Monday, March 15, 2010

Consolidation Price

More vacuuming up is going in the internet TV marekt as KIT Digital use the proceeds of their recent fundraise to purchase another of the old timers, Multicast. The $18m seems expensive for $12m of business next to the $6m of business they reportedly bought from David McCourt's depleted Narrowstep for just a £360k loan, but is, once more, loss making. Clearly, there is an economy of scale in this business and KIT are probably rivalling Brightcove in billings by now, but the former is very much a service business whilst the latter has grown organically based on core technology.

Moreover, KIT has a market cap of $123m after raising $15m recently on top of countless past raises, probably totalling over $100m and has not posted an operating profit in its history. The receivables and goodwill lines in its balance sheet should make anyone who stumped up for the $15m shudder. Worse still, an original shareholder would have been wiped out countless times - the ultimate sin, in my book.

Still, nothing ventured, nothing gained and there is now some maturity in this business with many of the pioneers - Narrowstep, Virtue, Move, Maven, Multicast, FeedRoom and White Blox amongst them, all having fallen by the wayside.

As usual, those with the deepest pockets are the winners, or perhaps their shareholders are the biggest losers?