On March 15, 2012, Cisco announced its plans to acquire NDS Group – a leading provider of Conditional Access & Digital Rights Management, as well as Software and Services for the digital Pay-TV market. The deal is valued at approximately $5 billion.
The acquisition provides a number of immediate benefits to Cisco – including expansion into emerging markets (China, India and Latin America)- where demand for Pay-tv services is growing rapidly, as well as into additional market segments – particularly Satellite – where Cisco has a limited presence. Additionally, key technology from NDS – chiefly its Content Protection and Software Solutions, will enable Cisco to strengthen its existing relationships with operators. Finally, Cisco acquires strong expertise in multi-screen service delivery solutions that have been deployed by NDS customers for some time.
The greatest asset of the NDS acquisition is Content Protection (and its VideoGuard product family) – which accounts for 55% of NDS’s 2011 annual revenue and is deployed across nearly 126 million households – with 84 million in emerging markets, and protects over $50 billion in pay-TV revenues. In September 2011, NDS announced its VideoGuard Connect; its next generation DRM for multi-platform pay-TV, enabling operators to seamlessly extend their pay-TV services to connected media devices. It enables the secure ingestion, delivery and consumption of premium content over both managed and OTT networks whilst maintaining subscription privileges across devices
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The Software Solutions segments includes DVR software, Middleware and Electronic Programming Guides. Its middleware is deployed in approximately 214 million units, its DVR software is deployed in approximately 47 million units; while its EPG is deployed across approximately 221 million units.
NDS’s largest customers are satellite operators. With DirecTV, BSkyB and SKY Italia accounting for 41% of revenues during2011. As such, NDS has developed solutions to address the “hybrid” approached favored by these operators which enables operation of set-top boxes and the delivery of content over both broadcast and broadband networks as well as over-the-top (OTT) to broadband connected set-top boxes.
The combination of Cisco and NDS will enable them to cover all market segments – IPTV, Cable and Satellite – and count the some of the largest operators in each segment as their customer.
Emerging markets represent a strong and growing market for NDS, accounting for 39% of revenues in 2011, up from 35% in 2010. NDS has strong relationships with key operators in these markets, including Bharti, CCTV, DIRECTV Latin America, Hathway and Tata Sky. The India DBS satellite market is currently experiencing phenomenal growth, with the 6 major operators adding 3 million subscribers per quarter.
Other key customers include Astro (Malaysia), Bouygues Telecom, Cox, Kabel Deutschland, Sky Deutschland, UPC (a unit of Liberty Global) and Vodafone.
During the conference call to discuss the acquisition, Cisco touted NDS’s expertise in multi-screen solutions and cloud based services and alluded to the inclusion of these capabilities into the Videoscape platform. This will definitely create an unparalleled end to end solution for future video services.
John Chambers stated that “video is the next voice” as collaboration & entertainment will become blended, enabling a completely different experience. He also stated that multi-screen video is becoming Bring-Your-Own-Device (BYOD) market and that Cisco has no plans to enter the consumer device market.
The acquisition is expected to close in 2H12 and NDS will become part of the Cisco Service Provider Video Technology Group (SPVTG).
Dr. Abe Peled, NDS Executive Chairman, will be named Senior Vice President and Chief Strategist for Cisco’s Video & Collaboration Group, of which SPVTG is a part. Dr. Peled will report directly to Marthin De Beer, Senior Vice President, Cisco Video and Collaboration Group. He has signed a 3-year commitment to stay with the company.