Thursday, December 22, 2011

Telestream's Acquisition by Thoma Bravo -- What It Means

Yesterday, the big news in the online video world was that Telestream, a long-time leader (and highly respected Sorenson Media competitor) in the video transcoding market, was acquired by private equity firm Thoma Bravo for an undisclosed amount of cash. While perhaps surprising to some, the news was not surprising to me at all for a number of reasons -- most significantly, for what it represents for the macro online and mobile video business.

First, to what the acquisition represents. In my recently-posted 2012 video forecast (click here to read them), one of my top 5 predictions was the following: "HD Video Enabling Eco-System Growth Explodes." And video transcoding, of course, is at the heart of enabling technologies, solving all the increasingly difficult issues of device specification, format and codec licensing and optimization, video resolution, frame size, network detection and optimization, adaptive bitrate delivery. These are just some of the technically challenging issues that make the heads spin for content creators. So, the Telestream acquisition underscores the critical and increasingly-central role of transcoding in the multi-screen delivery world that is growing exponentially all around us. After all, private equity firms don't "just" invest in companies -- they acquire companies because they are extremely bullish on an overall market opportunity.

Second, now to practical considerations. Telestream has been privately-held for well over 10 years. At a certain point, traditional investors understandably get "itchy" for a liquidity event. This was the right time in this case.

Bottom line -- expect further M&A in the video enabling space in 2012 as more and more companies view such technologies as being strategically fundamental to their overall missions. And, don't forget, leading online video platform provider Brightcove filed for its IPO months ago -- although I haven't heard much about this since, the company must be going public early in 2012. Is Ooyala next? My prediction -- Ooyala will be acquired in 2012.

Finally, congratulations to Telestream's CEO Dan Castles and team. Well done!