The recent launches of a plethora of new OTT TV services, including AppleTV+, Disney+ and HBO Max, together with enduring “cord cutting” in our view demonstrates the ongoing disruption in the PayTV industry. We have long viewed Amino as a beneficiary of structural change in the sector and we therefore revisit its acquisition of 24i in July and the subsequent view of the enlarged group’s combined capabilities seen at September’s International Broadcasting Convention 2019 (“IBC”). The combination of the two businesses means Amino goes to market with a materially enhanced product set and a significantly broader customer base – with new verticals and additional blue-chip names. The 24i acquisition also supercharges Amino’s transition towards a more software-led business model.
The recent past has seen Amino make a strategic investment in the software offering, both organically and via acquisitions to build an end-to-end ("E2E") online video delivery platform. 24i had a similar vision, but with greater focus on particular elements of the value chain - notably User Interfaces / Experiences ("UI"/"UX") and API development (interconnecting the respective elements of their own IPTV delivery platform). Whilst we believe the Amino platform is solid in both areas, the addition of 24i to the group enhances the existing product suite and should therefore create new opportunities in cross- and upselling.
Amino's historical business model has been to monetise its core competence of video software expertise via the sale of IPTV devices, bundled with its software to tier-two and three communications network operators globally. Over the past two years, the group has gained increasing traction with larger clients - for example PCCW and T-Mobile. It has also recorded increasing standalone software and services sales. The 24i acquisition brings new clients in new verticals to Amino - particularly broadcasters and TV channels. Over 500 brands use 24i services and the company has a strong customer roster, including names such as Fox Sports, KPN, NPO, RTE, Sinclair Broadcasting & Viacom.
Management attention over the past 12/18 months has focussed on moving Amino towards a more software- led business model. We estimate the 24i acquisition brings a c80% uplift in software sales to Amino on a reported basis. In reality, the true value of software to Amino is likely to be much higher than financial reports suggest – devices are powered Amino’s software and would be unlikely to be sold without software to make them useful.