Divide And Conquer: Cotney, Vogt Take on the Future

Former Imagine Communications CEO Charie Vogt and newly appointed CEO Tom Cotney discuss what the moves mean
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It was a four-and-a-half year ride for Charlie Vogt as CEO of Imagine Communications, one of the most public and recognizable faces of those leading the industry into an IP-based, virtualized future.

While his role as Imagine CEO ended earlier this month with the appointment of Tom Cotney as the company’s new top executive, Vogt’s role as visionary is far from over.

His new position is as a senior advisor with The Gores Group, the private equity firm that owns Imagine. In it, Vogt will focus on merger and acquisition activity in an attempt to put significant additional dollars into making Imagine “something that is much bigger,” he says.

While Vogt pursues M&As—whether as “an acquirer or acquiree”—Cotney will focus on making it easier for broadcasters and other media companies to transition from baseband to IP-based alternatives.

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Charlie Vogt

In this interview, Cotney and Vogt discuss this divide-and-conquer strategy, the importance of getting big, what changes customers can expect and what, if anything, Vogt’s departure from the role of CEO says about Imagine’s focus on an IP-based future for television.

(An edited transcript)

TV Technology:Charlie, how should the industry interpret your departure from the CEO role at Imagine Communications?

Charlie Vogt: When you have someone who was as visible as I was with our employees and the industry, it is certainly going to turn some heads.

I haven’t been a backseat CEO. I get the fact that, “Charlie’s leaving. What does this mean?” It means Gores [The Gores Group] has a lot of money they are trying to put to work, specifically in this sector. I have done 17 M&A transactions in the last seven years. It is an area where I can help and [one that] is needed. We were fortunate to find someone like Tom [Cotney] who has a lot of experience scaling companies and executing on the vision and strategy.

I think the combination of Tom and I is going to be very good for the industry and very good for Imagine.

Tom Cotney: I have been in venture-backed businesses for a little over 10 years and was looking for an opportunity where investors were willing to invest in proportion to the opportunity the business had.

As I looked at this opportunity and the ownership a couple of things became really obvious. First, this is an industry where the buying criteria is changing. Media companies still want bulletproof infrastructure, but their business models are under a lot of pressure. They want more flexible ways to buy –ways to buy technology that are a lot easier than just buying products off the shelf and integrating them on their own. That is one of the places where my background in services and technology-enabled services comes into play.

The other thing that became obvious is that people are not going to buy from small players. They are not going to buy from a fragmented market. A lot of the customers I have met so far are dealing with issues like being bought themselves or acquiring somebody or some part of their operation. They don’t need another variable called how long is my service provider going to last in the industry? It became very obvious to the Gores people, Charlie and me that we need to get bigger much, much faster.

That is where we came to this divide-and-conquer situation where Charlie is going to devote his full time to M&As so we scale up in the right ways and I am going to focus on migration paths from older technology to what we are building now. That’s how I would suggest the industry interpret not Charlie’s departure but the shift in his role. Then my arrival is helping us take these great technologies and make them easier to integrate and migrate to.

TVT:The Gores Group, Imagine’s owner, is a private equity group. That means one day it hopes to divest of the holdings in its portfolio and make a return on its investment. Were you brought in to polish up to prepare Imagine for a sale?

TC: I think at a high level, you characterized the private equity industry correctly. I can’t worry about that. What Charlie and I are trying to do is to build a good business here that is a reliable partner for our customers.

You know, my wife and I love the house we live in, but for some price it is for sale.

I can’t speak to hypotheticals like what somebody would offer for the business at some point in time. Our goal is to get stronger and dominate. I don’t think people are going to give serious consideration to a vendor that is just participating. So we are working together to get into a dominant position. Charlie is identifying the components, and I am integrating and selling.

TVT:Charlie, your role is as a senior advisor at The Gores Group focused on M&As. Where can you help Imagine create that dominance Tom has mentioned? What sort of acquisitions and mergers are you looking to make?

CV: We aren’t going to share all of our secrets, but what I will tell you is that just in the four and a half years I have been here, I go to NAB and IBC, and I scratch my head. I spend as much time as I have at a lot of customers and I scratch my head again. Outside of Belden, which bought Miranda and Grass Valley, you don’t have a large company that has the passion and interest, the vision and strategy, to try to do something significant.

