Market Insight

IBM acquires Clearleap

December 16, 2015  | Subscribers Only

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

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IBM has agreed to acquire Clearleap, a US based company who provides over-the-top (OTT) video solutions to the media sector. Clearleap’s OTT stack and SaaS solutions will be integrated into the IBM Cloud platform, and collectively, the combined portfolio will be positioned to help media companies reduce the complexity and expense of delivering digital content. Financial terms of the deal have not been disclosed.

Our Analysis:

The deal provides Clearleap with the ability to compete long-term in a crowded OTT-solutions space, and for IBM, serves as a means of strengthening its hand in media-and-entertainment specific services.

While Clearleap offers a comprehensive suite of OTT-solutions, and has succeeded in winning major deals with operators and broadcasters alike, the company’s long-term prospects are not necessarily rosy. The OTT-solutions space is incredibly competitive, and is characterized by its density of like-vendors. In a market where commoditization pressure is inescapable, competitive recourse has tended to take two forms. Solution providers have attempted to differentiate by investing in predictive analytics technology; firms have looked for scale and have positioned themselves for acquisition. Although Clearleap has raised nearly $45m in funding, the company’s yearly revenue stream – on the order of $15m – is insufficient to finance investment in market-leading analytics technology. For Clearleap, this deal is the equivalent of having one’s cake and eating it too – under IBM’s wing, Clearleap not only achieves the means to scale, but will be able to mesh its OTT solutions with IBM’s prowess in analytics.

IBM’s own calculus revolves around pursing new opportunities in the media space. Although the firm’s strength in predictive analytics and business intelligence is unrivalled, IBM has historically lacked the ability to package this expertise into a form that specifically addresses the needs of the media and entertainment industry. Each of IBM’s competitors in the analytics and cloud-solutions market – be it Cisco, Ericsson, Huawei, or Amazon – has recognized the necessity of offering video management and compression services. In purchasing Clearleap, IBM is not only buying a presence on major media companies’ doorsteps – HBO, Verizon, Multichoice, and A&E Networks all form part of Clearleap’s client base. It is also filling a gaping video-management gap in its media services portfolio.

What is not immediately clear is whether this deal in any way threatens some of the technology partnerships – and by extension, client relationships – that Clearleap maintains. Through its cloud-services partnerships with Amazon (AWS; Elemental) and Microsoft (Azure), Clearleap risks bringing into the IBM fold – however indirectly – two companies with whom IBM fiercely competes. We anticipate that the AWS and Elemental partnership will draw the most scrutiny, and should the relationship rupture, it is possible that this will impinge upon some of Clearleap’s valuable client relationships.

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