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Ericsson held up by competition probe

Ericsson’s proposed acquisition of UK-based Red Bee Media, Europe’s largest independent broadcast services company, has been held up by the UK Office of Fair Trading (OFT) out of fears it could hike prices for linear playout across parts of Europe. The OFT has referred the bid to the UK’s Competition Commission, after completion of a preliminary investigation culminating in rejection of guarantees offered by the two companies.

“Not only is there the possibility of price rises as a result of the merger, there is a risk the most complex channels will suffer a reduction in quality in their service levels,” said Clive Maxwell, OFT Chief Executive.

The concerns arose because of Red Bee’s size and dominant UK presence as provider of playout services to the broadcasters BBC, ITV and Channel 5, as well as leading cable operator Virgin Media. Red Bee has itself been growing through acquisition since its creation as a spin out from the BBC’s channel management services in 2005, when it was sold for £166 million ($260 million) to a company set up specifically for the purchase. After being renamed Red Bee Media, the company expanded into European multilingual subtitling and translation services by buying German specialist Titelbild Subtitling and Translation GmbH and Mundovisión, the largest independent subtitling and audio description company in Spain.

Then in August 2011, Red Bee Media moved into content discovery by buying TV Genius, also for an undisclosed sum. Its increased presence in Europe culminated in Red Bee Media winning its biggest contract to date outside the UK with a multi-year deal with Nordic pay TV platform Canal Digital DTH to supply rich metadata services spanning Norway, Sweden, Denmark and Finland.

This has also added fuel to opponents in the UK of the Ericsson bid for the company. RedBee with 1500 staff, is actually bigger than Ericsson’s own broadcast services division, which has just over 1000. The planned takeover is, therefore, a major part of Ericsson’ strategy to become one of the leading global players in playout, metadata and content discovery across all platforms, as was acknowledged by Joachim Bergman, Head of Operations and Global Solutions at Ericsson Broadcast Services. Speaking to Broadcast Engineering at IBC2013, Bergman highlighted how Red Bee would greatly strengthen both its media services portfolio and presence in Europe.

“We believe in future there will be 50 billion connected devices, and 15 billion of those will be video enabled,” said Bergman. “Red Bee is essential to that strategy to serve those devices with creative services, access services and metadata.”

It is quite likely Ericsson’s takeover of Red Bee will eventually be waved through, but only after further concessions and reassurances from the two companies.