itvt

–Shifts Focus from Niche Content Providers to Large Enterprises
–Forms Partnership with TSS

Broadband TV infrastructure company, Narrowstep (note: the company’s flagship telvOS technology has been used to power a number of high-profile broadband TV services, including the ITV Local service of UK commercial terrestrial broadcaster, the Independent Television Network), says that it is shifting the focus of its sales and marketing efforts away from smaller niche content providers–which it says "traditionally had lower margins and less financial resources"–and placing it instead on larger enterprises that require "sophisticated tools and functionality" for broadband video. The company claims that this strategic shift will accelerate its average revenue per customer and its revenue growth in general. As part of its strategic shift, Narrowstep says that it has "given notice" to "many people whose primary role was in developing and supporting the old system." Among those fired from the company: its co-founder, Iolo Jones, and its former software architect, Jason Jack.

Narrowstep says that it has been implementing a number of upgrades to its video asset management and network delivery platform, in order to support its new strategic focus. Those upgrades include 1) the release of version 2.7 of its player, which integrates Microsoft’s cross-platform Silverlight technology, and which it says will provide improved functionality to end-users, as well as increased backend support to channel owners; and 2) increased capacity and new features for the company’s content-distribution network, which it says are designed to make the latter more cost-effective and capable of delivering higher-quality video. Narrowstep says that it has been working on these upgrades since the end of its fiscal first quarter (May 31st), and that it expects a significant decrease in operating costs, now that the development work is complete.

In a prepared statement, Narrowstep chairman and interim CEO, David C. McCourt, explained the company’s strategic shift: "We are now in a position to offer new and existing enterprise customers the user features and video distribution they need to drive revenue and offer a superior user experience. Investing in the right technology to power your business is expensive and takes time. But now that the majority of these investments are behind us, we feel that the enhancements to our platform–including new payment integration, user interface, cross-browser compatibility and content distribution capacity enhancements–position Narrowstep as the leader in serving world-class telcos and broadcasters. For the last several quarters, Narrowstep was essentially supporting two businesses, with two sets of costs–one set of costs for existing customers we inherited who were focused on the niche channel market, and one set of costs associated with building and developing the tools the company needed to serve larger more sophisticated enterprise customers. Upon completion of these upgrades, we believe that our significantly reduced operating costs, our revenue growth potential, and our cash available will provide us with adequate funding to execute our plan."

In other Narrowstep news:

• The company has released financial results for its fiscal second quarter (2008), ended August 31st: Revenues totaled $1.3 million, compared to $1.6 million for the year-ago quarter; and losses totaled $4.9 million, or $0.07 per share, compared to losses of $1.3 million, or $0.03 per share, for the year-ago quarter (note: the losses for fiscal Q2, 2008 included $1.5 million in stock expenses and $0.2 million in depreciation, compared to $0.4 million in stock expenses and $0.1 in depreciation for the year-ago quarter). The company blamed the increased losses on higher operating expenses, related to the build-out of its video-based content-delivery network; an increased headcount "to support the Company’s growing customer base"; increased research-and-development expenses resulting from enhancements to the telvOS platform; and increased customization expenses. Revenues from the company’s narrowcasting business rose by $0.1 million, or 10%, from the year-ago quarter, while revenues from production services declined by $0.4 million (note: the company is in the process of extricating itself from the production business–see [itvt] Issue 7.39 Part 3B).
• The company has formed a strategic partnership with TSS Cross Media Group of Benelux (i.e. Belgium, The Netherlands and Luxembourg), under which the companies will offer broadband video solutions to telcos, broadcasters and advertisers. TSS bills itself as a specialist in the integration of telecom, Internet and broadcast technology "with the goal of developing value-added cross-media solutions for the international media and business markets." Its customers include Endemol, KPN Media, ProSiebenSat1, RTL Netherlands, SBS Broadcasting, Nickelodeon and Canal+ in The Netherlands; RTL in Germany; and Discovery in Norway and Denmark. According to Narrowstep, the partnership is part of a strategy that calls for it to expand globally through a network of international resellers: last year, it formed a strategic alliance with Dutch telecom giant, KPN, to offer a wholesale broadband video offering to network operators, ISP’s and content providers (see [itvt] Issue 7.39 Part 3B). "The interest from telecommunications companies, broadcasters and publishers to monetize video over the Internet with community features and functionality is tremendous," Narrowstep SVP, Barak Bar-Cohen, said in a prepared statement. "TSS has a great network of relationships and expertise in these markets and we are looking forward to building a strong and successful partnership."

Originally published in Issue 7.58 Part 1  January 14, 2008  Subscribe: http://www.itvt.com