ChainCast Acquires StreamAudio

On Tuesday, ChainCast Networks (www.chaincast.com) announced that it has acquired StreamAudio, a provider of streaming services for radio staions, for an undisclosed amount.

Joseph Rozenfeld, senior VP of engineering and CTO of ChainCast, said the relationship between the companies dates back to early spring this year, when the companies started testing out ChainCast's peer-to-peer system. Soon afterwards, said Rozenfeld, the acquisition started to make sense for both companies.

ChainCast’s technology is a peer-to-peer networking technology that allows webcasters to lower their bandwidth costs. Individual users tuning into a webcast essentially act as servers and distribute content along to other users, as in a chain. One user can route a stream to several other players in the network. This means that content owners don't have to stream individually to each listener, but rather to a small group of users.

Darren Harle, president and co-founder of StreamAudio said that the deal makes sense because bandwidth costs are too high to sustain his business. He mentioned the biggest conundrum of streaming, where as you become more successful with more listeners, streaming and bandwidth costs increase too. "It's a technology that really makes us profitable from the outset," he said.

The two companies would not disclose how much revenue was generated through ChainCast's bandwidth savings. "We're not free to disclose numbers," said Rozenfeld. "But [StreamAudio] is in the black right now, where they were fairly deep in the red before."

In the past few weeks, a number of Internet radio companies have folded because they couldn't turn a profit. Last week NetRadio shut down operations, and on Friday, RadioWave laid off all of its employees and closed up shop. "Without a better streaming infrastructure, those business models are never going to work," said Rozenfeld, about the companies going out of business. "They can't generate enough revenues to cover their streaming costs."

"With the acquisition of StreamAudio, we will prove that Internet Radio can sustain a profitable business model if, and only if, webcasters can dramatically reduce their cost of streaming," stated Paul Distefano, ChainCast’s president and CEO, in a statement. "Our technology and content delivery platform made this work for StreamAudio, and we can make it work for any media company or any one of our other potential customers."

Interestingly, ChainCast, the newer company with no announced customers, acquired the more established company, StreamAudio, with many real-life customers. Rozenfeld said it made sense because ChainCast essentially owns the pipes or distribution of content. "Whoever owns the pipes, owns the world," he said, comparing ChainCast to companies like WorldCom or AT&T. Rozenfeld said ChainCast isn't announcing any other customers yet.

ChainCast is aiming to convert 90 percent of StreamAudio's stations to its peer-to-peer network, but it will probably never convert all its stations because some are too small. "Our service is capable of doing both [peer to peer and regular streaming]," said Rozenfeld.

StreamAudio will remain a separate entity within ChainCast, so there would be no major upheavals to employees or customers. Harle said that StreamAudio runs as a small, tight company that keeps expenses down, with just 10 employees. "StreamAudio's mission stays the same," said Harle. StreamAudio currently has a low price of $395 per month for companies looking to get their radio stations online. For ChainCast, the acquisition gets the young company into a whole new world of terrestrial broadcasters, including Cox, Zimmer, Salem, Entercom and others.

Previously, StreamAudio had a contract with Akamai for bandwidth and delivery. But StreamAudio said that it recently cancelled that account to go with ChainCast now. Rozenfeld was happy saying, "We're proud to have former customer of Akamai's."