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DTS to Acquire iBiquity for Some $172 Million
- Thread starter RBR-TVBR Buzz Stream
- Start date
Ibquity To Have New Owner
Looks like Private Equity is interested in the HD radio business:
From Radio World...
DTS has entered into an agreement to acquire iBiquity Digital Corp. for $172 million.
IBiquity is the developer of HD Radio technology, which is the basis of in-band digital radio transmissions in the United States and in some other countries.
“DTS expects to finance the transaction through a combination of cash on hand and debt,” the company said.
The transaction is expected to close later this year and is subject to closing conditions. iBiquity is a privately held company based in Columbia, Md., with approximately 120 employees. After closing, Bob Struble will continue to lead the HD Radio business for DTS.
In making the announcement, DTS stated, “iBiquity has very successfully driven penetration of HD Radio technology in the North American automotive OEM market. Every one of the 36 major auto brands serving the U.S. market offers HD Radio technology on some of their vehicles, many as standard equipment. The company’s technology was built into approximately 35% of cars sold in the U.S. in 2014, and DTS expects the majority of North American vehicles to come equipped with HD Radio technology over time. The combination is also expected to provide opportunities for additional geographic, service and technology expansion.”
The announcement was made by Jon Kirchner, chairman and CEO of DTS, and Bob Struble, president and CEO of iBiquity. Struble called DTS “a like-minded partner” and said “our employees and customers, who will benefit from the additional scale and enhanced resources of a larger collective company.”
Looks like Private Equity is interested in the HD radio business:
From Radio World...
DTS has entered into an agreement to acquire iBiquity Digital Corp. for $172 million.
IBiquity is the developer of HD Radio technology, which is the basis of in-band digital radio transmissions in the United States and in some other countries.
“DTS expects to finance the transaction through a combination of cash on hand and debt,” the company said.
The transaction is expected to close later this year and is subject to closing conditions. iBiquity is a privately held company based in Columbia, Md., with approximately 120 employees. After closing, Bob Struble will continue to lead the HD Radio business for DTS.
In making the announcement, DTS stated, “iBiquity has very successfully driven penetration of HD Radio technology in the North American automotive OEM market. Every one of the 36 major auto brands serving the U.S. market offers HD Radio technology on some of their vehicles, many as standard equipment. The company’s technology was built into approximately 35% of cars sold in the U.S. in 2014, and DTS expects the majority of North American vehicles to come equipped with HD Radio technology over time. The combination is also expected to provide opportunities for additional geographic, service and technology expansion.”
The announcement was made by Jon Kirchner, chairman and CEO of DTS, and Bob Struble, president and CEO of iBiquity. Struble called DTS “a like-minded partner” and said “our employees and customers, who will benefit from the additional scale and enhanced resources of a larger collective company.”
I wonder if Alcatel-Lucent, the inventor of iBOC retained it's ownership stake.....I hope this means that investment into HD, particularly in subsidizing car radios with HD is in the offing. That will be the key to additional investment and acceptance of HD Radio. If they could improve the AM quality to make it comparable to FM for music, it could potentially mean some new stations as AM has lots of space where FM is packed like sardines in nearly every market.
The biggest mistake was charging on the front end. They should have given away the technology, given away the radios, get people hooked on the idea, and then collect the money on the back end. Instead, they created something that only a few stations use and a few people know about, and it's hard to build a business around that.
As BigA mentioned, perhaps the new owners should consider revamping the original business model to grow acceptance. That includes elimination of licensing fees for stations to broadcast IBOC/HD.
If an AM station doesn't play MP3 compressed audio files at goofy bitrates, then the audio quality of AM-HD is already technically equal to analog FM. Where the perception of inferior quality comes in (aside from the claims of the anti-HD choir here), is what used to be called dualing algorithms, where the compression algorithm of the audio file being played conflicts with the digital playback or (in this example) digital transmission algorithm.
R
rbrucecarter5
Guest
Wow - DTS is going to take a financial bath on this. Whoever recommended the buyout of iBiquity should be fired, tarred, feathered, and ridden out of their office on a rail. And probably will be when DTS loses a bunch of money.
I am glad I don't have any stock in DTS.
I am glad I don't have any stock in DTS.
The biggest issues for HD have to do with the fact that car manufacturers have to pay additionally to have HD capable radios. There is no subsidy; that is what satellite does, although they don't call it a "subsidy" but, rather, a revenue sharing incentive.
Cars are almost universally equipped with satellite. When an owner of a new car subscribes, a portion of the revenue goes to the car manufacturer. That is possible because satellite is a paid-for service.
HD is an enhancement to free OTA radio. There is no downstream revenue. iBiquity gets a small amount of revenue from the annual station licenses, but most of it comes from the chipset royalty or fee and that is mostly on car radios. There is some revenue from HD-2 and beyond usage, and much of that comes from the profitable use of HD subchannels for data, such as realtime traffic information.
