Ericsson: Red Bee bought for skills

The Swedish mobile communications giant announced its intentions on Monday 1 July, asserting that the purchase would allow it to provide improved managed services to its broadcast and telecoms clients around the world.

“This was a skills and competence- based acquisition,” said head of broadcast services Thorsten Sauer. “It’s obviously great to have great customers, but we look at this in terms of how their skillsets complement our ambitions.”

Known as BBC Broadcast until 2005, when it was sold to affiliates of Australia’s Macquarie Bank Group for £166m, Red Bee Media still provides the corporation with outsourced playout, publication, access and creative services.

An exclusive 10-year contract, worth an estimated £500m, was recently extended for a further 18 months to 2017, to give the corporation time to review its distribution and publishing agreements. The BBC spent £208m on service distribution in 2011/12.

Asked how Red Bee would benefit from the deal, Sauer pointed to Ericsson’s technology know-how: “We have 1,500 people who work with media-related R&D,” he said. “That is one clear benefit.”

The Red Bee Media deal, which is still subject to regulatory approval, is Ericsson’s second foray into the playout and distribution market, having bought Technicolor’s Broadcast Services Division in 2012.

Consultant and founder of Informitv William Cooper, a former head of interactive at BBC Broadcast, said the deal could be a major positive for Red Bee: “It now has the backing of a major multinational that clearly sees this as a strategic acquisition and part of a broader expansion. It would appear to be in a significantly stronger competitive position to retain the business of the BBC.”

On completion, Red Bee Media will be incorporated into Ericsson’s Business Unit Global Services, where current operations will be reviewed before the new owners look to “find some areas of improvement”.

Red Bee Media employs 1,500 people and turned over £135m in the year to May 2012.