Streamticker 2008: The Year in Mergers, Acquisitions, and Investments
Many have also speculated that larger companies in larger industries will eventually take a major role in the streaming/online video industry, including telecoms. For example, AT&T announced in June that it would spend $70 million in 2008 to build out its CDN infrastructure, something it also did back in 2000. Similarly, in January 2007, Level 3 Communications, LLC acquired the CDN assets of SAVVIS for $135 million (and later those of StreamCast) and has since become one of the largest providers in terms of storage capacity as well as a pricing leader.
In an interview with Streaming Media’s Dan Rayburn, Level 3 CEO Jim Crowe said, "Making a full range of optical and IP services remains core to our strategy. This approach allows us to meet the complete needs of media and entertainment companies that generally purchase a range of services from CDN to waves and sometimes dark fiber for data center interconnection and other facilities. … Because we have a portfolio of services to sell, we can leverage our ability to sell CDN and Internet transit to those customers that need both. … Based on the customer’s solution needs, we can bundle a host of services that we believe no other CDN provider is able to do today."
Following Crowe’s logic, it is not impossible to surmise that at some point CDNs will be viewed more as a technology or an arrow in the quiver of a larger company than as a stand-alone industry and that pure-play providers could cease to exist. This also would lend support to the countless rumors that circulated last year that providers such as Akamai and Limelight Networks were acquisition targets and that telecom providers, both domestic and foreign, were interested in acquiring a CDN, as were other technology companies such as IBM and Microsoft.
Another wide-reaching industry that is likely to play a big part in consolidation in future years—but that had very little involvement this year—is media. Although it is likely that media companies will continue to rely on partners for the underlying technology behind streaming and online video delivery, many believe media companies will continue to acquire websites primarily for distribution and, to a smaller extent, content. In past years, these deals made headlines, but in 2008, the only thing that came close was Comcast Interactive’s $125 million August acquisition of female-oriented email newsletter DailyCandy. Pilot Group Ventures purchased a majority share of the company in 2003 for $3.5 million.
DailyCandy has more than 2.5 million subscribers and, similar to NBC’s headline-grabbing $600 million purchase of iVillage in 2006, will help Comcast expand its online presence as more of its customers look to the web for entertainment. According to Comcast executive vice president Sam Schwartz, who issued a statement to paidContent.org at the time of the sale, "DailyCandy is a leading online brand that reaches an engaged, loyal and targeted female demographic with a unique editorial voice. They have a highly successful and differentiated advertising and business model that touches people on a very local level. We look forward to the obvious cross-promotion and content development opportunities across our CIM and Comcast brands."
The Legacy of 2008
Summing it up, 2008 will not go down as a banner year for online video M&A. Years from now, we will not meet at industry conferences and look back on 2008 as the year everyone got rich. Instead, we’ll remember it as the year when companies really dug in and fought to survive. Our stories will be more anecdotal. Someone will tell us that 2008 was the year that his or her company stopped allowing employees to fly first class. Someone else will tell us it was the year that he or she had to cut the company’s work force in half. Equally important, although certainly less talked about, will be how 2008 was a year in which the industry began to grow up, perhaps because it had no choice. And if we are lucky, we may even be talking about some stealth deal no one foresaw having the positive impact it did; even better, hopefully, it’s your company we’re talking about. After all, no one ever says the best deal they got was the one they paid the most for.
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