Brightcove Effect on the OVP Industry

Brightcove, the leading online video platform (OVP) has 30% market share, according to a 2012 Frost and Sullivan report. The OVP market has three dominant pure-play OVPs: Brightcove, Ooyala and Kaltura, which I refer to as the Big Three. ThePlatform is another major OVP company, but they were acquired by Comcast a few years back. The Big Three have each raised $100M+ in VC funding. Brightcove, the only public OVP generates about $30M per quarter. David Mendels, CEO of Brightcove stated that their next step is to “get to $250M to $500M revenue stage”, and reach a valuation in the multi-billions. What is more likely to happen, will Akamai reach $5B in annual revenue (2013 Revenue = $1.79B) before Brightcove reaches $500M in revenue?

 Brightcove Effect on the OVP Industry

Before I answer the question, I would like to share some quick notes. Brightcove reminds of another company that deals with content, Limelight Networks (LLNW). LLNW is the only other public CDN besides Akamai. LLNW has revenues that are 8x less than Akamai, and a market valuation that is 47x lower than Akamai’s. That’s good for Akamai, but unfortunate for the startup CDNs, since LLNW is more representative of the CDN startup ecosystem. If LLNW market valuation is suppressed, it’s likely to suppress the valuation of all other startup CDNs. However, if LLNW makes some bold moves, and increases it’s valuation to the $1B to $2B range, everyone benefits.

Brightcove is the LLNW of the OVP industry. However, in the OVP market, there is no Akamai type company. With Brightcove’s valuation hovering about $270M, Ooyala and Kaltura can’t fare any better, since Brightcove is bigger, and generates more revenue. When Brightcove reaches $250M in annual revenue, it will improve the outlook for the entire OVP sector.  At $250M in annual revenue, its possible Brightcove reaches $800M valuation, catapulting Kaltura and Ooyala to the $500M valuation range. I’m not a financial analyst, its only a hunch at this point. Do I think Brightcove can reach $250M in the next 2 years? Most definitely.

Do I think Brightcove can reach $500M in revenue? That is going to be extremely difficult. I believe that Akamai will reach $5B annual revenue before Brightcove reaches $500M. The overall OVP market for pure-play OVPs is small. If the overall OVP / OTT market grows significantly, Netflix and the Telco’s like Verizon are most likely to benefit from the market growth. There is nothing more that I would like to see than Brightcove pull a rabbit out of its hat, and generate $500M in annual revenue. If they do, the Brightcove CEO will realize his dream, and Brightcove might reach $2B in market valuation.