Charlie Vogt, Imagine Communications’ CEO, says TV is inevitably moving from broadband to IP. He talks about his company’s strategy for enabling that transition, Imagine’s recent acquisitions and how it will be affected by the upcoming spectrum auction. He also emphasizes the importance of moving to the next-gen transmission system ATSC 3.0.
There’s a revolution going on in TV technology, and Charlie Vogt is among its most vocal leaders.
The CEO of Imagine Communications preaches that broadcasters and other TV producers and distributors will eventually have to join the revolution — the transition from hardware-based baseband video to software-based IP video — simply to remain competitive.
With the help of Imagine and its IP technology, he maintains, they can all make the inevitable move and at whatever pace fits with their strategy and capex budgets. In his thinking, no customer gets left behind.
Imagine is the new incarnation of the Harris Broadcast. The Gores Group, a Los Angeles-based private equity firm, bought the underperforming division of Harris Corp. in February 2013 and a few months later handed the reins to Vogt, an experienced telecommunications technology executive. He was CEO of Genband when the Gores offer came.
The first revolution Vogt led was internal. He put his own management team in place, adopted the aggressive IP strategy and signaled the new beginning by rechristening the company Imagine Communications
If nothing else, Vogt has successfully impressed the new brand on the TV industry, starting with a press conference at New York’s Madison Square Garden last summer.
Imagine is a big fish among TV tech vendors, with revenue estimated to be somewhere south of $500 million, not including GatesAir, the TV transmission business of the old Harris company that is being operated as a separate company in preparation, many believe, for some kind of spin off.
In this interview with TVNewsCheck Editor Harry A. Jessell, Vogt articulates his IP vision and why it makes sense for Imagine and for the TV industry it serves.
An edited transcript:
You’ve been talking about the transition from baseband video to IP in TV production and distribution. How long will it take for that to happen?
It’s already here. I think anybody that says that IP is not playing a huge role in the way they’re developing content or delivering it is not in the media industry.
When I started talking about this 18 months ago, when I said it is going to be 100% IP from the camera to whatever device you’re looking at, people kind of looked at me and said, “What are you talking about?”
But people are able to do it right now. I mean look at all of the companies who are delivering a la carte content. It’s happening, and it’s happening because of the ability to take advantage of the Internet. For HBO or CBS or anyone else creating video content, it’s the simplest, easiest most economical way in which they can get content into the hands of everyone.
Then, you have the fact that once you get to an IP architecture, the acceleration of application development goes up exponentially because everybody is developing on a common set of tools and architectures. So I would tell you that it’s already here.
We’re starting to see RFPs for the first time that have zero baseband requirements.
I can’t say.
In the traditional TV space?
That’s right. I mean literally zero baseband.
Your strategy seems to have two parts. One is to support the streaming businesses for those who are IP today, and then at the same time bring the traditional TV business — the networks, the stations — along to IP over the next three to five years?
That’s right. I mean everybody is going to have their own pace. Every company has their own vision and strategy, right? And then every company has their limitations on what they can do every year as it relates to building towards that vision and strategy based on the amount of capex it has to spend. That’s why it is going to be an evolution. That’s why we have got a hybrid strategy.
If you want to continue to manage a baseband network, great. We’re still manufacturing and rolling out baseband routers. In fact, we’re announcing a midsized baseband router at the NAB Show. So it’s not like we’re abandoning baseband routers. I’m just trying to get ahead of the curve knowing where the industry is ultimately going to go. I don’t want to be a follower.
Our strategy says, whether you are an all IP guy or an all baseband guy, or a hybrid, we don’t care. We have technologies that supports a hybrid that could be 50/50, it could be 90/10, it could be a 100% IP.
We don’t care. We’re just going to make it really easy for you to migrate over time and that’s what our software-defined Magellan Orchestrator is all about.
That’s the key piece? That’s the tool you need to do the slow transition instead of the immediate conversion?
And it’s very elegant. Evertz is taking a little bit of a different approach. Look, I’m not knocking anybody. Everybody has a vision and strategy and you have got to get behind it and hope that you’re successful with it. But they have adopted a strategy to actually compete with Cisco and Juniper and all these multibillion-dollar IP companies where they’re actually integrating IP technology into their baseband routers.
Thinking about my principal readers, TV stations, especially the hundreds of full-service TV stations that do news? Why should they join you in this march toward IP? Is there a real return on investment for them?
They need to do it for three reasons. One is, the efficiency, the cost structure is much less long-term. Two, the ability to ultimately have an end-to-end IP infrastructure is going to allow them to participate in a much more accelerated news development environment. Three, the industry is moving in that direction and the last thing you want to do as a broadcaster is find yourself five years from now, with an old legacy network, with which you can’t compete.
