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Ascent Media sells playout business to Encompass

Ascent Media has agreed to sell the content distribution business of its subsidiary Ascent Media Group to Encompass Digital Media for approximately $113 million. This is part of the company’s recent strategy of cashing in assets with the stated intention of looking for new investments that will realize a greater benefit to shareholders. The corporation now retains only the systems integration division, but it continues to pursue strategic alternatives for this business unit.

The Encompass transaction is expected to close in the first quarter of 2011 and is subject to clearance by the FCC, the Singapore authorities and approval by Ascent Media's stockholders.

Encompass operates two of the largest independent broadcast facilities in the United States, in Los Angeles and Atlanta. The deal with Ascent adds outsourced network origination services to satellite, cable and pay-per-view programming networks through facilities located in the United States, UK and Singapore.

The acquisition will mean that there are now two service providers with a footprint that includes the United States, Europe and Asia, the other being GlobeCast. Singapore has emerged as a major hub for media businesses covering the Asian region, including India and the Asia-Pacific countries. As content creators, especially Hollywood studios, migrate to file-based distribution, Encompass will be well-placed to develop the business already built up by Ascent Media.

Bill Tillson, Encompass president and COO, and CEO Simon Bax started Encompass three years ago with the intention of focusing on the network origination business. “This deal is a perfect fit for our existing assets,” Tillson said. In the United States, existing Encompass operations include services for the major network as well as cable channels, local TV stations “and things around the movement of digital files to VOD, iTunes or VUDU, all related to the libraries captured for 24/7 playout,” he said.

A few years ago, it could take up to a year for a local-language version of Hollywood programming to air; that timescale as now been reduced to a matter of days in some cases. And, this acceleration of content distribution can only happen with global, file-based content distribution services. “With the Internet, having a delay between the point a TV show airs anywhere and when it airs everywhere is no longer viable,” Tillson said.

The UK and Singapore operations of Ascent provide services for Encompass’ existing U.S. customers, adding to the synergy of the acquisition. “We offer a one-stop shop that can capture their files and distribute their files across the world,” Tillson said. This model is already operating in the United States, where Encompass ingests, trims and quality checks syndicated programming, and then distributes to the many playout channels it operates for broadcasters. This allows the economies of scale: ingest once, QC once and playout many times.

Encompass does not want to enter the post business, but it will continue to operate a small edit facility at its Singapore base, which does compliance editing to meet the needs of the many different regulators across the Asia region, as well as for promo creation and interstitial media. “This is part of the service for channel origination,” Tillson said. The UK and Singapore bases will also provide language versioning for those markets.

Aside from the pending integration of the Ascent business, Encompass continues to develop playout outsourcing in the United States and expects to announce several deals in the coming months with station groups wanting to move to the central-casting model. The company is adding 25,000 sq ft to the Atlanta facility solely for that purpose. By outsourcing, stations avoid the capital expenditure to upgrade to HD and can benefit from lower operating cost though the economies of scale that Encompass can offer. “This allows station to focus on what they do best: news and sports for their local market,” Tillson said.

As part of the deal, Encompass gains a large teleport in Singapore with a footprint across Asia. In Los Angeles, its existing facility was land-locked and couldn’t be expanded; the acquisition adds the satellite facility in Burbank, CA. On the East Coast, Encompass gains a large facility in Stamford, CT. The full U.S. satellite coverage also allows the company to offer comprehensive DR facilities.

The acquisition is a strong indication of the changes in modern broadcast operations. Content is being moved rapidly across the world from the point of creation to transmission to a global audience. At the national level, stations are outsourcing master control operations to focus on local program origination. All of this is only possible as files replace videotape, and those files are moved between broadcast centers by fiber and satellite networks. Looking back, videotape enabled the transmission of live programs across time zones, but it eventually became a constraint on the expansion of broadcast operations.