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On Demand Group Sells Stake in FilmFlex

Seachange’s On Demand Group (ODG) has sold its one-third stake in the U.K.-based FilmFlex on-demand movie service to partners Disney and Sony for about $17.6 million. The deal leaves the two studios each holding 50% of the VOD movie service.

ODG plans to use the money to expand its operation in other territories and to focus on investments on ventures where it has a larger stake and has more control over the service’s direction, ODG CEO Tony Kelly said.

“We made a good profit,” Kelly said. “We plan to use the money to build up our operations in other markets and invest in on demand services” that offer movies, kids and TV product and other programming.

Kelly stressed that the deal with the studios was done on “very amicable terms” and that ODG continues “to do a lot of business” with the two studios, acquiring content from them for other on-demand services run by ODG.

But he said ODG wants to “be more in control of [future] ventures. Being a minority shareholder doesn’t always allow us to do all that we wanted to do.”

ODG, Sony and Disney set up FilmFlex in 2004, which was launched on U.K. cable systems in 2005. ODG develops and provides complete on-demand services for operators, acquiring all the content and providing all the management and technology needed, using technology from Seachange.

Under the terms of the deal, ODG will continue to supply a number of outsourced technical and creative production services for FilmFlex. ODG will be unable to launch a competing movie service in the U.K. “for a period of time,” Kelly added. They continue to run a separate music service for Virgin.

Kelly said his company has a 50-50 joint venture with the Tele München Gruppe in Germany to develop on-demand services for German-speaking markets.

ODG already provides PPV and near-VOD services in Germany for Unity Media and other operators and that will soon be in trials for true VOD services. He declined to discuss which operators will be testing VOD services, but said they expected to make announcements in upcoming weeks.

“Things are really to happen with VOD [in a number of European markets] and part of the reason for the sale was for us to be able to focus on those opportunities,” Kelly said. “FilmFlex is proof that we can build a successful business and we want to repeat that in other places.”

Demand for VOD products, he added, is coming from cable operators, telcos and ISPs. “There is a lot of activity. But can be difficult to build up an appealing on-demand platform. So why not outsource it?”