2018 NAB Show Event Channel

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Imagine Communications Wants To Get Bigger

The Gores Group, a Los Angeles based, global private equity firm that has owned Imagine Communications (the former Harris Broadcast) for four years, wants its asset to grow. With a customer base concerned about the next transition—IP, 4K, 1080p HDR—Gores thinks the right strategy going forward is to develop size through M&A as well as global expansion and be “empathetic” to customers’ migration pains

After overseeing the replacement of its hardware-based portfolio with software- and cloud-enabled technology and systems that support multichannel content delivery and comprehensive dynamic ad management, current CEO Imagine Communications' Charlie Vogt has been replaced by Tom Cotney, a telecommunications and mobile industry veteran hand-picked by The Gores Group to grow the business.

Vogt has been reassigned within The Gores Group as a Senior Advisor to drive M&A and business development activities at Imagine and other ventures. The two executives will work closely to grow Imagine Communications.

Cotney said he recognizes his customers’ concerns and wants to address them head-on with innovative products and migration strategies, developed closely with Imagine’s engineering team.

“The markets that we serve are not going to buy from a fragmented base of vendors,” Cotney said. “They want a one-stop-shop and that’s what we’re going to give them.”

The Broadcast Bridge spoke exclusively to Cotney about his vision for the Industry and how he plans to take Imagine Communications to its next level of success.

The Broadcast Bridge: It’s been four years since The Gores Group purchased the assets of Harris Broadcast. Is this management move a sign that Gores is re-evaluating the Imagine business?

Cotney: No, not at all. I come from the venture capital world, where the average length of ownership is 7.5 years. The last business I ran was 14 years old when our biggest competitor bought us.

We have a high-class problem at Imagine Communications where we have an owner that has a significant reserve of funds to help us grow the business. Charlie [Vogt] has done a nice job getting the strategy set on Imagine and establishing some product leadership. There’s no question about that.

But we need to get bigger. Our point of view is that the markets that we serve are not going to buy from a fragmented base of vendors. Our customers already have pressure from the streaming services that are challenging the traditional revenue streams of the broadcast industry. Now they are starting to experience some industry consolidation (e.g., Media General merging with Meredith Corp., Sinclair to buy Tribune Media, etc.).

We expect the buying criteria, particularly if these station groups get even bigger, to change significantly in terms of the types of technology they deploy. Systems will have to be tied into each other more tightly and securely than ever before. Broadcasters are dealing with a lot of uncertainty on their side of the equation. They don't want to deal with the uncertainty of whether a vendor is going to be around or not. So we have to get bigger.

There are a lot of ways to do that. On the M&A side, we’ll look at everything that’s reasonable.

Imagine’s xG ADS platform has been embraced by many different types of content distributors, including cable, satellite and Telco providers.

Imagine’s xG ADS platform has been embraced by many different types of content distributors, including cable, satellite and Telco providers.

The Broadcast Bridge: It’s been a tough year financially for vendors in this space. Some, notably Charlie Vogt, have said that there are too many vendors supporting the broadcast TV industry. Where do you see opportunity in the market?

Cotney: Well yes, I think there are too many vendors and there are not enough that are super strong and offer a wealth of products and solutions. That’s part of the whole ideal behind my coming on board: to try and grow the company. Get bigger, stronger and present less uncertainty to the customer and the industry at large.

That being said, bulking up just to get bigger is tricky. It’s more important for us to round out gaps in our portfolio so that we can be an end-to-end provider. Going forward, we'll have a stronger more compelling offering, which makes us easier to buy from [than the competitor]. That’s how we’ll win.

We also have to listen to what customers want to buy. Maybe it makes sense for them to purchase a service model instead of investing millions into on-premise hardware. This allows them to “fail fast” and turn off the operations quickly, without having to worry about getting stuck with big chunks of inflexible assets. No company is better suited to help TV broadcasters do that today than Imagine.

The Broadcast Bridge: How will Imagine change under your leadership?

Cotney: I think as good as we have been at building the new technology that our customers are now deploying, we need to be a little bit more empathetic about how our customers will migrate to it. If you have a prior generation of product, and you want to upgrade, you not only need a road map on how to get from point A to B. You also need a platform that requires a lower cost of ownership. Our IP-based technology will be lower cost and it will be more flexible.

We’re working with a customer right now that owns ten TV stations that has a generation of our equipment we are not going to support anymore. So, I have to address their concerns about IP in general, and assure them that this is the way forward. They are making a $2 million commitment to our next-generation technology, because it’s good and because their survival in the business depends on it.

The Platinum IP3, the latest evolution in Imagine Communications’ SDI/IP hybrid router technology, will help customs migrate to IP signal distribution,

The Platinum IP3, the latest evolution in Imagine Communications’ SDI/IP hybrid router technology, will help customs migrate to IP signal distribution,

We’re going to ask them to entertain the idea that instead of extending support contracts for old technology, they rent our new equipment. They can take our old equipment out and warehouse it for spare parts. That’s a migration plan. It’s more than about new features, I want this to be about, “now let’s sit down with these new features and see how we can make the upgrade happen without disrupting existing operations and never going off air.” That’s what customers want to hear. It’s has to be financially palatable.

The Broadcast Bridge: Where will you find new customers to help Imagine grow?

Cotney: I think we have a lot of opportunity in the international space. We're strongest in Europe, but not so much in other regions. The first hiring I approved was a new general manager to run our Asia-Pacific business. We’ll also try and expand in other markets [beyond broadcast] as well.

As a vendor, the broadcast industry is a very complex business to operate in. Eventually, I am going to have to focus a little more than we normally do on the breath of our product portfolio. IP for the broadcaster is a very strong statement. Expect us to try and grow internationally with that product line. We’ll also grow our cloud-based offerings.

So, technology is number one, international growth is two, and the third segment where we will continue to lead is in the ad insertion and distribution business for multichannel delivery. We have a platform [The xG ADS ad decision service] that’s basically an exchange for the advertising industry. Many different types of content distributors, including cable, satellite and Telco providers, have embraced it.

I come from the mobile industry and understand how serving ads work. We’ll continue to refresh that platform because it is a key to success for broadcasters going forward. The revenue generated from a targeted ad is four times higher than a standard broadcast ad.

So, in general, I see a move from proprietary platforms to an open environment that allows the customers to deploy it in the way they think makes the most sense.

The Broadcast Bridge: What’s on the horizon?

Cotney: I like solving problems. I think there is a lot of chaos on this industry and we at Imagine Communications are in a good position to address some real challenges for our customers and that really turns me on. That chaos is opportunity and I think it will be fun to try and find it.

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