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Market Insight

Kit Digital acquires Ioko

April 12, 2011

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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Kit Digital, a provider of video solutions, has acquired Ioko for $91.4 million. The deal is split between $74 million in cash and KIT common stock and is expected to close within a few weeks.

Ioko provides end-to-end, cloud-based managed platform solutions for multi-screen video delivery over internet-connected devices, to tier 1 telco, cable, media and entertainment companies around the world. Ioko's clients include AT&T in the US, the BBC, ITV, LoveFilm and BSkyB in the UK, and Foxtel in Australia.

Ioko currently generates approximately $54m in annualised revenue related to video asset management. Following their spate of acquisitions, Kit Digital expects 2011 revenues of approximately $210 million, up more than 98 per cent over 2010.

The acquisition of systems integrator Ioko is Kit Digital's fifth acquisition in 2011 for a combined $202.8 million. An announcement was expected after Kit Digital revealed in March that the funds raised from a public offering in December 2010 were to 'support a prospective larger acquisition'.

The acquisition of Ioko further expands Kit Digital's capacity to deploy internet protocol video and closely follows the acquisition of Polymedia. Ioko's over-the-top capabilities allow premium video services to be formatted and presented for numerous devices within the connected living room, and also over closed IPTV networks.

With the acquisition of Ioko, and Polymedia, Kit Digital is increasingly focusing on larger, tailored multi-screen deployments that have higher average revenue per user. Both Ioko and Polymedia will allow Kit Digital to more rapidly deploy network operator and broadcaster solutions to tier 1 broadcasters and network operators, a segment Kit Digital believes will be a primary driver for their future growth. It was also revealed that Ioko is working on two large unnamed deployments, in addition to U-verse, in the US.

More generally, the acquisition of Ioko begs the question of how providers should strike an optimal balance between relying on managed multiscreen services, and deploying in-house, self-managed solutions. There is little question that managed services dramatically reduce the price of multiscreen market entry, with particular regard to capital expenditures. At the same time, the most successful, remunerative multiscreen offerings are likely to involve advanced advertising, a breadth of pricing models, viewer-targeted marketing, and content recommendations. Achieving these monetization strategies will require tight integration between - and direct control over - the video assets, their management, the billing system, and content security policies (DRM). It may well be that this tight integration can best be accomplished by operators retaining more direct control of their multi-device, IP video services.

Kit Digital has signalled that its spree of acquisitions may be ending with the deal being the 'culmination of a three-plus year dedicated process to achieve global scope and market share in the IP video platform software sector'. Kit Digital will now concentrate on the process of organic growth through successfully integrating its acquired assets. It has been reported that the technology acquired in Kit Digital's January acquisitions were integrated and deployed to clients within two months.


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