Restructured OpenTV Targets Era Of Sustained Profitability
[Satellite News – 2-12-08] OpenTV, the U.S. based technology vendor, hopes the structural changes made in 2007 will better position the company in 2008.
The supplier of middleware and TV solutions to satellite pay-TV operators has a much leaner focus than before, said Ben Bennett, OpenTV’s COO and acting CEO. “We have removed some of the clutter from the OpenTV business over the last 12 months or so,” he said. “We had a lot of little businesses we acquired over the last few years. Some of those were neutral, and some of those were losing money for the company. An example is something like PlayJam, when the company had an initiative and focus around creating and operating interactive broadcast channels. So we have had an initiative to clear out some of those loss-making businesses. From a financial perspective we are much more health, and have a solid platform in which to move into 2008 and 2009.”
Todd Mitchell, a media equity analyst at Kaufman Brothers believes the sale of these assets makes sense. “OpenTV is selling PlayJam in an effort to simplify its business lines. We view this as positive,” Mitchell said in a November research note released after OpenTV announced its third quarter results. “ This is most likely one of the last in a series of divestiture of unprofitable niche businesses that we think were a distraction to management. Afterward OpenTV will have just three basic business lines: middleware, advertising and participation TV. OpenTV has a leading position in each of these businesses and all have potentially large end markets.”
Mitchell lowered its outlook for OpenTV after the company missed expectations in the third quarter, but he believes the OpenTV is poised to turn things around in 2008. “If you look at the organic demand, whether it is the transition to digital, or the upgrade in the developed markets, or the proliferation of pay-TV across the world, there is a very strong, organic demand for what OpenTV does,” he told Satellite News. “I would call it a high barrier to entry global business, and I see them as the number two player in this space. I think their proposition for service providers is very strong.”
OpenTV has restructured its business into two lines — middleware and advanced advertising, said Bennett, and with the company doing a lot of business with satellite pay-TV operators, he hopes added competition, particularly from telecommunications companies, will lead to more business for OpenTV. In the past two months, the company has announced deals with TrueVisions UBC, a direct-to-home player in Thailand, and Sky Italia.
“I think we have some great traction with our existing satellite customers,” Bennett said. “If you look at the market in general, our customers are now seeing some real competition. Competition is good for some, and not for others. It is good for us. There is competition from IPTV. What that does is that existing customers invest in being competitive. We are talking to the BSkyB’s of the world about advanced features such as USB support, hybrid network support, and remote PVR (personal video recorders). Our middleware roadmap is enabling those sorts of features. They can have a PVR interactive experience without having a hard disk in the box. They can use that port for richer interactive services, whether it is wireless or not. The existing satellite customers present us some interesting new opportunities.”
The IPTV threat in some countries may still be only minor at this stage. For example, BT in the United Kingdom has about 150,000 TV subscribers compared to BSkyB’s 8.8 million, but Bennett believes even in this case, satellite operators still will have to react. “Satellite and cable customers are seeing competition in their backyard,” he said. “In the past, they have had it pretty easy. I would say that IPTV has been relatively slow in terms of volume and value-added services, although it will be a competitive threat in the future. So they do have to look at that threat seriously and come up with strategies that both retain their existing customer base and continue to acquire new customers. … The satellite operators will need to look at their interactive services, and make it a 21st century experience. Satellite needs to embrace on-demand. The IPTV guys will have on-demand. Satellite players are not going to watch that market deteriorate.”
OpenTV also is working on providing operators and broadcasters with a stronger product which will help them generate stronger advertising revenues. “On the advertising side, we are making some good inroads with our campaign management product,” Bennett said. “This is a big bet for us in the future. On the Internet, you are seeing a lot of money being spent on advertising. In the U.S., that is a $70 billion market, but the U.S. market has an issue. The broadcasters and operators are losing advertising revenues to alternate media sources like time-shifted content, video on demand, the Interne and mobile. We work with EchoStar for example, and allow consumers to access specific advertisements from their hard disk known in the industry as telescoping.”