AWS Buys Video Software Maker Elemental Technologies for Reported $500M

Amazon Web Services (AWS) is bolstering its already substantial cloud-based video offerings with the acquisition of Portland, OR-based Elemental Technologies.

Elemental makes software to enable multi-screen delivery of video content over the Internet—things like video encoding, decoding, and transcoding. It has been working with Amazon subsidiary AWS for four years to serve shared customers in the media and entertainment industry, writes AWS chief evangelist Jeff Barr in a blog post.

“During this time we have been impressed by their penchant for moving fast and their long-term vision for software-defined video,” Barr writes. “We quickly realized that we could work together to create solutions that spanned the entire video pipeline. Today’s announcement will allow us to work even more closely together to provide media companies with a family of on-premises, hybrid, and cloud-based solutions for Internet-based video delivery.”

The companies did not disclose terms of the acquisition, set to close in the fourth quarter. The Oregonian, citing an unnamed “source close to the transaction,” pegged the purchase price at between $300 million and $500 million. The Information pegged the price at $500 million.

In a news release, the companies said Elemental has upwards of 700 “media franchise” customers who use its software for things like over-the-top video delivery (HBO Go, BBC iPlayer, ESPN Score Center, to name a few) and delivery of the highest-definition video of the world’s biggest live events (4K Ultra HD coverage of the 2014 World Cup).

Elemental will continue operating in Portland under its own brand, but will more deeply integrate with AWS, the companies said.

Elemental was co-founded in 2006 by Sam Blackman, Jesse Rosenzweig, and Brian Lewis, its CEO, CTO, and chief architect, respectively. That was the same year Amazon launched AWS, now the largest provider of cloud computing, storage, and other Web-based infrastructure, which is rapidly augmenting or replacing on-premises servers and software at companies and organizations large and small. This year, Amazon began reporting revenue from AWS, which grew 81 percent to $1.82 billion in the second quarter, with operating income of $91 million.

Elemental CEO Blackman

Elemental CEO Blackman

Xconomy has covered Elemental extensively over the last seven years, including this 2011 piece that noted Amazon’s moves into online music and video and Elemental’s status as “one to watch” among only a few remaining independent video processing technology providers.

Elemental raised $44.1 million across five funding rounds from the likes of Telstra Ventures (which led Elemental’s December 2014 Series D funding round), General Catalyst Partners, Luminari Capital, Norwest Venture Partners, Sky.com, Voyager Capital, Steamboat Ventures, and In-Q-Tel—a venture investing arm of the U.S. intelligence community. In-Q-Tel’s involvement stemmed from an early video processing project Elemental did for the U.S. intelligence community, and pointed the way toward new industry verticals for Elemental, such as helping governments handle video for national security purposes.

AWS famously won a $600 million contract from the CIA to build a private cloud computing environment, so while the Elemental deal is focused on shared customers in media and entertainment, there may be other natural areas of collaboration.

Elemental raised seed capital in 2007 from the Alliance of Angels, Bend Venture Conference, and Oregon Angel Fund.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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