Telstra to pay $290m for streaming media firm

Telstra is ramping up its presence in the digital media market, agreeing to pay around $290 million (US$270 million) to hike its stake in streaming video and analytics vendor Ooyala to 98%.

Telstra plans to use the acquisition to develop and grow the global market for Ooyala’s personalised video platform technology.

Following the acquisition, which is expected to complete within 60 days, Ooyala will become a subsidiary of Telstra. But it will continue to operate as an independent business with its own brand, and continue to be led by existing CEO Jay Fulcher.

This marks the first investment for Telstra’s Global Applications and Platforms division, which was established last year. The business aims to invest in segments adjacent to Telstra’s core telecom business in response to ongoing digital disruption.

Telecom providers worldwide are facing declining core service revenue in response to competition from over-the-top communications service providers such as Skype, WhatsApp and LINE. Many are seeking to diversify in response.

At the same time, demand for mobile and online media is increasing as smartphone use becomes ubiquitous and video consumption habits change.

Telstra CEO David Thodey said the company’s resources will allow Ooyala to accelerate its growth. “Ooyala delivers a personalised video platform as an end-to-end cloud solution service, which saves customers high upfront investments in online video infrastructure and helps increase the return on their content. Our investment allows Ooyala to take their solution to the next level.”

Ooyala’s customers include broadcasters, pay-TV operators and online media sites. Its value proposition involves using analytics to provide recommendations, personalised content and advertising to its customers’ end users.

Telstra’s customer and partner relationships, experience in online video and investment in Foxtel make it the ideal partner for Ooyala, Thodey said.

“This provides an opportunity for Telstra and Ooyala to establish a consolidated leading global company to deliver platforms and services on which the next generation of TV and video will be built.”

Ooyala was founded in Silicon Valley in 2007 and has attracted major customers including Telstra, Foxtel, News Corp, NBC Universal, ESPN, Comedy Central and the Washington Post. Telstra first bought into the company two years ago, and in that time has spent US$60 million to acquire 23% of the company.

Ooyala’s Fulcher said the company hopes the involvement of Telstra will help the company cement its position as an “innovative and forward-thinking cloud TV and video platform company”.

An unfortunate side effect of Telstra’s plans for Ooyala is that if it succeeds in its goal of increasing adoption of streaming media services, this will only add to the strain being placed on overburdened mobile networks worldwide, Ruckus Wireless Managing Director Pat Devlin noted.

“Mobile operators everywhere are under increasing pressure to offer better network performance, faster data speeds and value-added services to subscribers, to keep up with insatiable subscriber demand for data-intensive applications. However, the implications of adding things like video are dire,” he said.

“Forward thinking telcos are looking at Wi-Fi as an attractive option and complimentary technology to scale capacity, efficiency and footprint of their existing macro networks.” While it would not be practical to cover an entire country, Wi-Fi can be the perfect solution in dense metro areas where a disproportionate amount of traffic is generated, he said.

It should be noted that Ruckus Wireless manufactures Wi-Fi networking equipment for telecom operators and enterprises.

Telstra recently announced a $100 million investment aimed at building a nationwide Wi-Fi network using mostly hotspots provided by its own broadband customers. In return for providing a hotspot, customers will be able to use their existing broadband bandwidth allocation at other hotspots within the network. The company hopes to have 2 million hotspots active nationwide within five years.

Image courtesy of Retinafunk under CC