BRIC Building
It may for instance look to bite into the government or faith-based verticals, where KIT is not currently very strong. Penetration into BRIC markets (Brazil, Russia, India, and China) is another target."There are more opportunities in Brazil and India, and also Greater China and Eastern Europe, than we are able to properly service in terms of sales.
The 2008-2009 recession was felt more severely in OECD countries but another reason for KIT digital’s BRIC approach is the phenomenal number of young people coming of age in these markets, more used to understanding digital and new media. And these countries are making capex decisions which are leapfrogging more developed nations’ IP infrastructure in many cases—particularly around 3G mobile and IPTV cable systems.
He notes that, as one indication of BRIC potential, there is a over 25% IPTV penetration in Brazil whereas in the US it’s less than 2%. He suggests that countries like Poland have a far greater number of 3G handsets per capita than the US. Incidentally Isaza Tuzman, a U.S. citizen, has both Latin American and Middle Eastern roots.
"If we are weak in China, where we are number three, the good news is that ahead of us are Chinese-only competitors. We may look at joint ventures to enhance our market share there.
"We don’t want to approach companies that are so small as to render the buy meaningless. Likewise, we don’t want to acquire a company so large that is threatens to swamp us. Any prospect needs be accretive to our business from day one, likely be turning over no more than 15% of our pro forma combined revenue, and have a corporate governance and company culture that we feel is a good fit."
The Three-Screen Future
The phasing in of its next-generation VX-one platform has already begun and is an area of major strategic focus through 2010.
"We see tremendous potential for '3-screen' IP video platform deployments with mobile operators as well as MSOs globally. We’re not retiring the old platform (the basic data layer is the same), but the biggest difference is that it is harmonized across three screens—providing one interface and central administration system for clients to manage video across mobile, IPTV-enabled television sets and PCs."The platform is also being adapted to support delivery of IP video to tablet computers. KIT has also partnered with video search engine specialist blinx and video facial and object recognition company Viewdle for it to re-sell or offer these technologies on an ad revenue-share basis with third parties.
VX, he claims, will be the first platform to enable centralized asset management across 400 device types and 73 codecs "for industrial grade clients pushing millions of assets through the system."
In the U.S., companies are trailing their international competitors—particularly those in East Asia and Western Europe—in the use of mobile video as a tool to grow their business.
A KIT-sponsored survey last December found that while nearly 60% of executives believe that video content distribution is "important" or "very important" to their business, only 16% make use of mobile video capabilities.
"Video content is rapidly consuming the bulk of energy and resources around new content produced for web-based consumption, and while many U.S.-based companies are developing some form of an online video or even cable-like IPTV offering, they are behind their global competitors in developing a mobile video strategy," added Arnd Froehlich, KIT's global head of mobile services and innovation. "We anticipate our U.S. client base to grow ten-fold over the next several years as 3G and 4G networks in North America become prevalent, and we see a rapid catch-up period vis-a-vis European and Asian markets."
IPTV is also far more advanced in Europe and Asia than in the U.S. "Two years ago 90% of our revenue was in over-the-top deployments and that’s now down to 50%, although that 50% OTT piece has also grown in revenue. The pace of growth is very high and the main reason for this is not technical – although there are strong arguments for better QoS from greater bandwidth control.
"The main reason has to be the ease of consumer transaction. A simple click and a service such as Champions League highlights is added to the customer bill. It’s a simple, direct and trusted customer relationship with your existing mobile carrier. Moreover IPTV or mobile video don’t always require the end customer to pay at all. Content can be ad-supported with advertisers paying an operator to reach the customer."
KIT digital believes the video management space is becoming more specialized, as one group of companies focus on browser-based video players and others like KIT, thePlatform (a subsidiary of Comcast), Iredeto’s Entriq division, or Elta TV in China, focus on the asset management piece.
"I see the industry bifurcating with some focusing more on SMEs and developing video players in browsers and others getting deeper into asset management and publishing up into the players of the first set of companies. This is not a value judgment—they are just different paths," explains Isaza Tuzman.