IBM Flexes Cloud Video Muscle

About: International Business Machines Corporation (IBM)
by: Shudeep Chandrasekhar

IBM has announced three major client acquisitions at the 2016 NAB Show.

This flexing of cloud video muscle is a significant move for IBM to be at the leading edge of video growth over the next decade.

What other impact will these announcements have on their overall cloud strategy?

Several of IBM's (NYSE:IBM) more recent acquisitions have been leading up to one of the biggest moves by the company in the cloud. Just hours ago, IBM announced several client initiatives for its recently launched IBM Cloud Video unit that will set the ball rolling on a big shift in video production, sharing and distribution for the media industry.

The location for this announcement - the 2016 NAB Show in Las Vegas starting today, April 18. Hosted by the National Association of Broadcasters, the NAB Show is an annual destination for media and entertainment companies to mingle with the technology companies that are enabling their industry and keeping it in a constant evolutionary state.

Participants and sponsors include not only technology companies like IBM, Google (GOOG, GOOGL), Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO) and Intel (NASDAQ:INTC) but also corporations as diverse as Verizon (NYSE:VZ), Nielsen (NYSE:NLSN), Dropbox (Private:DROPB) and LG (OTC:LGEAF).

A Brief Overview of IBM Cloud Video

Less than three months ago, IBM launched the Cloud Video unit after a string of acquisitions geared toward putting Big Blue in the midst of what is potentially a $100 billion-plus market.

The strategic acquisitions toward the Cloud Video initiative include Ustream, Clearleap, Cleversafe and - the pivotal point of this disruptive announcement - Aspera, the data transfer technology that will make it all happen.

Below is an infographic overview of how IBM Cloud Video Services is structured.

IBM's Client Initiative Announcements

Today, IBM announced several key client acquisitions for its IBM Video Cloud Services business that will rapidly take them to the top of the segment. IBM has moved with the speed of a startup, but by leveraging IBM's R&D Lab and its capabilities and merging that with offerings from the recently acquired companies.

"IBM is at the forefront of the industry at a time when video is the driving influence in how organizations communicate, share information, and entertain," said Braxton Jarratt, General Manager of the IBM Cloud Video."Today's announcements will be viewed as a significant milestone in the company's cloud video strategy, as IBM makes the sharing, distribution, and management of video increasingly simple across any device."

Announcement 1: IBM Cloud Video to Power Comic-ConHQ's New Video Channel Launching May 7

IBM has inked a deal with Comic-ConHQ to be their technology partner for the latter's video channel that is debuting next month. Comic-ConHQ is a collaborative undertaking between Comic-Con International and LionsGate (NYSE:LGF), and is launching a subscription-based on-demand video service on May 7.

IBM will provide the technology infrastructure that will give the channel's viewers access to their favorite Comic-ConHQ programming seamlessly on multiple devices.

"The IBM Cloud video solution is a reliable, robust, and secure platform that enables fans to access and enjoy Comic-Con HQ and all our live, original and licensed programming on their favorite screen, anytime they want," says Seth Laderman, Executive Vice President and General Manager of Comic-Con HQ.

IBM will be handling all technology aspects of this video streaming service, including billing, subscriber and content management and device compatibility for the streamed content.

The video streaming industry is a fast-growing one that I've written about in an earlier article called Facebook's Future is Video. For IBM, this is a significant move into the same space, but with a different model and scale.

In a way, you could say IBM is attempting to capture the enterprise equivalent of what Facebook is trying to do for its millions of users.

Announcement 2: Canadian Broadcasting Corporation to use IBM as Technology Backbone

The second key client IBM has acquired in the video streaming segment is Canada's national public broadcaster. CBC will be using Clearleap to deploy its video streaming service to users across Canada.

Of significance here is that Clearleap will allow seamless transmission of CBC's 600-plus titles - including Murdoch Mysteries and Heartland - to web, iOS and Android devices. Accessibility enhancements include closed captioning, robust search and discover functionality and, more importantly, high-quality video irrespective of screen size.

Lauris Apse, Director of Digital Products, CBC, on IBM Video Cloud's end-to-end technology capability:

"We knew we needed a video platform to support our strategy of building an audience in an aggressively competitive environment. We partnered with IBM because they know what it means for a broadcaster to be digital. IBM's flexible video technology, its depth of experience in digital workflow, and its understanding of our existing infrastructure made them the perfect fit to give our audience a great experience."

Announcement 3: AOL's New Media Management Platform to Use IBM Aspera

AOL (NYSE:AOL) will be using the Aspera suite of software as a key part of the technology infrastructure that will support media transfer across its national and global production units. The partnership also will enable AOL's global creative teams to effectively distribute, manage and collaborate on large media projects.

To put it in perspective, several properties of AOL already have the reputation of providing high-end editorial, image and video content across multiple devices with negligible degradation of media quality. These properties include well-known names such as TechCrunch, The Huffington Post and Engadget.

