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TVN Entertainment Finds Merger Partner In Avail Media

5/18/2009 8:30 AM Eastern

Video-on-demand provider TVN Entertainment Corp. is merging with IPTV content aggregator Avail Media, creating a new entity promising to provide a full-service, multi-platform video distribution service for cable and telephone companies.

The deal is expected to be announced today (May 18).

Financial terms were not disclosed, but one cable industry executive briefed on the deal said TVN's owners were selling out to the new investors for $80 million.

Doug Sylvester of TVNWhile not commenting on the terms overall, TVN president Doug Sylvester told Multichannel News that majority owner Morgan Stanley will sell out to the new owners.

Existing Avail backers Columbia Capital, Novak Biddle Venture Partners, Valhalla Partners and Pioneer Ventures, plus the National Rural Telecommunications Cooperative, are investing in the new entity "to create a scalable and extensible platform enabling delivery of next generation video distribution services," the companies said.

In 2007, Columbia, Novak Biddle, Valhalla and Pioneer pumped $25 million into Avail, which also received $5 million in debt financing from a strategic investor and a line of credit from a Silicon Valley bank, according to Avail's Web site.
In all, backers have put more than $40 million into Avail, an industry executive familiar with the deal said.

Avail itself was created from the late 2006 merger of IPTV startup BroadStream Communications and Auroras Entertainment.

Avail CEO Ramu Potarazu, who was BroadStream's chief earlier and also was president of Intelsat,  will head the new company that combines Avail and TVN.
TVN has come under increasing competitive pressure in the video-on-demand distribution realm, from the likes of Comcast Media Center and Ascent Media, and from cable distributors hoping to save on VOD costs, industry executives said.

Ascent Media scored a win earlier this month, signing an agreement with CBS and Warner Bros. to create a new platform for distributing broadcast syndicated programming to stations.

Morgan Stanley, through its Princes Gate Investors fund, bought into TVN in 1997, when digital-cable video services were beginning to roll out, according to securities filings.

In fiscal 1998, it invested $45 million in TVN, according to a 1999 filing.

"I'm sure Morgan Stanley is happy," the executive familiar with the deal said.

The question now, the executive said, was whether TVN and Avail would focus more on IPTV distribution now, even though Avail has not yet turned a profit and TVN is cash-flow positive.

Sylvester said: "We have found like-minded investors who are excited about where the market's headed and believe that now is the time to proactively combine these entities so that you have all of the right elements under one roof."
Potarazu said that for the interim Avail, of Reston, Va., and TVN, of Sherman Oaks, Calif., will retain their current headquarters.

Sylvester said the merged company would provide affiliates an end-to-end distribution solution for companies trying to reach consumers via traditional television as well as through the Web and on mobile devices.

Potarazu said "we can address smaller operator and telco needs with a complete solution on linear programming from Avail as well as the great content that's been delivered by TVN."

TVN, through eight VOD networks and the ADONISS marketing support and asset management services system, provides on-demand event and movie content to some 46 million multichannel video subscribers.

TVN affiliates listed on its Web site include satellite leader DirecTV; big cable operators Comcast, Charter, Cox and Cablevision; mid-sized and smaller operators Mediacom Communications, Insight, Bresnan Communications, Buckeye Cable and Blue Ridge Cable; and telco-TV providers AT&T and Verizon.

Its annual revenue is in the $17 million-$20 million range, according to two venture-capital executives familiar with TVN.

Avail Media, the smaller of the two firms, distributes an IPTV-based lineup of channels from ABC-Disney, Turner Broadcasting and NBC Universal to telephone company affiliates, including AT&T.

Last month, Avail announced its first cable deal, with WRB Enterprises' Turks and Caicos Television Ltd., to replace a cable system destroyed by a tropical storm in 2008.

Avail also provides middleware and digital rights management, scrambling and descrambling, satellite receivers, conditional access, set-top provision, service management, systems integration services, and program management for video hub office components.

TVN said Cowen & Company was its financial adviser and Montgomery & Hansen LLP was its legal adviser, while Avail Media was advised by Cooley Godward Kronish LLP.

 

Mike Farrell contributed to this story.

September