our customers will have access to the leader in accelerating content and applications online, supported by a combination of the most experienced teams in the industry."

The deal, expected to close by year's end, is tentatively planned to be accomplished in both cash and stock, with approximately $7 million in cash changing hands and almost 3.1 million shares of Akamai common stock being used to acquire all of the outstanding common stock, preferred stock, and vested and unvested stock options of Nine Systems.

"We believe that as our business supporting media clients grows and their needs advance, the combined Akamai and Nine Systems rich media framework will allow us to develop the best solutions to help our customers," concluded Sagan. "[Our goal is to help them] simplify the control, management, distribution, reporting, and monetization of digital assets on the Internet."

One thing is for certain: executive teams and investors in other companies with streaming media platforms similar to Nine Systems' Stream OS platform are taking notice of the increased mergers and acquisitions activity. "Expect to see quite a bit more activity in the next six to twelve months," says Todd Loewenstein, CEO of ArcoStream. "The companies that are attractive as acquisition targets all have applications that sit on the network and add value. You can't just sell streaming anymore."