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Synced Up With OTT

When Himesh Bhise joined Synacor in August 2014, the company was largely known for its TV everywhere and Web-portal services. It was also struggling for growth and facing static from activist investors pushing for it to sell to the highest bidder. A year later, and Bhise, a former Comcast, Charter Communications and AOL executive, has quickly put Synacor in position to go it alone by bulking up its core businesses and branching into new ones through a mix of acquisitions and strategic pivots. With those decisions, Synacor is poised to help its multichannel video programming distributor (MVPD) partners, including Mediacom Communications, Buckeye CableSystem, Google Fiber, Windstream, Suddenlink Communications, Charter Communications, Verizon Communications and Sling TV, among others, expand their authenticated TV everywhere strategies and put them (and a number of new ISP customers) on a path to develop and launch new over-the-top video offerings. Next TV editor Jeff Baumgartner recently connected with Bhise to discuss Synacor’s product and business strategy in more detail and talk about the company’s plans to help its partners attack an ever-changing pay TV marketplace. An edited transcript follows.

NTV:Let’s talk OTT. Most of your partners are traditional MVPDs, but there’s a lot of over-the-top activity brewing in the sector. What’s happening there, and what are you doing to help them prepare for this shift?

Himesh Bhise: With the Zimbra acquisition, we will now be working with 120 ISPs around the world. Clearly, an area that is top of mind for many of them is OTT, or the next generation of video. And I can see that [occurring] in three areas.

One is for them to continue to play in the ecosystem of TV everywhere. Many of their programming partners have launched their sites, and those sites require them to authenticate against their MVPD credentials. Many MVPDs have launched search-and-discovery experiences to continue in their role as a search-and-discovery provider, which is the legacy of the guide and the set-top, but kind of translated … for digital. That effort is very much underway, and … we will continue to be a leader in that space.

The second one is an aggregated digital video experience launched by the MVPD, similar to [Comcast’s] This will require them to ingest video content … transcode, encode, and deliver [video] into an experience that they have branded and they have created, and drive usage of that property across the subscriber base on multichannel platforms.

NTV:And you view that as a step beyond TV everywhere?

HB: So many different people have so many different definitions of what TV everywhere is. I try to carve out the two experiences separately.I think there is a search and discovery, and there’s an authentication experience, and then there’s a deeper video-consumption experience that, on digital, mimics the aggregated experience that MVPDs deliver on the set-top box.

In the third bucket … is true OTT, which is outside of the traditional cable [TV] subscription. You’re targeting a specific segment; it could be millennials or certain ethnicities. It may be loosely linked to your cable bill, but it may not be, and it’s truly kind of a new, separate, digital-first video service.

NTV:How much interest are you seeing in that third bucket? We’ve seen some examples start to pop up — DirecTV with Yaveo, Verizon Communications with Go90 and Comcast with its coming “Watchable” offering.

HB: I think it’s becoming clear that there are certain customer segments that are broadband-first, or are generationally more likely to watch one type of video content versus the other. I think there is interest in our customer base to reach that segment.

I think there’s another version of it, which is targeted at bringing content to your subscribers that historically wasn’t able to find a home on the set-top box. Legacy QAM systems are capacity constrained. As an MVPD, you’re looking to bring this new video content to your customers. Digital is a great way of doing it; it’s much more efficient. We’re seeing a lot of interest.

NTV:In that example, then, you’re talking about bringing content from a service like AwesomenessTV or even Netflix and integrating that over-the-top capability at the set-top level.

HB: Absolutely. Let me give you an example. We announced a few weeks ago that we have developed a native mobile app that is a companion to our desktop portal/start page experiences. But what makes this mobile app interesting … is that the video section of that app is entirely populated by short-form video that we have assembled and curated through many, many partnerships with providers who are traditionally lumped in the millennial video space.

There’s an example of a digital offering that is targeted to millennials that is short-form that our customers can deploy to their users in a very simple fashion. There’s no incremental billing required. It’s pertinent content that they can use digital to provide, and it’s advertising-supported.

NTV:Is this what MVPDs must do to stay competitive as more viewing continues to shift to some of these other sources of video? Or is it bigger, where they have to move to a next-gen platform like Comcast is doing with X1, or what Charter is doing with the Worldbox and its cloud-based Spectrum guide?

BH: There are existing segments that they’ve got to be able to reach. We’ve been talking about creating content packages that speak to the Latino community or the Indian community or the Chinese community, etc., and making sure you’ve got enough representation of that kind of content. The same thing with millennials — making sure we have enough content packages for them.

The other [area] is broadening the business model. MVPDs today have a subscription model that is very large. They have a premium model for the HBOs and Show-times of the world. And there is an advertising model. I know that all three models exist today for MVPDs but we typically tend to talk about the bundled subscription model.

And I think in this world of the future there is a lot more room for the narrow, premium and the ad-supported model as a way of expanding. And I think the set-top box changes with the advent of IP. Every major MVPD, whether it’s Comcast or Charter or Liberty [Global] — everybody has announced their next-generation set-top box initiative. Clearly, the set-top box experience is going to improve and also the set-top experience and digital experiences are going to come closer together, which is exciting.

NTV:How are you factoring your strategy into the set-top box world as more IP connectivity reaches into that platform? Do you see yourself playing a role there, in addition to a lot of the mobile-focused and online video stuff that you’ve been focused on?

