Tech Briefs: Encoda Acquisition Expected to Push New System to Market

Oct 25, 2004  •  Post A Comment

Harris Corp.’s plans to buy Encoda Systems, the longtime but recently fading leader in the provision of traffic systems to television stations in the United States, should help make Encoda a more competitive player. About a year ago nearly 80 percent of TV station revenue flowed through Encoda’s traffic systems; that number has since dropped as other station groups have jumped ship from Encoda and signed long-term deals with next-generation traffic providers. Sinclair, for instance, defected earlier this summer to OSI.

However, Encoda said its new relationship with Harris, which is best known for automation systems and transmitters, should provide a necessary cash infusion to push Encoda forward with a next-generation traffic system.

“I think it’s going to mean significantly increased investment in bringing new technology to market,” said Bob Duncan, senior VP, sales and marketing, at Encoda. “The combined power of our two companies is significantly greater than Encoda as a standalone entity, and the investment in new technologies to expedite the delivery is a strategy for the merged company.”

Critics said it’s about time. Encoda has been promising a next-generation traffic product for several years and has not delivered, said an executive at a broadcast station group. In addition, it has lost U.S. TV station customers to newer players such as Wide Orbit, OSI and Marketron.

Eric Mathewson, CEO of Wide Orbit, said his company has snagged 183 stations from Encoda, including both stations installed and booked. He said he’s not worried about the combined Harris and Encoda. “The capabilities of Encoda are well known by broadcasters. The capabilities of Harris are well known. I don’t think anyone in broadcasting will be surprised by the level of their future success,” he said.

Harris said it will buy Encoda for about $340 million. Encoda’s revenue for the 12 months ending June 30 was $124 million. The deal should close in early November. Despite the station losses, Encoda has grown its revenue by about 6 percent each year during the past few years, due to other new business it has gained, Mr. Duncan said.

HD Set Sales to Double This Year

At last week’s Consumer Electronics Association Industry Forum in San Francisco, the association said it projects that about 8 million high-definition sets will have been sold by the end of this year, doubling the base of installed sets heading into this year. Revenue for HD sets is up about 68 percent this year over last year, said Sean Wargo, director of industry analysis for the association, adding, “The HD category as a whole is a very strong one.” Most sales still involve rear-projection sets, but as flat-panel displays begin to account for more HD set purchases, the revenue figures for HD sets will rise further.