I met with Lou Schwartz, Head of the Americas for KIT digital, at Streaming Media East 2010, to get an update on the recent merger of Multicast Media with KIT digital. Schwartz co-founded and led Multicast Media for 10 years, a privately-held Atlanta-based online video platform company that specialized in live webcasting, IP video management and targeted multimedia communications. Schwartz discussed the rationale for the merger transaction, and KIT digital's product roadmap strategy focused on multi-platform delivery and greenfield markets.KIT digital is a publicly traded IP-based video delivery company based in Prague, Czech Republic with global offices in 28 different countries and 3 regions, Asia Pacific, Europe and the Middle East and, the Americas, that extends from Canada to South America, which Schwartz assumed responsibility for with the merger. KIT digital acquired Multicast Media in March 2010 for approximately $18 million, following the purchases of Narrowstep, Visual Connection, Morpheum, Kamera, The Feedroom and Nunet. Both The Feedroom and Nunet brands were both acquired and retired in late 2009, but Multicast is alive and well and now part of the KIT digital family.
Multicast Media provided media communications solutions and delivered 50,000 live events in 2009 for nearly 1,000 organizations of all types, with a large sector of media and entertainment, faith-based and enterprise customers. Schwartz said that the rationale for the merger with KIT digital, was based on a huge opportunity for Multicast to grow beyond its vertical strategy in browser-based delivery to multi-platform three-screen delivery, with a greater emphasis on mobile handsets and set-top boxes and IPTV delivery. After 10 year in the business, Multicast recognized that the market was rapidly expanding in favor of multi-platform delivery.
According to Schwartz:
"What KIT brought to the table was all this experience globally around the mobile handsets and set-top box and IPTV delivery, and felt that our clients and customers, particularly in the enterprise space and other vertical markets that we were pursuing, were looking for a true multi-platform strategy. What the transaction did for us was enable us to expand the breadth of our product and service and also give us global visibility – and being a publicly traded company today is really a safe bet when enterprise customers are looking to find a vendor of choice."Schwartz described KIT digital's financial performance positive, with a recently completed capital raise of about $60 million, a healthy balance sheet, and a first quarter revenue up 80% to record $17.4 million from $9.6 million in the same quarter a year ago. According to a recent earnings report, KIT digital currently has approximately 23.1 million common shares outstanding, with approximately $67 million in cash on the balance sheet. The company's revenues are primarily comprised of software license and maintenance fees, software set-up fees, and technical integration and creative service charges.
The merger helped Multicast cross sell among products among existing KIT customers and take advantage of greenfield markets where it hadn't been able to take advantage of previously. What is unique and really appealing him, Schwartz said, is the heightened focus on verticalizing around certain markets. As this industry matures, he said, the audience for their services are looking for guidance and they are taking more of a consultative approach to sales and marketing. Not all video initiatives are driven by monetization models based on advertising, subscription and pay-per-view as with media and entertainment, and customers other verticals like enterprise, faith, government have specialized business requirements that mainly drive corporate communications, training, marketing and sales.
As part of the appeal of the acquisition strategy, Schwartz described the goal of consolidating the "best of breed" capabilities into one common platform they call VX-one, which has been released and start migrating customers onto over the next few quarters. KIT is harvesting the best technology and solutions from within each of the product stacks of Multicast, The Feedroom and other acquisitions into a unified platform. KIT also recently acquired broadcast video and IPTV provider, Benchmark Broadcast Systems, to further expand in the South Asia, Southeast Asia and Greater China region.
Schwartz elaborated on KIT's view of the online video platform space, reiterating that the company is taking more of a consultative approach with its customers:
"With respect to the online video platform space, we still see it as a very crowded market, particularly in the US. As we expand our focus globally we're seeing greenfield markets again. We're going to into South America, into Brazil, into Argentina, where don't see our peers regularly. But we're not competing in an online video platform space for the table stakes, the things that you commonly see in an online video platform – transcoding, asset management and distribution – there's certain basic features that all of our peers and competitors have baked into their online video platform.
We believe that we have to touch the client in a variety of ways. It's not just video on demand put on your website, but it's video threaded into every communication. We're looking for customers that are making video the fabric of their communicate strategy... We're not looking for the commodity buyer, we're looking for the purchaser within our defined verticals that is more solutions and business oriented, and looking to us for thought leadership and guidance."
About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading, global provider of on-demand, Internet Protocol (IP)-based video asset management systems (VAMS). KIT VX-one, the company's end-to-end software platform, enables enterprise clients to acquire, manage and distribute video assets across the three screens of today's world: the personal computer, mobile device, and IPTV-enabled television set. The application of VX ranges from commercial video distribution to internal corporate deployments, including corporate communications, human resources, training, security and surveillance. KIT digital's client base includes more than 1,000 customers across 30+ countries, including The Associated Press, Best Buy, Bristol-Myers Squibb, Disney-ABC, FedEx, General Motors, Google, Hewlett-Packard, Home Depot, IMG Worldwide, Intel, News Corp, Telefonica, the U.S. Department of Defense, Verizon, and Vodafone. KIT digital is headquartered in Prague, and maintains principal offices in Atlanta, Cairo, Cologne, Dubai, Melbourne (Australia), London, New York, Stockholm and Toronto.
For additional information, visit www.kitd.com or follow the company on Twitter at www.twitter.com/KITdigital.
