Espial Group Inc. is trying to tap into a market at a time when consumers are demanding more from their interactive video experience.
CEO Jaison Dolvane says 70 per cent of 18-24 year olds watch video on something other than their television. Instead, they use mobile devices with Internet capabilities.
This is where Espial comes into play.
Over the past year, Espial has changed its focus to the ‘Over-the-Top’ market, meaning making software for televisions with high quality Internet streaming capabilities.
“If you look at all the other age demographics they’ve all increased their video-watching on mobile and smart devices from last year,” he says. “It’s a foregone conclusion that TV and video will be consumed on all sorts of devices and not just your television.”
The Ottawa-based Internet protocol television (IPTV) company creates software for service providers to deliver TV over the Internet. Espial has been in the ‘Internet’ or ‘smart’ television market for close to a decade now and is counting on that to keep giving it a competitive advantage.
“It’s a skate to where the puck is going to go thing and we’re already there,” says Dolvane.
Espial says consumers are demanding video at a faster rate than ever before.
Over the past year, Espial has changed its focus to the ‘Over-the-Top’ market, meaning making software for televisions with high quality Internet streaming capabilities.
Dolvane says now television operators and providers, such as Bell, Rogers and Shaw, need to roll out free services over the Internet as efficiently as possible, something that Espial specializes in.
“People want to watch TV on their phone or on their gaming device. It’s a trend we’re seeing,” says Rory Altman director of consulting firm Altman Vilandrie & Co. “That’s why Over-the-Top companies are successful.”
Altman says that in the next five years, 10 per cent of Americans are expected to have abandoned pay-tv subscriptions in favour of an on-demand Internet service.
CUTTING THROUGH THE COMPETITION
Unfortunately for Espial, it is operating in a very competitive market place. That’s why Dolvane says Espial’s open-platform is something that differentiates it from other IPTV companies.
Other companies provide their software through a set-top box, so every time a service provider wants to make a change the box has to go back to its manufacturer.
Dolvane says Espial’s interactive TV platform allows service providers to take hold of their own destiny.
“They can control the services and then innovate the features that they want to deploy so they can rapidly roll them out. We give them capability and flexibility and put it in their hand,” he says.
Dolvane adds that other companies provide their software through a set-top box, so every time a service provider wants to make a change the box has to go back to its manufacturer.
But Gary Schultz, president of Multimedia Research Group (MRG) warns that an open platform may not be as important a selling point as Espial imagines.
“While open platform may be an advantage, it’s not the main thing operators look for,” he says. “They want scalability and the highest in quality of service functionality and the ability to innovate quickly. While open platform may provide innovation-ability, its value is crippled without the other two.”
Dolvane says Espial’s open-platform provides an edge, but it’s not its only advantage. He says Espial has high video functionality, excellent flexibility for the service provider and high video capacity.
REELING IN THE BIG FISH
Perhaps the key for Espial is to hook the big service providers.
“As people are consuming more video they need more video capacity. We can provide that and get paid for that too.”
Once Espial secures a service provider, like a Bell or Rogers or a smaller company, the service provider will add customers to pay for its services and videos on its devices. Espial gets paid every time one of their subscribers adds a customer, a set-top box, or any capability.
As the industry grows, so will Espial.
“As these services become more interesting we will be deployed on a larger base,” says Dolvane “Each set top box in each house may increase to a couple in each house. As people are consuming more video they need more video capacity. We can provide that and get paid for that too.”
This is why it is critical that Espial keeps adding customers
Altman says companies like Espial always need to be in discussion with service providers to stay in tune with a vicious, fast-paced and ever-changing market place.
Dolvane says Espial is talking with the big fish, like the Bell, Rogers and Shaws of the world, regularly to reel in deals that use Espial’s capabilities.
But Espial also has customers around the globe, and its network of influence keeps expanding.
The company has a deal with Vodafone in Iceland, to provide Internet TV services for its 25,000 customers.
As of March 2011, Espial’s software also powers Hitachi’s new ‘connected’ television line, making its the first manufacturer to ship a connected TV in Japan.
These partnerships have contributed more than 10 million patented software licences in devices for its smart TV platforms that are now used world-wide.
PROFIT ON THE HORIZON?
Espial has recorded two straight quarters of record revenue.
“On a cash-flow basis we’re actually profitable. I think as we continue to drive forward at some point the good will is going to go away.”
In 2011’s third quarter ended Sept. 30, 2011, Espial reported $3.8 million in revenue – a 29% increase from the same quarter last year, and gross-revenue of $2.9 million.
However, it still had a net-loss of $316,049 but this is still an improvement over last year’s third quarter loss of $694,205.
Dolvane says the loss is not concerning.
“On a cash-flow basis we’re actually profitable,” he says. “I think as we continue to drive forward at some point the good will is going to go away.”
Espial’s shares can be bought at $0.90 on the Toronto Stock Exchange as of Dec. 27, 2011. It has been hovering between $0.60 and $1.20 over the past twelve months.
Espial expects to build on its success because it lives and breathes in a market that keeps expanding.