You have made four acquisitions. I am going to give you the name of the company you acquired and you tell me why you acquired it. Digital Rapids.
Digital Rapids was really about two things primarily. One, they had some advanced IP-based, file-based transcoding technology. A lot of the original transcoding technology was all hardware-based, which had a lot of limitations and incremental cost that a lot of the large carriers didn’t want and so they had done some pretty cool things investing in that.
The other is something that’s really taking off like wildfire inside of the company and with our partners and customers. It’s our next-generation workflow management platform. The workflow management element is sort of like Intel Inside. It links all of our technologies and provides a better environment for creating tools and advancements.
Open TV is real simple. It had about 50% of the advertising management, the traffic and scheduling market with the cable operators. We had the other 50% so it was really a consolidation play for us.
What about RGB?
Yeah, RGB really is exciting. A lot of people historically think of RGB as another player in the video transcoding space and certainly they did well early on with their transcoding technologies, but over the last couple of years they have had a very similar vision with ours as it relates to moving the traditional playback and DVR functionality into the cloud.
They also had some unique software to do dynamic ad insertion where you can dynamically insert ads on the fly real-time. So those two things were very well aligned with our cloud video platform that we have been working really hard to get that to market by midyear.
The fourth was Imagine Communications, from which you took your name.
Well, it was a great name, which is why we took it. If you look at the four acquisitions, there was one common theme and that is, they were all laser-focused on helping us accelerate our offerings to the MVPDs. So we went from having small market share in the MVPDs to having a pretty sizable and significant role and share in the MVPDs.
Let’s talk about traffic. WideOrbit seems to have captured the lion’s share of the business in the broadcasting space. Do you think you can win some of that share?
It’s sort of segmented into three pieces. You’ve got your traditional North America broadcaster. We’re about 40% of that market. And then you look at the MSOs. We have almost all of that market. And then, we’re doing really well internationally with our traffic and scheduling platforms.
So, the challenge is that customers sign long-term contracts and you only have an opportunity to participate when those contracts come up for renewal. It’s tough. We’re doing everything we can to continue to advance our platform so that customers don’t want to look anywhere else.
In North America, outside of about five companies, the business is split between us and WideOrbit. As long as both companies are doing their job, then I would expect there would be some stability there.
You know, in the MSO space we’re doing some pretty cool stuff around impression-based ad sales as well as dynamic ad insertion. We’re also investing heavily in programmatic buying, which is something that certainly generating a lot of buzz right now and certainly something that a lot of the broadcasters are looking to augment their existing sales strategy with.
Because of the FCC’s incentive auction, TV stations are going to have to go through reorganization of the TV band. They might also implement a new broadcast standard. It sounds like a lot of potential business for GatesAir.
Yes. We think so.
But is it just another flurry of business as it was back in ’08 and ’09 when the industry transitioned from analog to digital or is this a sustainable solid business going forward?
What’s going to happen here in the U.S. is that the majority of broadcasters will decide to participate in the auction. It’s going to be too lucrative for them not to.
The ones that don’t are going to have to buy new transmitters and new exciters to be able to move to a new frequency. And the government is going to actually help subsidize the cost for new technology.
We have got about 70% of the North American market historically. So as long as we continue to do our job, we think there’s a pretty sizable opportunity down the road.
There’s an expectation that GatesAir will be spun off in an IPO. Is that the plan?
We never said anything about a GatesAir IPO. I mean we have never really validated that either company is on a path for an IPO. Both companies are just head-down focused on building their business.
I mean … we are owned by private equity and at some point private equity companies are going to find a way to cash out. So I think both companies have a lot of options and right now we don’t think about those kinds of things. We’re just focusing on building a great company.
What about next-gen broadcasting? Do you think it’s important that broadcasters make that leap to the ATSC 3.0?
I do. IP is a big part of it and I don’t know any of the major broadcasters that are not following it very closely. We have got a pretty big voice both on the Imagine and GatesAir sides and so, yeah, we’re investing heavily in it.
You came from the telecommunications industry where the technology vendors consolidated down to a handful. Is that what’s happening in this space, in the TV media space?
I think it will. There are basically four or five companies that dominate the telecom world. We’re spending $100 million a year in research and development. There’re not a lot of companies in our space that are spending anywhere near those kind of dollars to enhance the existing portfolio as well as innovate for the future.
I see no path forward for the small companies to try to figure out how they survive and generate enough profits to be able to innovate and compete with a larger scale company. So I certainly believe that we’re going to see continued consolidation to where in three or five years there’re probably five or six really big companies that are driving most of the innovation in the space.
And is Imagine going to be among them?