July 27, 2007

It's not TV ... it's Everything

By Jim Barthold

Harmonic's decision this week to acquire Rhozet is just one more indicator that television, as we have known and loved it, is about as dead as the television dial.

For those unaware of the deal, Harmonic, which has had a longstanding presence in any number of cable headends and has actively been working with telcos, satellite players and broadcasters, needed another element in its technology reservoir to sate today's shifting video demand. Rhozet, with only a fraction of Harmonic's history and even less of that than Harmonic's workforce, had a couple things that made it worth $15.5 million in cash and stock: customers like Amazon.com, ET, ESPN, MTV, The Weather Channel and Yahoo! and a software-based universal transcoding solution that facilitates the creation of multi-format video for Internet, mobile and broadcast.

The key words there, of course, are multi-format, video, Internet, mobile and broadcast. As industry buzzwords go, they're probably at the front of the peleton. As HBO might say, it's not TV ... it's the whole damned communications enchilada. OK, so maybe HBO wouldn't say that, but it sounds like something they'd say, and HBO is a content owner that's looking at putting its stuff on the Web and on mobile phones as well as in satellite, telephone and cable subscriber homes.

"The Harmonic customer (read that cable operator or telco) is looking at the Web and mobile and saying, 'I gotta get there.' At the same time, they have to take the Web content and channel it back into their core cable businesses, which is a file-based problem," said David Trescot, CEO of Rhozet. "They want to have a Comcast channel that you can go to on Web TV that shows you the best of what showed up on the Web this morning."

Size matters

Rhozet, with only 24 employees, can't fill these kinds of orders, so it was open to being acquired by Harmonic. For Harmonic, the addition not only answers a product need, but also shuts out competitors who have been OEM-ing Rhozet technology to get into the transcoding space.

"It's a recognition that as we move forward there are going to be an increasing number of sources of content trying to get to an increasing number of consumers of content," said Marty Picco, vice president of systems and technology at Harmonic. "Our customer base has been television operators, DBS, cable, telco and so forth, (and) we've been looking to move outside that space."

Rhozet facilitates relationships with content creators and studios and distributors. Traditional players like The Weather Channel or Discovery Channel have moved from the mundane linear TV space to the multi-media interactive file-based content using Rhozet. They also interface with traditional Harmonic customers like Comcast or DirecTV on primary video entertainment levels and, increasingly, as part of multi-format offerings. The complexity of developing content to fit each stratum is what a combined Rhozet and Harmonic will bring to customers on both sides of the content divide.

"The other side is the whole disruptive change of how the Internet affects this in terms of distribution of assets by traditional players and bringing new players onto the scene in terms of content generation, new distribution models and so forth," Picco said. "Rhozet has great traction in both those domains. Their customer list is the 'A list' of players in those areas."

New space, old customers

With Rhozet, Harmonic can move into a new space and better serve an old one, Picco concluded.

"We saw the transition from our business being more real-time based towards an on-demand model. That's one of the things that drove our acquisition of Entone last year, and this is a follow-on to that activity. More and more of what television is going to be is not real time, so this will open the door to all kinds of offline processing opportunities, (and) transcoding is the basic one."

- Jim Barthold