DG Fastchannel Acquires Match Point Media

Acquisition accelerates transition of $5 billion infomercial market to digital distribution.
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DG FastChannel, a provider of digital media services to the advertising, entertainment and broadcast industries, has acquired privately-held Match Point Media LLC and its divisions, Treehouse Media Services, Inc. and Voltage Video, Inc., which distributes customized Direct Response (DR) advertising, for $26 million in cash. The transaction closed Oct. 1.

DG says it acquired MatchPoint to expand its reach into the informercial market, estimated at $5 billion annually. "When we combine the Match Point assets with our recently deployed next generation High Definition (HD) compliant Pathfire long form network and its complementary Ads network, supported by our world class service platform, DG FastChannel is uniquely positioned with the technology necessary to digitize the DR industry," said Scott Ginsburg, Chairman and CEO of DG FastChannel. "With this transaction, DG FastChannel expands its offerings in advertising content customization with the opportunity to bring digital distribution and digital workflow solutions to the DR marketplace. We expect that infomercials will switch from a predominantly Standard Definition (SD) format to the more complex HD format over the next several years, and we believe the Company is now positioned to lead this transition."

"For nearly 20 years, Treehouse has been a leader in dub and ship distribution and customization for the DR industry,” said Matt Edelman and Andy Donato, Principals of Treehouse Media. “As we seek to bring greater efficiencies to our customers in the areas of distribution and product innovation, the principals at Match Point believe that DG FastChannel's world class products and services, paired with our expertise, will provide the greatest value to our customers. The combined DG FastChannel and Treehouse entity will enable faster turnaround times and the ability to change offers quickly, both of which are critical to our customers."

Over the past decade, the broadcast advertising distribution market has largely converted to file transfer digital technology. According to management estimates, approximately 35 percent of the broadcast distribution market has not yet transitioned to a digital workflow, so that content must be transferred from advertisers to broadcasters by physical dub and ship methods. The DR payloads are split between long form and short form content with an estimated 60 percent long form.

For the nine months ended September 30, 2010 Match Point expects to record approximately $14 million in revenue, with EBITDA of approximately $3 million. DG FastChannel expects to realize approximately $2 million in cost synergies by the end of 2011. The company will provide additional financial detail regarding the transaction on its regularly scheduled third quarter earnings call.