SeaChange International Inc. let go with the industry's worst kept video-on-demand secret Tuesday afternoon, revealing with the release of its second quarter numbers that the company had won a contract to be Insight Communications' new VOD server and system vendor in 10 markets.
Prior to going with SeaChange, Insight's primary vendor was Diva Systems Corp., which, after finding itself buried in $500 million in debt, filed for bankruptcy in late May and sold its assets to Gemstar-TV Guide International for a paltry $40 million. Insight had previously replaced Diva with TVN Entertainment Corp. as its primary VOD content aggregation supplier and on-demand content transport partner.
Insight offers VOD in the following cities: Anderson/Noblesville, Ind.; Bloomington, Ind.; Champaign/Urbana, Ill.; Columbus, Ohio; Covington, Ky.; Evansville, Ind.; Kokomo/Lafayette, Ind.; Lexington, Ky.; Louisville, Ky.; and Rockford, Ill.
An Insight spokeswoman said the MSO hopes to complete the switch-out by the end of this year.
With that, Diva's book is now pretty much closed. The page is now turned for Diva's former affiliates. AT&T Broadband also turned to SeaChange to replace Diva in its small VOD deployments in Atlanta and Los Angeles, and Charter Communications Inc. went with Concurrent Computer Corp. and nCUBE in its mix of VOD markets.
For second quarter earnings, SeaChange reported revenues of $33.3 million, up 23 percent, versus the same year period. The Maynard, Mass.-based vendor also was hit with a net loss of $635,000 (2 cents per share), narrowed slightly from a net loss of $684,000 (3 cents a share) in the second quarter of 2001.
SeaChange said its second quarter loss included legal expenses and accrued interest charges tied to the nCUBE Corp. jury verdict in May 2002. In that case, a Delaware District Court jury upheld an nCUBE patent suit over VOD technology, ruling that SeaChange "willfully infringed the patent." The jury also ruled that SeaChange must pay nCUBE in excess of $2 million in damages, plus a 7 percent royalty on all sales of infringing products after Feb. 1, 2002. SeaChange, meanwhile, is awaiting a final judgment in a separate patent infringement case brought against nCUBE.
SeaChange also pointed to new VOD business with three "major" North American cable operators, noting AT&T Broadband, Insight and a third unnamed MSO. According to CED research, on the North American cable front, SeaChange also supplies VOD gear to Adelphia Communications, Cablevision Systems, Comcast Cable Communications, Canada's Rogers Cable Inc., Time Warner Cable, and RCN Corp., an overbuilder that launched VOD in the Philadelphia area last December.
SeaChange said it ended the quarter with a "planned basic subscriber base" of 14.1 million, and 70,000 residential VOD streams shipped, giving it an aggregate 296,000 streams.