Kelly addressed HD on AM from a technical perspective. There is one additional aspect of AM HD which is a killer and that is the need to restrict audio bandwidth to 5 kHz, making the analog version of the station sound less than optimum. And with far less than 200 AM HD stations, this is probably a dead issue.
You know this how?
It seems likely that DTS did projections based on trailing metrics and built a model that looked favorable. With essentially all car manufacturers including HD in many if not all models and HD being increasingly used to transmit data, the model probably looks positive. Add in revenue for HD-2 and HD-3's that originate for translators and you have an income stream that may not be the original "dream" but which is solid.
DTS is a technology company, and holds thousands of patents. It is likely that envision other uses for the iBiquity patents within their corporate operations.
If you understood how much due diligence goes into this type of deal, you would not make such a wild, unfounded and ungrounded statement.
The very down market responded by adding nearly 4% to the DTS share price following the sale announcement.
(For the pro-IBOC trumpeters here): I have never heard AM IBOC sound anywhere near as good as FM, most of the high frequencies are simulated. Can you spell artificial?
I do not thing there are any "pro-IBOC-trumpeters" here. There are some realists who look at facts and trends, there are the DXers who pretty much dislike any change in technology, and the alternative history buffs who inject disinformation, opinion and inaccurate data.
I think there are a few pro IBOC'ers here just as well as there are a few anti-IBOC people here and also a few neutral people. Can you realistically explain to me why there is still such a thing? Is there ANY good reason for it? Do you believe that more than a handful of people in each market actually listen to it? I have never met anyone who has even heard of it never mind listen to it other than Dxers. If radio personnel were following facts and trends then why is AM IBOC still in existence? The only reason I could fathom that is that a few big legacy stations are afraid to admit that it's done for or they don't want to admit defeat on any level. FM IBOC was saved from the scrap heap at least for the time being by translators, there is nothing like that at all for AM.
There are different numbers floating around as to how much venture capital was put into iBiquity. At the high end, according to http://current.org/2012/11/slow-growth-for-hd-radio/ "Since its founding in 1998, the company has secured more than $300 million in venture capital." Likewise, the iBiquity website says that Bob Struble "secured the support of the investment community, raising over $300 million to date."
To break this down further, according to the current.org article, "According to a 2009 SEC filing, Ibiquity raised $42.4 million in a cash and stock offering. Other rounds of financing in 2001 and 2004 garnered $75 million for the company from investors." http://venturebeat.com/2008/03/28/i...yet-another-round-to-fuel-hd-radio-ambitions/ says that they raised $15 million in a fourth round of funding in 2008, with an estimated $115 million prior to that (making $130 million in total). The third round in 2005 was for $30 million. http://dmwmedia.com/news/2005/02/17/digital-radio-broadcast-developer-ibiquity-lands-30-million The Washington Post puts the number at $135 million, as of 2005. http://www.washingtonpost.com/wp-dyn/articles/A58846-2005Feb27.html This would imply about $150 million in total.
DTS paid $172 million.
To break this down further, according to the current.org article, "According to a 2009 SEC filing, Ibiquity raised $42.4 million in a cash and stock offering. Other rounds of financing in 2001 and 2004 garnered $75 million for the company from investors." http://venturebeat.com/2008/03/28/i...yet-another-round-to-fuel-hd-radio-ambitions/ says that they raised $15 million in a fourth round of funding in 2008, with an estimated $115 million prior to that (making $130 million in total). The third round in 2005 was for $30 million. http://dmwmedia.com/news/2005/02/17/digital-radio-broadcast-developer-ibiquity-lands-30-million The Washington Post puts the number at $135 million, as of 2005. http://www.washingtonpost.com/wp-dyn/articles/A58846-2005Feb27.html This would imply about $150 million in total.
DTS paid $172 million.
Here is a RadioInk.com interview with the principals involved in the purchase/merger between Ibquity and DTS. Sounds like a pure licensing play: https://soundcloud.com/edwardryan/strublefinal
For the record, I'm neither for nor against IBOC for radio broadcasting. I've been involved with it because it's been my business to be. In Seattle, I recommended that the station group I worked for at the time, not bother spending the capital on HD Radio because I felt there were better ways to invest money in the operation with faster return at that time. Now that FM HD is much more mature and the cost of implementation has leveled off, I see no reason why a mid to large market station shouldn't implement it.
I was involved with the original AM HD tests in the Northwest. We chose to make several passes at different transmitters, antenna systems, file types played etc. Assuming one follows the design parameters of airing files at a standard CD 44Khz sample rate, we measured HD frequency response from the test AM stations typically 50Hz to 13Khz +-1.7dB. What was a marked improvement noted, was signal to noise ratio. Nothing in our tests was artificial, because there is no way to produce high frequencies that don't exist in the original file.
R
rbrucecarter5
Guest
Common sense. This thing is a dud with the consumer.
