Brightcove Goes Mute on Competition

NEW YORK (TheStreet --Brightcove (BCOV) may be a leader and pioneer in the field of on-demand video, but that only means the big guys will be actively trying to take your business.

The company is hoping to raise $55 million in an IPO expected to make its debut on Friday. It's looking to sell 5 million shares with pricing seen ranging from $10 to $12 each. The Cambridge, Mass.-based company does state in its filing that it expects significant competition, but doesn't name any names.

In its filing Brightcove states, "We will likely encounter significant, growing competition in our business from many sources, including portals and digital media retailers, search engines, social networking and consumer-sharing services companies, broadband media distribution platforms, technology suppliers, direct broadcast satellite television service companies and digital and traditional cable systems."

In plainer terms, they list every conceivable online method, but neglect to get into specific entities.

"I take that as a negative, because we know who the competitors are," said IPO Desktop President Francis Gaskins. Those rivals include Akamai Technology ( AKAM), which is its closest challenger. Google ( GOOG) is also developing a product called Google Drive that is more consumer oriented.

Brightcove should be able to fight off the competition for a while though because of the stickiness of its contracts. The company usually signs clients to one-year deals and with the services that are provided, it makes it difficult for the customer to want to change.

For example, TheStreet ( TST) currently uses Brightcove to deliver its video and was approached by Akamai. However a change would have incurred costs as well as hardware changes.

Plus, Brightcove offered a lowered rate, so there was no reason to incur the headaches of a change. Brightcove provides the video player, advertising services and storage for TheStreet with Akamai network in the background.

Brightcove increased its customer count by 185% in 2010 and 57% in 2011 as demand for online video has increased. In 2011, the average number of monthly streams was 743 million - a 56% increase over 2010.

The financial picture for Brightcove is a mixed bag though. Sales were up 45% to $64 million, but losses stayed flat at $18 million.

"In other words, Brightcove lost 28 cents on every dollar of sales," said Gaskins.

Yet, the recurring dollar retention rate was 88%. The company also has a $43 million backlog for 2011, most of which will be recognized as revenue in 2012. That's up from a $28 million backlog in 2010.

Following the IPO, Brightcove's two largest shareholders will be its venture capital firms Accel Partners and General Catalyst Partners. They will own 42% of the outstanding common stock.

-- Written by Debra Borchardt in New York.

>To contact the writer of this article, click here: Debra Borchardt.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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