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Amazon’s Elemental Move

Amazon’s Sept. 3 acquisition of media software provider Elemental Technologies should be a smart one as the global online video market scales up to US$30 billion in net terms, according to the latest analysis from Media Partners Asia.

Elemental has more than 700 customers, powering OTT applications such as ESPN ScoreCenter, BBC’s iPlayer, HBO Go and Sky Now while serving the likes of Foxtel, Telstra and Tata Sky in Asia-Pacific.

Essentially, Elemental helps media companies convert content into multiple video outputs for transmission across digital video platforms.

Elemental also supports 4K and Ultra HD services.

Amazon’s deal came with an estimated US$500 million price tag, fairly decent at ~7-8x what the industry estimates Elemental will generate in revenues this year.

It is also reasonable relative to other frothy M&A valuations associated with recent tech takeovers in the digital space.

Elemental Cloud is built as Platform as a Service (PaaS) to manage high-volume video demands in the cloud.

This lowers the capex that media companies need to develop multiscreen video offerings and generate revenue.

"Elemental’s integration with the cloud and its PaaS make this the first at-scale SaaS operation for Amazon Web Services [AWS], and indicates Amazon's intent to move further up the stack of technology services,” says Piper Jaffray analyst Gene Munster.

"We believe this pairing plants Amazon squarely in the media production and distribution value chain, and has application for both it and its AWS customers," Munster adds.

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