We have had some very exciting, very large scale wins in IP and the cloud arena around cloud playout and networking. I think there is a decade-plus-long evolution and I think The Gores Group wants to be a significant player participating in that. Whether that’s as the acquirer or the acquiree, we subscribe to the philosophy that we need to be something that is much bigger.

We started something called Imagine 2.0 a year ago, and we didn’t get jumpstarted enough because we were trying to operate the company. We were trying to get landmark wins around next-generation IP playout, which we have successfully done.

It is hard because the M&A side is filled with going down a lot of broken paths, and you don’t get anywhere. I think this is an area I can help, and Tom can do a great job managing the business. One way or another we want to be part of something bigger.

TVT: Charlie, you spearheaded Imagine’s push to transition the industry from an SDI, black-box kind of world to an IP-based world with a virtualized future. Do you think you and Imagine were ahead of your time or in sync with where the industry wanted to go?

CV:I don’t think we were ahead of our time because we would never have been where we are with Disney and many others that have not been publicly announced. We spent almost three years and close to $250 million investing in next-gen technology across playout and networking.

What a lot of people don’t understand is the planning, the product architecture and development cycle is three years. I’ve been here four and half years. We spent the first year cleaning up the company, rebranding and sort of structuring things in order for us to move forward and getting all of the employees aligned.

What I would tell you is, you are always going to be early if you’re going to be a winner. There’s a lot to be said about first market-mover advantage. You can’t be too early if you want to win. You are either a leader, a fast follower or a laggard. And I’m not a laggard or a fast follower.

TVT: Tom, from your perspective, what does Imagine need to do to achieve your stated goal of dominating the industry?

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Tom Cotney

TC: For us to succeed, we have to be more sensitive—not just in our attitudes but in the way we sell products to companies that are going through their own M&A machinations.

What we have to do is realize that sometimes it is not appropriate for a customer to make a large capital purchase. They may want to try something as a service first before they make a purchase. We’ve got to start expanding our aperture when we develop products to include how the customer is going to buy—not just how the technology is going to perform and deliver broadcast quality.

That’s my first challenge to the team. From my conversations with customers, I hear: “You guys have this technology thing nailed.” We have to address people who have challenges with their business models on how they need to buy. I think that is the thing customers can count on with me in this role.

TVT:Tom, not all of your customers are big networks and large station groups despite the ongoing consolidation in the industry. Many broadcasters, especially the smaller ones, want to wring every last bit of use out of their SDI infrastructure. Has that been an obstacle to the uptake of IP?

TC: I think that is where my experience ports to this business. I was dealing with a sales situation this morning with a client who has stations in 10 markets and is on our legacy products. The sales opportunity that we have on the table is a response to extend support for one of our oldest products. You know, I would love to have that money, but I don’t think that is in this customer’s best interest by extending the misery by not being in the market and buying technology for six years.

I told my team, let’s go back and look at getting them on our new technology and finding a way for them to spend money on that, not the older tech. It just doesn’t make sense to pay for a service contract when you need to cut over to the new technology. We discussed a solution where the customer could migrate immediately to the new technology, and we are going to make the financial side of that much more palatable than what they otherwise might perceive to be making a big speculative purchase.

I go back to the point that customers on the buy side are worried if you are going to be there in the future. They are worried about the stability of their own business.

So, maybe what we need is rental options instead of exclusively purchase alternatives. Maybe what we need are ways that people can more easily move that old inventory of product around in their network as they are renting a piece and then cut over when they can afford it.

But you are right, it could be an inhibitor. But we are going to knock those obstacles down.

CV: I think Tom said it very well. Here’s the most important thing everyone needs to understand. We consciously developed an IP-native architecture that can operate in an SDI and IT network environment, and we don’t really care what everyone’s timeline is.

Every customer that is looking at Imagine appreciates that if they want to continue to operate in a 40-year-old environment, they can buy our technology today and operate in that environment and move to a pure IP-native architecture when they are ready.

I think everybody is going to move to IP in different phases. Our goal was to make sure we were first with the technology that gave customers a unilateral and uniform choice to move forward with next-generation playout, automation and IP networking independent of whether or not they want to operate in a premise-based, cloud-based, IP-based or SDI baseband environment.