The $5 billion Cisco acquisition of UK content security and pay TV software vendor NDS has, as expected, been approved by the European Union after confirmation that the combined group would still face strong competition in the region.
This came as little surprise because, although NDS is a major player in content security with some big clients, it does not dominate the field. And, while Cisco is the world’s number one vendor of IP routing infrastructure, it has a relatively small presence in the European set top market, possessing less than the 25-percent share it has in the U.S. Cisco entered the set top boxes and pay TV infrastructures in 2005 through the $6.9 billion purchase of Scientific Atlanta. NDS marks its biggest buy since then.
Cisco anticipated building on the Scientific Atlanta purchase through internal development to offer a total one-stop shop for pay TV. But, that event has faltered, and the company needed NDS to complete its portfolio. The move also gives Cisco access to some of the big names in pay TV, including the world’s two biggest, DirecTV and Comcast, along with Foxtel, Kabel Deutschland, Kabel BW, and various News Corp subsidiaries or affiliates, including Sky Italia, Sky Deutschland and BSkyB. NDS is currently owned jointly by News Corp and private equity firm Permira.
The main strategic reason for Cisco’s purchase was to enrich its Videoscape multiscreen platform, which so far has failed to win many customers, with Canada’s Rogers Communications, Israeli-based Yes and France’s Numericable among the few to have been hooked so far. In January 2012, Cisco made an important addition to Videoscape by licensing software from cloud TV specialist ActiveVideo Networks. This helped Cisco position Videoscape as a cloud multiscreen delivery platform capable of transcoding content created with standard Web tools into MPEG or H.264 video for streaming over either QAM or IP networks, and then be decoded by standard set top boxes or CE devices such as smart TVs.
Apart from mature content security technology, NDS brings tools that will improve the scalability of Videoscape, and also tap the cloud for real time analysis of viewing behavior. There are two points here: First, one of the stated benefits of the cloud model is elasticity, meaning the ability to cope with fluctuating demand over the day as well as rapid growth in user numbers and expansion in services. However, the cloud has proven in the past not to have sufficient server and storage hardware to cope with varying demand, nor the database software capable of coping with sudden surges in levels of access. NDS believes it has this solved and will reveal new technology at IBC 2012.
The second point, not entirely unrelated to the first, is that cloud distribution brings the potential to monitor changing consumption and usage patterns not just over time, but in real time. This is because functions formerly performed within dedicated and isolated infrastructures, or within a home gateway or network, are now in the cloud and more readily monitored by the operator. NDS has some tools that it believes will open up great potential here for reducing operations costs, and enable service providers to respond quickly to changes in customer behavior, both from a management perspective and also for developing new applications or functions.
Clearly, big operators and broadcasters are not going to rush headlong into the clouds, and for Cisco enlarged by NDS, as well as competitors, one of the challenges will be to present a coherent migration strategy to IP-network based distribution that continues to exploit established broadcasting infrastructure.