Posts Tagged ‘MLBAM’

Disney Acquires Equity Stake in BAMTech

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Aug 09 2016

Disney announced a $1 billion acquisition of a minority stake in BAMTech, the entity holding Major League Baseball’s streaming technology and content delivery business.  The spin-out of BAMTech from MLB Advanced Media (“MLBAM”) was announced in late 2015.  The Disney investment in BAMTech had been rumored for several months.

In its quarterly SEC filing, Disney disclosed it acquired an initial 15% equity position in BAMTech for $450 million.  Disney has committed to purchasing an additional 18% equity interest in BAMTech for $557 million in January 2017.  Those two investments value BAMTech at $3.05 billion.

Disney declined to provide any specifics on BAMTech’s operating profile, though did note there is “some very slight dilution from the acquisition.”  However, Disney’s management felt this was more than offset by the trajectory of BAM Tech’s business and the opportunities to combine with Disney’s content properties, most notably ESPN.

Based on the previous public statements by MLBAM’s CEO Bob Bowman, the  $3.05 billion valuation level implies a revenue multiple of 12.2x expected 2016 revenue for BAMTech (please note several estimates involved in that calculation).

As part of the investment, Disney also gains the right to acquire majority ownership “in the coming years.”  The NHL currently holds a 7% – 10% equity position in BAMTech based on the August 2015 partnership deal between the companies.

The announcement coincided with Disney’s fiscal third quarter results.  During Disney’s call with analysts, CEO and Chairman Bob Iger, added context on Disney’s diligence of BAMTech.

“I love the business model because I love the quality of what they’ve created, largely from a technology perspective.  You’re look at an industry-leading platform.  And we did a fair amount of due diligence on this, speaking with people who have been clients of their service.  And also, we did our own due diligence in the sense that we’ve been clients of competing services.  And we concluded that what they’ve got is really robust” said Mr. Iger.

Since Disney is already a customer of BAM Tech, one immediate question is why Disney thought it was necessary to buy BAM Tech as opposed to renting its services as a customer.  During an interview with CNBC, Bob Iger responded to the customer vs. owner question from CNBC host Julia Boorstin.

“First of all, we think it is a good investment. We love their business model.  We think that in today’s world having the ability to stream on a scale basis live sports and live programming is a competitive advantage and something that is necessary.  We love the user interface.  So, overall we look at is as an investment.  But as a partner, as a part owner, and ultimately as a majority owner, we feel it gives us an ability to jump start not only ESPN, but are other business as well, into a space that we think is not only very exciting but extremely important in a very dynamic media marketplace.  So much better to own than to rent” responded Mr. Iger.

 

Related Content:

Press Release: Disney Acquisition of Minority Stake in BAMTech

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Disney Expected to Acquire 33% Stake in BAM Tech

Analysis | Posted by Josh Stinehour
Jul 05 2016

Bloomberg is reporting Disney has agreed to acquire a 33% equity stake in BAM Tech, the recent spin-out of MLB Advanced Media (“MLBAM”), the streaming technology division of Major League Baseball (“MLB”).  Forbes is separately reporting the deal is tracking toward completion later this summer.

Disney is reported to be purchasing the 33% equity stake in BAM Tech for $1.16 billion, implying a valuation of $3.5 billion.

As part of the investment, Disney also gains the right to purchase an additional 33% of BAM Tech during the next four years.  Should Disney exercise the option, it would become the majority owner of BAM Tech.  The NHL currently holds a 7% – 10% equity position in BAM Tech based on the August 2015 partnership deal between the companies.

MLBAM is jointly owned by all 30 MLB franchises, with each holding a 1/30 ownership interest.  BAM Tech comprises the technology service business of MLBAM serving third-parties (i.e. not MLB).  The August 2015 spin-out of BAM Tech was intended to enable MLBAM to accelerate commercial initiatives with third parties unaffiliated with MLB.

