Market Insight

Kit Digital to file for Chapter 11

April 24, 2013

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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Video solutions provider and systems integrator Kit Digital will file for bankruptcy under Chapter 11. Under Chapter 11, Kit's corporate reorganization will be backed by the firm's three largest shareholders Prescott Group Capital Management, JEC Capital Partners, and Ratio Capital Partners. While it is not clear precisely how much re-capitalization will take place, Kit itself will be the only entity to go through bankruptcy; five of the firm's constituent companies - Ioko, Polymedia, Multicast, Megahertz Broadcast, and Kewego - will form the basis of the newly-formed, re-dubbed Piksel.

Between 2010 and 2012, Kit Digital embarked on a series of acquisitions intended to strengthen its market position within IP-video. In so doing, Kit amassed considerable expertise   and technology across three key segments: asset management, via the acquisition of Polymedia and Kewego; system integration, via the acquisition of Megahertz Broadcast, Ioko, and Benchmark Systems; and user-interface (UI) and user-experience (UX) tools and development, via the acquisition of Kyte and KickApps.

Details are still scant, but what is known about the re-organization signals a Kit - or rather, Piksel - concentrating on a more restricted but focused set of competencies and opportunities. Retention of the Ioko and Megahertz assets suggests that system integration will comprise a cornerstone of Piksel's positioning. Given the goodwill and respect that the industry harbours for Ioko, and the firm's centrality to a number of very high profile IP-video launches - Sky Player and Channel4's 4oD among them - retaining Ioko assets in particular is likely to be strategically valuable.  Likewise, retention of Polymedia and Kewego will allow Piksel to double-down on an opportunity that is continuing to sweep across the broadcast space: the movement to re-think the asset management chain, and consolidate what until now have been siloed online and broadcast workflows.

What is perhaps most telling is Piksel's apparent movement away frontend, value-added services. Between the Kyte and KickApps acquisitions, Kit attempted to shift a substantial portion of Kit Cloud's value - Kit's video management solution - toward the frontend. Rather than focusing on the development of core asset and content management capabilities, Cloud's differentiation revolved around video player development, multi-device app authoring, app porting, and the implementation of in-app social viewing functions. The market for frontend, value-add services is extraordinarily competitive, and presents a difficult path to differentiation or specialization.

 It is unlikely that all frontend, on-device intellectual property assets will be jettisoned during the course of Kit's reorganization. However, given that neither Kyte nor KickApps has explicitly been mentioned as part of Piksel suggests that the new entity will be focusing its development, and messaging, where most of the value truly lies: asset management.

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