SeaChange fills in content play

SeaChange International announced its has paid $13.4 million in cash for the remaining 72% of the outstanding capital stock of the European content aggregator On Demand Group Limited (ODG) that it did not previously own.

ODG currently aggregate television content and movies for on-demand and pay-per-view services throughout Europe, including cable operators ntl and Telewest in the U.K. The company also was among the founders of the recently launched FilmFlex on-demand movie service venture with Sony Pictures and The Walt Disney Company.

After the acquisition, ODG will operate as a wholly owned subsidiary of SeaChange. Also as part of the agreement, if ODG meets certain annual performance goals over the period through January 31, 2008, SeaChange will pay an additional $9 million in contingent consideration, including up to 50% payable in shares of SeaChange Common Stock with the remainder payable in cash. That amount will be reduced or increased based upon ODG’s performance relative to goals, with the maximum aggregate contingent consideration being approximately $11.4 million.

The deal gives SeaChange, which generates most its revenue as a video server vendor, a package of content to compete with similar collaborations. During a press conference today, Bill Styslinger, president and CEO of SeaChange International, said the company also plans to leverage its existing partnership with middleware vendor Minerva.

“[The ODG acquisition] positions us to be an end to end solutions provider going forward,” he said.

Initially, the company will focus its combined efforts on Europe and South America.

Beyond offering a turnkey solution for on-demand services to video providers, the deal also gives SeaChange a partial ownership in FilmFlex, which is expected to be cash flow positive by the end of this year, Styslinger said. Among the libraries FilmFlex has access to are those form Sony Pictures Television International, Sony Classics, Walt Disney Television International, Warner Brothers, Pathe, MGM, Dreamworks, Hollywood Pictures, Touchstone Pictures, Miramax Film, Buena Vista International, Paramount Pictures, Columbia Pictures, TriStar and Icon.

Beyond simply providing content like its U.S. counterparts, ODG also actively manages all on-demand services for service providers.

Tony Kelly, CEO of ODG, said the company’s plans to push that model into the telco video market, emphasizing its experience with cable operators as well as its ability to speed on-demand service to market.

“We have a business model that helps new providers get into business quickly,” he said.