MLBAM is already responsible for several high-profile streaming services including CBS/Turner’s March Madness Live, HBO Now, PGA Tour Live, Sony Playstation Vue, watchESPN, and the WWE Network.

At the 2016 Re/code summit, Bob Bowman, the CEO of MLBAM, said he expects revenue of $1.2 billion to $1.3 billion during 2016 (a substantial increase over 2015 revenue of $800 million).  Mr. Bowman also stated a revenue split of 80 / 20 between baseball and third party revenues.  Those figures suggest BAM Tech was an approximately $160 million revenue business in 2015 and is set to grow to $240 – $260 million (50+% year-over-year).

Using those revenue estimates for BAM Tech, the Disney investment values the business at an approximate revenue multiple of 14x forward-looking sales (Note: several estimates were used to arrive at that valuation figure).  It is unknown whether part of this consideration accounts for the value of the option Disney received, which would allow Disney to gain majority control.  All things being equal, purchasing control should come at a premium.

 

Related Content:

Bloomberg Article Reporting Disney Investment

Forbes Article on Disney Investment in MLBAM

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

AWS is now a $10 Billion Annual Revenue Business

Analysis, Broadcast technology vendor financials | Posted by Josh Stinehour
May 02 2016

Amazon reported results for the first quarter of 2016.  Since the first quarter of 2015, Amazon has been reporting the individual results of Amazon Web Services (AWS).  Based on Q1 2016 figures, AWS is now a $10 billion run-rate revenue business with a trailing twelve month operating income of nearly $2 billion.

The reported revenue for AWS consists of the more than 70 services now offered from the AWS platform including the sales of compute, storage, and database.  Amazon does not specifically address how much AWS revenue was attributable to the media industry.  However, the AWS figures are an informative data point for better understanding the broader adoption of cloud services.

For the three months ended March 31, 2016 AWS had revenue of $2.6 billion, a 64% increase over the first quarter of 2015.  AWS represented 8% of Amazon’s sales for the quarter, an increase from the 6% contribution for Q1 2015.

AWS operating income for Q1 2016 was $604 million, which was a 210% year-over-year increase versus the first quarter in 2015.  During the quarter AWS actually generated more operating income than all of Amazon’s other business lines – both on an individual and aggregate basis.

Operating margins for AWS in the quarter were 23.5%, a substantial increase over the 12.4% operating margins during Q1 2015. The reporting of operating income now includes a burden for stock-based compensation (this lowered operating margins versus historical reporting).

Management attributed the growth in AWS revenue and profitability to increased customer usage and cost structure productivity.  This was partially offset by continued pricing decreases and increased spending on technology infrastructure.

The below chart from Amazon’s Q1 2016 earnings presentation illustrates the growth of revenue and operating income for AWS over the past year.

 

AWS-Results

 

Operating incomes doesn’t capture the cash flow impact of capital expenditures and payments attributable to the financing of equipment for AWS, which is not disclosed directly.  It is a capital intensive business.

Additional information from Amazon’s filings are illustrative of the significant level of investment in technology infrastructure attributed to AWS.  The Company’s total capital expenditures (cash) were $1.2 billion in Q1 2016, a 38% increase over Q1 2015. According to Amazon’s SEC filings, “This primarily reflects additional investments in support of continued business growth due to investments in technology infrastructure (the majority of which is to support AWS) and additional capacity to support our fulfillment operations.”

Cash capital expenditures do not account for property and equipment acquired under capital lease obligation (non-balance sheet items).  Property and equipment acquired under capital leases were $875 million in Q1 2016, an 8% decrease over Q1 2015. A majority of this spend is due to investments in technology infrastructure for AWS.

On Amazon’s call with earnings analyst, Brian Olsavsky, SVP and Chief Financial Officer, stated the combined total of capital expenditures and capital lease obligations was $9.5 billion in the trailing 12 month period.  AWS is the largest driver of this spend, but does not consume all of this number

AWS specifically and cloud vendors more broadly, are benefiting from a secular trend toward cloud usage among media and entertainment sector.  As cloud providers replace the capital expenditures of media customers, there are significant implications for technology vendors and service providers.  The $9.5 billion figure (noted above) is equivalent to almost half of all annual product sales in the media and broadcast technology sector based on the latest results of the IABM DC Global Market Valuation Report (www.iabmdc.com).

