Updated with additional comment from SpotXchange CEO Mike Shehan and RTL.
European entertainment network RTL Group announced Thursday it will acquire a 65% stake worth $144 million in video supply-side platform and programmatic marketplace SpotXchange.
Depending on the performance of the company, RTL could acquire additional stake in the company through the terms of an earn-out agreement. Read the press release.
The deal comes weeks after Facebook acquired competing sell-side video advertising platform LiveRail, underscoring the race to acquire a piece of the programmatic video pie.
In a recent interview, SpotXchange founder and CEO Mike Shehan alluded to the company's future as a standalone sell-side video platform -- or not. "If we considered strategic partnerships, it would be in a form that would allow us to pursue our vision on the supply side and continue to offer our services so as not to conflict with the buy side," he told AdExchanger.
According to Shehan, "Instead of selling to a major US technology company, and becoming one feature in a giant ad tech stack, we've taken a route that will allow us to operate independently while becoming a core part of RTL's global business and strategy."
Elaborating for AdExchanger about the deal, Shehan said, "We honestly [didn't] think there [were] many, if any, other companies that would help SpotXchange achieve its goals of successfully penetrating each and every European market…RTL is twice the size of Yahoo and four times the size of AOL."
The deal is inherently about owning the content, distribution and delivery method while simultaneously allowing the publisher to monetize those assets.
Through the terms of the deal, RTL will appoint three members to the company's board, while Shehan and Steve Swoboda, founder, COO and CFO, will continue to manage the day-to-day operations of the company, according to the release.
"Video is going to be the battleground between the traditional TV companies and the digital companies," said Dave Morgan, founder and CEO of Simulmedia. "Display and search weren’t because those were largely the businesses the print companies had. Print companies lost that battle in users. But the TV companies haven’t. The TV company viewership is strong and they have really robust balance sheets."
RTL Group is an $8 billion-TV, broadcasting and cable conglomerate owned by German media company Bertelsmann. Some might know RTL for its content production division, FremantleMedia, which distributes such popular titles as The X Factor and American Idol. RTL operates 54 TV channels and 27 radio stations.
The SpotXchange investment is not the company's first foray into digital video monetization. RTL last June entered into a strategic partnership with BroadbandTV, a tool that helps media companies monetize videos containing their IP which are uploaded to YouTube.
According to Sorosh Tavakoli, founder and CEO of European video ads platform Videoplaza, "RTL knows programmatic trading will be important for the TV advertising market in the future and it's clear they wouldn't want that market developing without their participation."
SpotXchange helps publishers ranging from Hearst to Mail Online and News Distribution Network monetize. The company's goal is to provide "holistic yield management," in Shehan's words, to manage all opportunities from direct-sold to programmatic.
This deal, in Tavakoli's view, is about "RTL future-proofing themselves for when programmatic trading becomes a reality for broadcasters. The SpotXchange acquisition will allow RTL to tap into the mid-and-long tail part of the market, complementing their strong position in premium."
Other industry insiders agreed.
"Digital video is an entirely different ecosystem than traditional TV," commented Scott Ferber, chairman and CEO of Videology. "To play big in the future of TV, TV companies need to buy, build, or partner to obtain digital video technology. RTL is a great 'TV-plus' media company who has a lot to gain (or lose) from TV and digital convergence."
In response to SpotXchange's future autonomy for existing publisher clients, RTL provided this comment for AdExchanger: "RTL Group is and always has been a decentralized company and we have a proven track record in demonstrating that our businesses are run autonomously. We do believe that SpotXchange will benefit from RTL Group's operations and vice versa…we will invest to grow SpotXchange's business development resource to help forge strategic partnerships with rights owners and continue the investment in the best-in-class technology platform and partner support team."