Tivo To Acquire Digitalsmiths, A Leading Cloud-Based Content Discovery Service

written by: Richard Kastelein

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tivoTiVo, a leader in the advanced television market, today announced that it will acquire Digitalsmiths, the Pay-TV industry’s most broadly adopted cloud-based content discovery and recommendation service. Digitalsmiths offers personalized video search, recommendations and browsing, social trending, and mood-based discovery which can be used to instantly connect consumers to the most relevant movies, TV shows and live events available, at any time, on any screen including set-top boxes, tablets, smart phones, computers and gaming consoles. Digitalsmiths currently works with 46 blue‐chip U.S. and international Service Providers including seven of the top 10 Pay-TV operators in the United States, Content Providers and Consumer Electronic Manufacturers.
“The Digitalsmiths acquisition opens new opportunities to commercialize and deploy TiVo’s cloud based services and technologies to operators, in an extremely cost effective way that can be offered either independently or in conjunction with TiVo’s renowned user interface,” said Tom Rogers, CEO and President of TiVo. “Additionally, Digitalsmiths contributes approaches, expertise, and data opportunities that complement and extend TiVo’s extensive work in advanced television to customers seeking search, recommendations, and portability. Our acquisition of Digitalsmiths will expand TiVo’s role with Tier-one U.S. Service Providers through its significant relationships with the 7 of the top ten 10 U.S. Pay-TV providers, which serve 64% of the country’s Pay-TV households. Finally, we believe Digitalsmiths’s revenue growth trajectory and attractive margin structure can help accelerate TiVo’s long-term Adjusted EBITDA growth.”
“The Digitalsmiths team is excited to be part of TiVo,” said Ben Weinberger, CEO and co-founder of Digitalsmiths. “Both Digitalsmiths and TiVo share an acute focus to improve the consumers’ viewing experience, and we understand the importance of the ‘service’ or ‘cloud’ to achieve this goal through next generation personalized video discovery solutions. “I look forward to working as part of the TiVo team to provide a best-in-class product set to service providers, consumer electronics manufacturer’s and content providers.”
“TiVo values our core mission of providing superior personalized video discovery experiences for our customers and partners”, said Matt Berry, COO/CTO and co-founder of Digitalsmiths. “TiVo’s acquisition of Digitalsmiths underscores the robust technology and deep customer base Digitalsmiths powers. We are confident joining forces with TiVo profoundly enhances our ability to seamlessly deliver industry leading video discovery solutions that drive superior customer satisfaction and better usage metrics for video services.”
Working with leading service providers, content providers, and consumer electronics manufacturers, Digitalsmiths has revolutionized the dynamics of video discovery by delivering unified, personalized experiences that instantly connect consumers with the most relevant video content available, at any time, on any screen. Seamless Discovery, Digitalsmiths’ core product, delivers superior personalized discovery experiences that drive higher consumer engagement and satisfaction, helping video service providers increase average revenue per customer and decrease customer churn. Additionally, Seamless Discovery adapts to each user’s constantly changing viewing preferences in real-time, ensuring a personalized experience that is relevant and effective in any discovery context at any particular time.