The adoption of cloud infrastructure in the media industry is not necessarily a negative development for the technology vendor community.  AWS views its services as unburdening organizations from the undifferentiated heavy lifting of technology deployments.  In this way, AWS is allowing media customers and media technology suppliers to focus on the aspects of their businesses differentiating their products and services to customers.

Moving to cloud infrastructure does necessarily require new technology architectures, revenue models, and operating structures.  These topics were discussed extensively during the recent Media Technology Business Summit at the 2016 NAB Show including a keynote from AWS titled, “’All In’: Cloud Transformation of the Media Industry.”  If you haven’t downloaded our slides from the event, a complimentary copy is available from the following link.

While Amazon does not disclose specific AWS numbers in the media vertical, Amazon founder Jeff Bezos did note a high-profile media customer in his annual letter to shareholders (excerpt below).

“MLB Advanced Media is an example of an AWS customer that is constantly reinventing the customer experience. MLB’s Statcast tracking technology is a new feature for baseball fans that measures the position of each player, the baserunners, and the ball as they move during every play on the field, giving viewers on any screen access to empirical data that answers age-old questions like ‘what could have happened if…’ while also bringing new questions to life. Turning baseball into rocket science, Statcast uses a missile radar system to measure every pitched ball’s movements more than 2,000 times per second, streams and collects data in real-time through Amazon Kinesis (our service for processing real-time streaming data), stores the data on Amazon S3, and then performs analytics in Amazon EC2. The suite of services will generate nearly 7 TB of raw statistical data per game and up to 17 PB per season, shedding quantitative light on age-old, but never verified, baseball pearls of wisdom like ‘never slide into first.’”

 

Related Content:

Presentation: Q1 2016 Amazon Earnings Presentation

Press Release: Q1 2016 Amazon Earnings Press Release

SEC Filing: Q1 2016 Amazon SEC Filing

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Industry Thought Leaders to Discuss “Shifting Media Economics: Impact on Strategy, Finance, and Technology” at 2015 NAB Show

Analysis, broadcast industry technology trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Conference Sessions, Online Video, OTT Video | Posted by Joe Zaller
Apr 09 2015

Whether you are a supplier, buyer, or investor in the media technology sector, you won’t want to miss the fourth annual NAB Show event co-produced by Devoncroft Partners and the organizers of the NAB Show.

 

NAB Devoncroft 2015 Shifting Media Economics Session Announcement

 

Now part of the NAB 2015 Media Finance and Investor Conference, “Shifting Media Economics: Impact on Strategy, Finance, and Technology,” will be held on Sunday April 12, 2015 in room N235 of the Las Vegas Convention Center.

Designed to be a thought-provoking kickoff to the 2015 NAB Show, this half-day conference examines the “the business of the media business” from the perspective of all levels of the media value chain. It includes panel discussions featuring C-level executives from leading broadcasters, service providers, technology vendors, and private equity investors. Each group will offer a candid assessment of how their respective business models, operational practices, and strategic decision making have been impacted by the dramatic shift in media industry economics.

The keynote, “The Future of TV. One Man’s Opinion.” will be delivered by Bob Bowman, President, Business & Media of Major League Baseball (MLB), who oversees MLB Advanced Media (MLBAM) and MLB Network.

MLBAM has been involved with several recent high-profile streaming events including WrestleMania 31, the opening day of Major League Baseball, the NCAA March Madness basketball tournament, and the recent launch of HBO Now.  Bowman is scheduled to take the stage just one hour before the highly anticipated season 5 premiere of “Game of Thrones” becomes available via HBO Now.