OK - a patent mill. Maybe they see some other application for the technology - one that isn't hurt by continual drop-outs. In any case, companies buy up every patent they can afford - and hope that one in 100 produces a return. Sounds like a good place for HD radio to go to die.
Due diligence isn't a guarantee of profit. Only of potential profit. And failure is always an option. I wouldn't have infused money into the PC Junior, Microsoft Bob, the Cue Cat, New Coke, etc. All developed with due diligence. All miserable flops. HD radio is in the flop category. Most people other than the few of us that understand and use it just don't care. Ten years ago it was still a promising technology. The reality today is - you have to be an experienced DX'er to make it work marginally well.
In an admittedly unscientific poll - EVERY person who has ridden with me in the car, no matter how avid an oldies, smooth jazz, Christian rock fan they might be - gets extremely annoyed at the dropouts and requests I change the station. Since HD-2 is about the only thing HD radio ever had going for it - and it isn't reliable - the handwriting is on the wall. I'm doing everything right - real whip antenna, one of the most sensitive radios made, etc. My daughter's boyfriend has HD radio in his truck - a shark fin antenna. Analog reception is better than I expected from a shark fin antenna. It can actually receive very weak translators. I was mildly impressed. My radio can do much better on them. But HD radio - 20 miles from full class C stations over flat terrain? Drop out after drop out. NOBODY, including me, will listen to a train wreck like that. They might as well not even have bothered to put HD in the radio. My daughter's boyfriend - and my daughter listen to satellite. Annoying that you have to pay, but it WORKS. HD doesn't.
Gee 4% gain on one stock in one day. That pretty much mirrors the gain in the market as a whole yesterday. If you aren't planning to have a stock ten years from now, you have no business in the market. Day traders - and I know a successful one - are young and can afford to lose it all. And - they probably will. DTS and other patent mills? Not in my portfolio and never will be. Good, well known companies with products and services people use, in a number of different industries - a long term perspective to investing - and I am on track to retire a multi-millionaire. One who darn sure isn't buying stock in DTS based on one day 4% increase. That doesn't impress anybody.
Well, the company is producing a significant profit with revenues in excess of $40 million a year and margins of around 30%. And growing.
No, I did not say that. I said that DTS is a technology company that has several thousand patents o their own, and may see cross platform applications for their patents and iBiquity's ones to grow both parts of their business. That is not a patent mill, but, rather, a company which develops and expands on its technology and research.
There is no evidence That DTS is speculating with patents. They appear to be using them to create products and services that they are marketing very successfully, thus the ability to buy another profitable technology company.
iBiquity is solidly profitable today.
[/QUOTE] I wouldn't have infused money into the PC Junior, Microsoft Bob, the Cue Cat, New Coke, etc. All developed with due diligence. All miserable flops.[/QUOTE]
Dreadfully poor comparisons. All those were products, not companies. All those were developed with market research, not due diligence. Due diligence is the process of examining the accounts, assets, liabilities, facilities and other aspects of a company or asset to make sure there are not "surprises inside" and that all seller representations are verified (that's a really simplified explanation, too). For example, in buying a radio station with a transmitter site, you check that there are no Superfund restrictions or liabilities or potential ground contamination from PCBs.
The PC Junior was just a product that did not sell as expected; in the consumer package goods industry, about half the new products introduced fail. Yet the producers, like P&G and Unilever are considered great investments.
But again, DTS is buying a company, yet you are talking about products.
A flop that will make $12 million to $18 million net profit this year. I want to own one of those flops.
Actually, they gained 10% over two days, while the market lost 2%
No, it doesn't.
That's the craziest thing you may have ever posted... and that is a competitive field.
The best actively managed mutual funds trade regularly. Even Warren Buffet, whose Berkshire-Hathaway is in a sense a mutual fund or company of companies, buys and sells. I personally try to emulate the Buffet style and buy where there is potential growth and sell when a company or sector shows no more growth or has hit on other difficulties such as new regulations or new competitive technologies. I can not think of a single investment I have held for ten years.
I have noticed that people who have to say they are millionaires generally aren't.
Here is a quote from today's Inside Radio:
"The publicly traded audio technology firm is not only ubiquitous throughout the entertainment
industry, but on the consumer side its innovations are present on more than two billion devices. In 1993, DTS introduced
high-definition multichannel audio with the release of Steven Spielberg’s film “Jurassic Park,” which put the company on the
map. (It didn’t hurt that Spielberg was one of the company’s initial investors.) By 1996, the company had won a scientific and
engineering Oscar for the “Design and Development of the DTS Digital Sound System for Motion Picture Exhibition.” Today,
every major U.S. studio utilizes DTS multichannel digital sound, and a majority of Hollywood’s feature films are released in
DTS format."
This company is no patent mill. They are innovators who obviously see further profitable growth for iBiquity.
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