Recently, a graduate student was tasked to write a research paper on a struggling company for his new project, and the company given to him was Brightcove. He reached out to bizety.com for feedback, in order to understand why Brightcove is struggling, and make recommendations on how Brightcove can improve their situation. Since I’ve discussed Brightcove in the past, we’ll do a deep dive session into Brightcove’s situation. Prior to January 3, 2014, Brightcove was doing well, with their stock price hovering around the $14/share range, and a market valuation of $400M+. For an OVP company, this was as good as it gets, especially since they were twice the value of Limelight Networks at half the revenue.
Then on Monday January 6th, Brightcove announced the acquisition of Unicorn Media for $49M, from a founder that was sued by the SEC at a previous company, and the stock market punished Brightcove stock wiping out about $150M in market valuation. For Brightcove, this was devastating. This deal was a really bad deal, not only from a technology standpoint, but also from a business standpoint. Many have no clue why Brightcove would spend $50M on an ad company. It doesn’t make sense, because an OVP player and Ad company don’t play well together. In my book, this acquisition is in the same category as Limelight acquiring Eyewonder, and Internap acquiring Vital Stream. Limelight and Internap haven’t fully recovered. Will Brightcove recover? It’s really hard to say, but let’s give it a shot.
Challenges in the OVP Market
According to a 2012 Frost and Sullivan report, Brightcove commands 30% of the OVP market. This year, Brightcove is generating about $30M per quarter, or $120M annually. If we apply the same ownership percentage of 30% to 2014, the OVP market is about $400M. Based on these numbers, the overall OVP market is small. To make matters worse for Brightcove, there are two well-funded competitive OVP players, Kaltura and Ooyala, and Comcast owned ThePlatform. All three pose a considerable threat to Brightcove, as they are well funded, and their platform features are as good as Brightcove. And that’s not including the dozens of other small OVP players in the industry.
Finally, and most importantly, the OVP market is fragmenting into specialized media platforms, making the general OVP approach of be everything to everyone old school. MediaSilo, Aframe, and even Adobe offer video platforms that cater to the professional filmmaker that enables them to upload mezzanine files to the cloud, edit them in the cloud, and do much more. The value-added services that were once done onsite are moving into the cloud. A few years back, this would have been the perfect target market for Brightcove. However, they missed this golden opportunity to build a first mover advantage. Now the new platforms catering to this niche are capturing market share, and gaining traction with the large media companies.
In summary, Brightcove is in an extremely competitive market that happens to be small, and is fragmenting, giving way to a new slate media cloud platforms that cater to specific niches in the video ecosystem. Brightcove has a tough road ahead. They will have to do something drastic to improve their situation. We’ll explore these options in another post. Why is Brightcove Struggling