Market Insight

Ericsson to acquire Red Bee Media

July 01, 2013

Tom Morrod Tom Morrod Research Director | Consumer, Displays, Media, Security & Telecoms

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Red Bee Media, one of the leading media broadcast services in the UK. The acquisition, subject to regulatory approval, will include Red Bee Media's employees and infrastructure - currently controlled by Macquarie Advanced Investment Partners, part of the Australian financial group. Once approved, Red Bee Media will confirm and extend Ericsson's expertise in media asset management, playout and digital video publishing, metadata services and content localisation. For Ericsson, which was previously more focused on managed service portfolios for telecom operators, this acquisition further expands its capabilities in the media sector. It will be the second major transaction, after acquiring the Broadcast Services Division of Technicolor for $25m nearly a year ago.

Ericsson has been present in media managed servicing for several years now, but it was only after it acquired the Broadcast Services Division (BSD) of Technicolor in 2012 that a new expertise and clients were added to its portfolio. For Ericsson, focusing on managed services as its core business strategy, Technicolor's BSD brought in both global scale and experience across countries. A year after transaction Ericsson Broadcast Services (EBS) serves customers in countries such as the UK, France, Sweden, or the Netherlands, already managing over 1.5m hours of broadcast from its playout centres and delivering over 200 channels.

The $25m acquisition of Technicolor's BSD and the creation of Ericsson Broadcast Services offered the scale and range of services needed to compete in the media sector. EBS offers already services encompassing ingest, QC, compliance, transcoding, archiving and distribution for HBO Nordics, Swedish TV4 and ITV among others. It also offers the Media Delivery Network, a single platform solution to the delivery of managed and unmanaged content and proposes a multiscreen solution to its customers. In April 2013, Ericsson reached an agreement with Microsoft to acquire Microsoft Mediaroom, one of the leading IPTV and multiscreen solution providers, with 20 per cent share of the global IPTV STB installed based by the end of 2012. Mediaroom is an IPTV platform deployed at operator's head-ends and inside customer's set-top box, but with a wider opportunity to provide managed services for multiscreen and IP video delivery which might fit into Ericsson's wider media strategy.

The acquisition of RBM, with yearly revenue of $240m, will open up new perspectives for growth for both companies. For Ericsson it is vital to step into new markets with high entry requirements. They will expand its customer database, product portfolio and know-how. Ericsson was lacking in video editing capabilities and has integrated with Forbidden Technologies' FORscene to provide video editing, project management, and metadata creation, areas where RBM is particularly prominent. RBM's presence in most Western European countries and Australia, with over 120 channels managed, production and postproduction and user interface services, fits well together with EBS' expansion plans. Red Bee is already seen as a fully developed managed services provider with its own OVP (Online Video Player). The combined company will grant EBS (including RBM) an estimated revenue of more than $250m and the ability to offer services starting from production to delivery either traditional way or OTT. It is the first major repositioning of a competitor in the media managed services industry since Ascent Media sold its creative and distribution businesses in 2010 to Deluxe and Encompass respectively in deals totalling just under $200m. Since then intense consolidation of technology and services has seen a small number of large competitors such as Arqiva and TDF in Europe, and Deluxe and Encompass in the US, which Ericsson will be up against for traditional services.

In a wider market context, RBM has been looking to reposition itself away from the notion of a linear playout company with additional capabilities within the comprehensive media asset management service. Undoubtedly, combining assets with EBS makes them even more of a contender in the playout sphere, where with over 300 managed channels they are going to be amongst the widely used in Europe. Furthermore, the new creation will capitalise on Ericsson's position in telecoms and mobile service provision as mobile operators start to provide more video distribution (demanding both services and technology). With Ericsson's position in telecoms, Microsoft Mediaroom's in IP video and multiscreen, and Technicolor and RBM's in traditional broadcast, Ericsson's new suite of capabilities looks like a strong contender in the future landscape for video delivery.


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Ericsson Red Bee Media
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