IBM's capabilities will be put fully to the test here because all of these companies as well as AOL's other properties generate massive amounts of media data across the majority of media types consumed by online users. Aspera's forte is the ability to stream high-quality content through the internet rather than depend on satellite links and other systems that have inherent latency issues.

Background on IBM Video Cloud's Components


Prior to being acquired by IBM, Ustream, which was founded in 2007, had raised about $60 million from investors including DCM Ventures and SoftBank Capital. Their customers include Facebook, HBO, Nike, Discovery Channel, Cisco, Sony, Intuit, NASA, Mazda and Samsung.

The acquisition was the lynchpin for IBM to launch its Cloud Video Services unit, and the company is now poised to take advantage of the rapid growth not only in video streaming but also opportunities in data storage and retrieval, security and analytics.

"With the deal, IBM has formed the Cloud Video Services unit, which combines assets from Ustream and the recent acquisition of video-on-demand management firm Clearleap. The unit also will create solutions integrating technologies from other IBM investments, including Aspera and Cleversafe. IBM Cloud Video Services will be led by GM Braxton Jarratt, former CEO of Clearleap."

- Variety

Significant Client Testimonials for Ustream


"We work with Ustream to plan our events. Each one is unique and has it's own challenges, but I'm able to pick up the phone or Skype and talk to the Ustream folks and ask, 'What are the best settings?' 'What's the best way to do this?' If we were working with a company that just provided the bandwidth, we wouldn't have that additional support."


Clearleap and Cleversafe

These two acquisitions are significant in that one helps clients (such as HBO, The History Channel, Time Warner Cable (NYSE:TWC) and Verizon (VZ)) process and manage their video assets, while the other provides scalable data store functionality that is vital to handling large amounts of video media.

The biggest advantage of IBM owning Clearleap is that all of the processing and asset management features and functionality are exposed as open APIs on Bluemix, IBM's Platform-as-a-Service (PaaS) offering. This will allow big media companies to fully integrate these services with their on-premises systems and help them leverage the functionality of Clearleap.

More importantly, it will be a gateway for IBM to explore cloud revenue opportunities with these companies over the coming months.

With Cleversafe, IBM is squarely in the market with data storage solutions that will further their cloud agenda. Video files are, obviously, one of the largest media types, and Cleversafe provides an ideal solution to securely store large banks of video content that media companies need to maintain on an ongoing basis.

Cleversafe is not only a robust system, but also has a wide moat made up of over 350 patents related to object-based data storage, which technology itself is used by several of the world's largest cloud providers like Amazon, Google and Microsoft.

This puts IBM in an enviable position in this particular area of their cloud portfolio over the other three major cloud players (what I call the "Cloud 4ce" companies).


But possibly the most significant acquisition in terms of video broadcasting and transmission is Aspera, whose namesake technology is at the heart of this initiative by IBM.

From IBM:

At the core of the Aspera solutions is the patented Aspera Fast, Adaptive, and Secure Protocol (FASP), a breakthrough transfer protocol that uses existing wide area network (WAN) infrastructure and commodity hardware to achieve speeds up to hundreds of times faster than FTP and HTTP. FASP transport technology provides enterprise-grade security and exceptional reliability and bandwidth control."

Investor-speak: The Real Impact of IBM Video Cloud Services

These announcements signal a basic shift in the way video content will be shared, distributed and managed across the globe. With the ability of this service to carry high-quality video through available internet pathways, the cost of producing and distributing videos will significantly reduce, enabling smaller players to reach out to global audiences.

This shift that IBM is now facilitating underlies a tectonic movement in the video streaming industry itself. With video production and distribution becoming more affordable, I don't see this as a mere $100 billion industry. I believe it's much bigger than that.

We've already seen how video content is overtaking the internet, and IBM validates that by estimating video to be 80% of Internet traffic by 2019.

Within this space, competition comes in the form of offerings such as Microsoft's Akamai and Brightcove's VideoCloud, both of whom have a significant global presence. For IBM to seriously compete in this segment, they will need to keep pushing on the client acquisition front. The fact that AOL and CBC are now on board will help the video cloud unit to be positioned in the market in a stronger way, but it will be a few quarters before we can see how IBM fares against other veterans of video cloud.

Top line decline has been a worrisome element among IBM's investors, but Virginia Rometty's strategic imperatives seem to finally be paying off. The revenue streams resulting from these moves in Video Cloud will play out over the next several years - even though we may not see any immediate, significant benefits to the top line.

The IBM Cloud Video Services unit appears to be one of the focal points of their strategy to help enterprises transform their business.

One of my biggest grouses with IBM has been, until now, the lack of "big-brand" additions to their cloud client list. As we've seen, Amazon, Microsoft and Google have all been highlighting their achievements in this area - and at the end of the day, even for major players, adding big names does help brand awareness to a great extent.

With the addition of Comic-ConHQ, CBC and AOL, I do believe IBM has made a strong statement about their intention to get to and stay at the top of the video growth phenomenon that we're witnessing.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.