Tuesday, August 12, 2014, 11:01 AM ET|Posted by Will Richmond
Late yesterday Australian telecom provider Telstra acquired online video publishing platform Ooyala, by increasing its ownership stake from 23% to 98%, through an investment of $270 million (the purchase of the incremental 75% stake implies a total enterprise valuation of $360 million. Though Ooyala's revenues are undisclosed, as one point of comparison, Brightcove's current public valuation is approximately $200 million).
Subsequent to the deal's closing Ooyala will become a subsidiary of Telstra and will operate as an independent business with existing management and brand. This is a model that has worked successfully for thePlatform, another major OVP which was acquired by Comcast back in 2006. Ooyala will become part of Telstra's new Global Applications and Platforms group, which is investing in companies that are "adjacent to Telstra's core business, where software disrupts traditional business models."
Online video certainly fits that description, and the deal for Ooyala is the latest in a wave of consolidation occurring as the industry continues to mature. It wasn't that long ago when an OVP's primary role was to simply enable content providers to manage and post a flow of videos onto their web sites and measure viewing (at a time when many content providers were still trying to figure out why they'd want to do this in the first place!)
Now the OVP's role has been vastly expanded as online video has become far more complex, due to the proliferation of mobile and connected TV viewing devices, TV Everywhere implementations, cloud-based infrastructure, rising OTT competition, sophisticated ad models increasingly driven by programmatic, global deployments, development of online-only originals and perhaps most important, vastly different consumer behaviors and expectations.
As a result, online video is no longer a side project for major media companies, as it was just 10 years ago, but rather a mission critical part of their business strategies. As a result, OVPs' products and services are racing to keep up, requiring significant investments. In this context Ooyala had 3 options to sustain itself: go public, raise further private financing or be acquired - as it chose to do. With Telstra's financial resources and global scale, Ooyala is now virtually guaranteed to remain a significant OVP competitor going forward.