OpenTV plans merger with fellow ITV firms

Sep 30, 2002  •  Post A Comment

Interactive television middleware company OpenTV announced plans last week to acquire fellow ITV players ACTV and Wink Communications. The merger will create a vertically integrated ITV company with interests in middleware, interactive advertising and content and television-commerce.
The ITV space has floundered during the past year and a half and has needed the sort of jump-start that this type of consolidation can provide in creating a market leader, said James Ackerman, OpenTV’s CEO.
The deal will create an ITV concern with access to more than 10 million U.S. homes, through OpenTV’s U.S. reach of more than 5 million homes and Wink’s 6 million homes.
“We will be uniquely positioned to offer programmers and advertisers ITV solutions regardless of set-top box platform or distribution on a variety of set-top box platforms,” Mr. Ackerman said. He added that Wink has successfully ported its interactive TV application-interactive enhancements and information added to TV programs-to Scientific-Atlanta, Motorola and DirecTV set-top boxes and is well under way with its integration into EchoStar, casting a wide net for technological platforms for ITV. ACTV brings targeted advertisements and multicamera-angle interactivity into the OpenTV fold.
With the two acquisitions, OpenTV can grow as a market leader, said Peter Boylan III, Chairman of OpenTV and CEO of Liberty Broadband Interactive Television, which holds a 46 percent economic interest and an 88 percent voting stake in OpenTV. Liberty Broadband Interactive Television is a newly formed subsidiary of Liberty Media Corp. and includes the Wink Communications investment. Liberty Broadband Interactive Television is also slated to include ACTV, although that deal had not yet closed at deadline Friday. Essentially, OpenTV is scooping up sister companies from under the same corporate umbrella and merging them into one larger concern.
“As a market leader in middleware, however, [OpenTV] had not made enough progress in the U.S. … particularly in two areas-advertising and enhanced programming,” Mr. Boylan said. “Wink and ACTV will go a long way in ensuring that position of OpenTV [as a market leader].”
The merger is a natural progression that occurs in a developing industry, said Scott Ray, chief financial officer of OpenTV. “You have to get more efficient. You need the best cost structure possible,” he said. The combined company will eliminate duplicated overhead, allowing OpenTV to slow its cash flow burn rate and break even on cash flow within the next several quarters as it assumes new revenue streams from ACTV and Wink, Mr. Ray said. “The industry is going to benefit from a consolidation because OpenTV is going to be able to bring much more of a one-stop solution bringing a best of breed from three different companies.”
However, the merger is more of a reflection of the status of the ITV industry and an attempt to cobble together the pieces into one company and make a go of it, said Bruce Leichtman, analyst with the Leichtman Research Group. “How long could these companies go on given the state of the capital markets?” he asked.
Still, the merger is a logical step for the industry and should enable tighter product integration and development, said Rob Aksman, analyst with Filter Media, a digital media consulting firm. The ITV industry has seen the possibility of a market leader emerge before, only to retreat, such as when AT&T Broadband pulled back its plans for the DCT-5000 boxes last year. The OpenTV merger represents an opportunity to fulfill the need for a market leader and also allows OpenTV to leverage its relationship with cable operators through Liberty, Mr. Aksman said.
The Wink acquisition should be completed in the next few weeks and the ACTV acquisition by the end of the year.