Digitalsmiths Key Statistics

  • Powers 7 of the top 10 US operators that serve 64 million homes in the U.S.
  • Digitalsmiths powers 46 domestic and international customers and partners including Foxtel, Sharp, Univision, zeebox and i.TV.
  • Currently Digitalsmiths Seamless Discovery platform is licensed to Service Providers and other providers that service more than 100 million households worldwide.
  • Digitalsmiths TV Everywhere video discovery solutions are deployed on more platforms than any other solution including: iOS, Android, Roku, Xbox, PlayStation, Kindle and multiple set-top boxes.
  • In October 2013, Digitalsmiths was named to the Streaming Media 100, an exclusive list of companies powering the most interesting, innovative and important work in online video.
  • Continued growth of the world’s largest database of proprietary scene-level, time-based and mood metadata now totaling over 11 million data sets. The database delivers an incredible level of accuracy and detail to Digitalsmiths personalized video discovery products.
  • Digitalsmiths is experiencing rapid growth in transaction volume. The company’s cloud service handled 90 million transactions in July 2013, growing to almost 150 million in December 2013.
  • During Calendar Year 2013, Digitalsmiths experienced rapid growth in both its user base and revenue. TiVo anticipates continued rapid growth from increased penetration within Digitalsmiths’ current customer base and through new customer wins. Digtialsmiths’ current user base represents about 10% of the total potential user base licensed under its current contracts. TiVo expects the active user base to grow to over 50% penetration in the next few years. These factors should drive significant double-digit revenue growth rates for Digitalsmiths for the next several years. Additionally, the highly efficient nature of Digitalsmiths’ SaaS offering should drive strong margins and a material contribution to TiVo’s overall Adjusted EBITDA in Fiscal Year 2016. Further, TiVo expects Digitalsmiths to be Adjusted EBITDA positive in Fiscal 2015 (begins February 1, 2014). Additionally, TiVo will have access to more than $20 million of Digitalsmith’s NOLs as well as Digitalsmiths’ intellectual property. TiVo plans to provide additional details on the transaction when it reports its fourth quarter fiscal year 2014 results.

Under the terms of the deal, TiVo will pay $135 million in cash, subject to a working capital adjustment. The transaction, which is subject to customary closing conditions, is expected to close in the first quarter of Fiscal 2015.

Separately, TiVo announced that it has increased its current stock repurchase authorization by $100 million, giving the company approximately $186 million of unused repurchase capacity as of the current date. In conjunction with this increased authorization, TiVo intends to repurchase $100 million during the first quarter of Fiscal 2015 (after it can either modify its existing 10b5-1 plan or enter into an accelerated stock repurchase program).

About the Author

Richard Kastelein
Founder of The Hackfest, publisher of TV App Market and global expert on Media & TV innovation, Kastelein is an award winning publisher and futurist. He has guest lectured at MIT Media Lab, University of Cologne, sat on media convergence panel at 2nd EU Digital Assembly in Brussels, and worked with broadcasters such as the BBC, NPO, RTL (DE and NL), Eurosport, NBCU, C4, ITV, Seven Network and others on media convergence strategy - Social TV, OTT, DLNA and 2nd Screen etc.

He is a Fellow of the UK Royal Society of Arts (RSA) and UK Royal Television Society (RTS) member.

Kastelein has spoken (& speaking) on the future of media & TV in Amsterdam, Belfast, Berlin, Brussels, Brighton, Copenhagen, Cannes, Cologne, Curacao, Frankfurt, Hollywood, Hilversum, Geneva, Groningen (TEDx), Kuala Lumpur, London, Las Vegas, Leipzig, Madrid, Melbourne, NYC, Rio, Sheffield, San Francisco, San Jose, Sydney, Tallinn, Vienna, Zurich...

He's been on advisory boards of TEDx Istanbul, SMWF UK, Apps World, and judged & AIB awards, Social TV Awards Hollywood, TV Connect & IPTV Awards.

A versatilist & autodidact, his leadership ability, divergent and synthetic thinking skills evolved from sailing the world 24000 miles+ offshore in his 20′s on sailboats under 12m.

He spent 10 years in the Caribbean media & boating industry as a professional sailor before returning to Europe, to Holland.

A Creative Technologist and Canadian (Dutch/Irish/English/Metis) his career began in the Canadian Native Press and is now a columnist for The Association for International Broadcasting and writes for Wired, The Guardian & Virgin. His writings have been translated into Polish, German and French. 

One of Kastelein's TV formats was optioned by Sony Pictures Television in 2012. 

Currently involved in a number of startups including publishing TV App Market online, The Hackfest and Tripsearch TV. As CSO for Worldticketshop he helped build a $100m company.

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