HB: We really see ourselves as digital-first. I believe our role expands as digital becomes more and more of the set-top experience.

For example, we can integrate with [our customers’] traditional set-top providers … to align the digital experience and the set-top experiences. We can do the same thing with metadata to ensure that it flows back and forth. We can enable a cloud DVR service in our video cloud. We can enable an Android box experience, whether it’s owned by the MVPD or has a business relationship with the MVPD. Those are all the use cases that we’re focused on enabling that bring the two worlds together.

NTV:You bought Nimble TV early this year. Though Nimble TV was providing a consumer service that allowed subscribers to access their pay TV services on various connected screens and devices, what gap did Nimble TV fill for Synacor?

HB: As we were putting our whole video cloud and video infrastructure together, one of the areas in which we felt there weren’t a lot of options in the market was live linear encoding. We hadn’t come across many companies that did live linear really well. That’s what we really liked about Nimble — they did it, and they did it at scale. They had hundreds of thousands of [customers] using their product, so clearly it worked. And they were pulling in a lot of live, linear feeds. That’s why we bought them and brought them into the architecture. And the team helped us expand video-engineering expertise at Synacor.

If we go back to some of the use cases we just talked about, pulling in specific linear feeds [to] the set-top box or creating specific offerings targeted to a specific ethnicity and combining both live linear and VOD, the Nimble technology really helps us do that.

NTV:What is the status of integrating Nimble TV’s technology into your video cloud ecosystem?

HB: We’ve put in a bunch of work-flow-management tools and encoders, which we received through our Siemens partnership, and the entire instance is now up and running in our data centers and in the cloud. So we are ready, and [the product] has been in the market for a couple of months, [and we’ve been] showing the infrastructure and solution to various providers. In fact, we were asked to demo at the [The Independent Show] recently.

NTV:Let’s talk a bit about TV everywhere. Authentication has long been viewed as a friction point. How has in-home auto-authentication helped in this regard? Have you seen a boost in connect rates?

HB: We’ve invested in auto in-home authentication, and it’s been a part of our product and platform for a while. We’ve deployed it with some customers and we continue to deploy it. We have a roadmap to deploy it with all of the customers we have for Cloud ID.

It’s intuitive, that’s for sure, once you take away the extra step of login inside of the home. You get more traction and engagement. We’ve found that the abandonment rates just plummet like a stone. [Per Synacor, its Cloud ID authentication systems, including social login and auto-authentication, deliver TVE abandonment rates of 0% to 20%, improved from the industry standard of 50% to 60%.]

NTV:Out-of-home auto-authentication has also been this Holy Grail of sorts for TV everywhere. What kind of progress are you making in that area?

HB: We believe we have a really interesting technology that enables out-of-home authentication as well. We haven’t announced how we’re going to do it yet, because we’re still developing it.

NTV:Is this a 2016 product or are you looking at something that would appear later this year?

HB: My guess is that it’s 2016 most likely. It does require a little bit of work with our customers.

NTV:You’ve been extremely active on the M&A front (see sidebar, this page). Are you still on the lookout for more deals? If so, what areas would you be focused on at this point?

HB: Our M&A has been very focused on accelerating and driving the strategy that we announced a year ago, when we said we would create a video services team and put an infrastructure together. Nimble fit exactly that.

In that strategy, we also said that we thought international and enterprise are really important and very valid growth markets for us. Zimbra adds not just a large set of customers ... but also gives us this really cost-effective distribution footprint around the world. Zimbra operates in 135-plus countries around the world, over 500 hosting providers, over 1,200 value added resellers ...

That’s what creates the framework of Synacor as well. Their network is interested in representing some of our technologies on the video side with cloud ID or on portals, which could be very interesting to us.

We’ve got a lot of assets now, and a lot of room to execute and capture the value from the assets that we’ve acquired. So, I think I feel good. But that said, I think we will be opportunistic as well. It’s got to be the right company, the right team and the right cultural fi t and the right strategic fi t to drive growth, and it’s got to be the right economic fi t to make sure that we’re continuing to drive value for our shareholders.

Steering Toward Growth

A snapshot of moves Synacor has made since Himesh Bhise took the helm in August 2014:

SEPTEMBER 2014: Cuts about 70 jobs, or 20% of the workforce, as part of a reorganization aimed at streamlining Synacor’s business, focusing its R&D costs, and returning the company to growth.

JANUARY 2015: Acquires NimbleTV, a deal that gives Synacor access to a scalable live, linear encoding platform for online video apps and services.

MARCH 2015: Partners with the Platform, the Comcast-owned online video publishing unit, to provide the back end of Synacor’s coming OTT platform.

MARCH 2015: Rolls out Cloud ID SDK, a platform that aims to simplify mobile app development for the consumer login process, with Sling TV, Dish’s OTT TV service, is among the platform’s early takers.

JULY 2015: Shored up OTT platform via partnership with Siemens Convergence Creators, maker of an online video product called OTT SWIPE, and EveMeta, a provider of low-bandwidth video encoding systems.

AUGUST 2015: Acquired Zimbra, provider of an open source-based email, messaging and collaboration solution, for $24.5 million. Zimbra has more than 120 ISP/communications services provider customers worldwide, including Comcast, Vodafone, Emerson and H&R Block.

SOURCE: Company information, Next TV research