IBC 2018 Reflections: Encompass Digital Media CEO Chris Walters on Babcock acquisition and OTT-market explosion

Encompass Digital Media hit IBC 2018 fresh off announcing its plans to acquire Babcock International Group’s Media Services business. With the deal, Encompass will look to expand its footprint in the EMEA and extend its combined channel-layout, transmission, and digital-products portfolio, as well as adding international radio distribution to its suite of services.

Encompass Digital Media CEO Chris Walters

SVG sat down with CEO Chris Walters to discuss why the Babcock deal made sense for Encompass; how it adds to the company’s digital-services portfolio at a time when the OTT market is exploding; the company’s recent M&E customer wins; and how he sees the balance between fiber, satellite, and public-internet solutions for backhaul/contribution evolving in the coming years.

Why did the Babcock International deal make sense for Encompass, and how will it impact your services portfolio moving forward?
We’re really excited about the Babcock [acquisition]. Our company has been built up through a variety of M&E transactions over the years, and this is a great example. One of the regions that we were looking to scale was EMEA, which was the smallest of our four regions. And so we’ve looked at a variety of opportunities over the last couple years to do that. The Babcock [acquisition] comes down to a few main factors.

First, we wanted to increase scale, which is why we’re looking at developing more businesses in the EMEA region. They have some services that are directly overlapping with some things that we do, such as playout, meaning we can now do that effectively on a larger scale.

Second, they have some very sophisticated digital services supporting some really demanding clients. While we provide a wide variety of digital services across the globe, we found their offering with a variety of other clients to be a step further than our efforts thus far. We thought that the combined digital-services [portfolio] was something that we could offer to a broad set of clients around the globe.

Third, [Babcock] has great relationships with some of the most important media companies in the world, and a large portion of that relates to audio distribution. They are heavily involved in radio distribution, while we’re primarily focused on media distribution, so it’s a natural extension for us.

And finally, they have a great management team. It’s a midsize business with really strong leadership. So we thought trying to scale up in the region while also adding some really skilled people to our team was important. I would expect a large share of [Babcock’s executive team] to be part of our team going forward.

Specific to your second point about adding digital services, how do you think the Babcock deal bolsters Encompass’s digital offering?
Right now, there is a whole host of digital players in the market that are acquiring sports rights at a pace that is much more rapid than in prior years. Spending is growing materially, and the value of the deals is going way up. Therefore, the expectations in terms of the quality of delivery are also rising. When you pay tens or hundreds of millions of dollars for sports rights, you’re not going to accept a mediocre [streaming] experience.

Many of these companies — like DAZN, for example — are going into many markets and acquiring all the rights in that market and then putting all the content on its digital platform. And so their subscriber bases will shoot up, which means any disruptions to the quality of experience can lead to huge problems.

The role that Babcock plays is full oversight over all content acquisition and delivery in order to ensure a pristine [streaming] experience throughout. And then whenever there’s any issue, they will troubleshoot it as rapidly as possible to improve the experience. Virtually no one — even some of the biggest digital-media companies in the world — is monitoring at the level of granularity and troubleshooting with the sophistication that Babcock offers. We see that skill and capability as something that’s dramatically extendable around the globe. The organizations who are spending the most on this content around the world largely haven’t figured it out. And we feel like the Babcock service offering can serve those needs. So we feel like it was perfect timing.

Are there any recent customer wins worth noting in the M&E space for Encompass?
We’ve recently extended our [contract] for channel-playout services with IMG in Asia for a few years. That will run out of our broadcast facility in Singapore and includes everything from live events to playout to fiber delivery. Our new business activity is growing exceptionally well, both in North America and globally.

On the traditional broadcast side of your business, how are you seeing the use of fiber vs. satellite evolve for backhaul of live sports events? And have you seen the use of public internet increase as a contribution solution?
I was speaking on a panel recently with a few other large service providers talking about this exact thing, and the consensus of the group was that people are now looking for more tiered solutions. Everybody is open to experimenting, and so the conversations with clients are very different than they were five or 10 years ago when there was only one answer: satellite. Today’s solutions can include satellite, fiber, and the public internet, and, thankfully, we’re doing all three.

I would say that it breaks down like this: for almost all high-value events, you’re going to have satellite involved in some way because it’s so reliable. And, even if the fiber is primary in many cases, satellite will be backup. And so we see satellite continuing to play a very substantial role for many years to come on those events. But, for lower-value events, without question, you are now seeing public internet being used for contribution and distribution in many cases.

It’s the same thing in full-time services for some channels. The lower-end channels are incredibly open to innovative solutions. We also think using the public internet as a disaster-recovery solution for some of the lower-end channels is an interesting [prospect]. The natural migration path will be towards some of these more innovative solutions that are very cost-effective. And people will start using them for DR, prove it out, and then who knows what will happen five, 10 years down the line. But, for most of our customers that own high-value rights, we believe the traditional methods will continue to be used.