The conference will also include presentations of the latest market research on industry trends and financial performance.  This includes preliminary excerpts from the Devoncroft Big Broadcast Survey, the industry’s definitive demand-side study of the broadcast and digital media industry; and the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

In advance of the NAB Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector. This report is available to download here (registration required).

This conference is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector. It provides an excellent opportunity to network with industry executives and the financial community ahead of NAB show commitments.

Approximately 400 executives attended this standing-room only event in 2014. We hope to see you there on Sunday April 12, 2015.

Please note that because this event is part the 2015 NAB Show Media, Finance and Investor Conference, registration is required.

 

An overview of the conference is included below.  Full details are available on the NAB Show website.

 

Shifting Media Economics: Impact on Strategy, Finance, and Technology

 

1:40pm – Welcome and Introductions

Presenter:

  • Peter White, CEO IABM

 

 

1:50pm – Review of Market Developments

Josh Stinehour of Devoncroft will take the podium for his annual (enthusiastic) presentation on developments in the media technology sector.  If you have any final announcements you would like Josh to consider for his presentation, let him know.

Presenter:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

 

2:15pm – The Broadcast & Media Technology Industry in 2015

Devoncroft founder Joe Zaller will present a data-driven overview of the forces bringing dynamic change to the media technology sector in 2015. This will include preliminary results of the 2015 Big Broadcast Survey, the industry’s most comprehensive demand-side study, and observations from the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

Presenter:

  • Joe Zaller, President Devoncroft Partners

 

 

2:40pm – Business Strategy Perspectives from Industry Executives

CEOs from four of the media and broadcast industry’s largest technology suppliers will debate the most important commercial issues facing the industry, and discuss their strategies to position their companies for success in a rapidly evolving marketplace.  The panelists will also offer opinions on how changes in the business environment are impacting vendors and customers.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Patrick Harshman: President and Chief Executive Officer, Harmonic, Inc.
  • John Stroup: President, Chief Executive Officer, Belden, Inc.
  • Tim Thorsteinson: Chief Executive Officer, Quantel and Snell
  • Charlie Vogt: Chief Executive Officer, Imagine Communications

 

 

3:20pm – The Broadcast Buyer Perspective on Industry Trends

Senior technology executives from four leading broadcasters will offer informed perspectives on the most significant industry trends affecting technology budgets and the technology purchase decision.  The audience will benefit from an emphasis on the business implications of technology decisions to broadcasters.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Ken Brady: SVP Media Technology and Operations, Turner Broadcasting Systems
  • Richard Friedel: EVP & General Manager, Fox NE&O
  • Fred Mattocks: GM Media Operations & Technology, Canadian Broadcasting Corporation
  • Bob Ross: SVP East Coast Operations, CBS Broadcasting, Inc.

 

 

4:00pm – The Service Provider Perspective on Industry Trends

A panel of executives from leading media service providers will discuss views on both technology developments and deployment considerations for media organizations.  Discussion topics will include solutions for multi-platform content delivery, the economics of outsourcing, how service providers can leverage their scale to deliver increased performance and agility, and how next-generation data center architecture may impact the media ecosystem.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Darcy Antonellis: Chief Executive Officer, Vubiquity
  • Anil Jain: SVP & GM Media Group, Brightcove, Inc.
  • Steve Plunkett: Chief Technology Officer, Ericsson Broadcast & Media Services

 

  

4:30pm – The Institutional Investor Perspective on Industry Trends

A panel of leading investment professionals in the media and entertainment sector will offer the audience the institutional investor’s perspective on the industry. The discussion will include the panelists’ intelligence-gathering plans for the NAB Show, views on the trends that are driving investment dollars in the sector, and a review of the characteristics influencing the evaluation of an investment opportunity in the media technology industry.

Moderator:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

Panelists:

  • Chris Kanaley: Vice President, Parallax Capital
  • Nick Lukens: Vice President, Vector Capital
  • Bryce Winkle: Vice President, The Gores Group

 

5:00pm – Keynote: The Future of TV. One Man’s Opinion.


Presenter:

  • Bob Bowman, CEO MLB Advanced Media

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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