NDS Invests in BlackArrow, Readies Jointly Developed Cable Ad Platform

Set-top box and conditional access supplier NDS was the lead investor in BlackArrow’s $20 million Series C financing around, NDS said. NDS also added Pyrros Koussios, senior vice president of corporate development, to BlackArrow’s board, NDS said. The funding round, BlackArrow’s third since its founding in 1998, also included earlier investors Cisco, Comcast Interactive Capital, Intel Capital, Mayfield Fund and Polaris Venture Partners.

With the investment, NDS and BlackArrow are jointly developing an advertising platform that will be capable of being deployed from the cable head-end to the set-top box, Narwid said. BlackArrow sells software to insert targeted ads on pay TV and online platforms including video-on-demand (VoD). BlackArrow’s software will be combined with NDS Dynamic that provides audience measurement and addressable advertising, although the timing for releasing the combined platform hasn’t been set, Narwid said. Prior to the agreement with BlackArrow, NDS Dynamic was expected to start deployment in 2011. “It will be sooner, rather than later,” Narwid said. NDS and BlackArrow jointly demonstrated their technologies at CableLabs’ Interop last October, around the time BlackArrow began the recent funding round, Denhart said.

NDS also has developed Ad Agent, a 140-kb code that turns a DVR into an ad recommendation engine by monitoring viewing behavior and program content. Ad Agent uses SQLite database software tuned for set-tops that builds up a user profile with pre-defined rules.

In partnering with BlackArrow, NDS will gain access to U.S. cable operators, including Comcast, it said. NDS previously deployed its MediaHighway middleware and XTV DVR platforms with DirecTV in 2005, replacing TiVo. But the companies, both one-time News Corp. affiliates, parted ways. In addition to DirecTV, NDS provides conditional access and other software to Cablevision. In BlackArrow, NDS gets a partner that started deploying its Decision Suite software with Comcast in the Jacksonville, Fla., last year and has since expanded to other markets, Denhart said. NDS Dynamic is undergoing tests with a “major” pay TV operator, said Narwid, declining to identify the company.

Decision Suite sits at a cable operator’s head-end between video servers typically supplied by Motorola or Seachange and back office systems. In an online environment it can be in the content delivery network. The software uses subscriber information and program data to insert ads based on information from a sales suite. The software system then places ads across multiple platforms including VoD, DVRs and online video, company officials said. The companies will use NDS’ professional services and systems group to deploy the jointly developed platform, Narwid said.

"There is a need to put ads out onto to platforms in a way that can handle their characteristics including VoD, applications, and addressable video,” Narwid said. “The two things that have been holding this up are a realization of standards and the promise of modernization and return on investment."

In addition to the U.S., NDS and BlackArrow will work to bring the technology to the international markets that have traditionally been NDS’ strength, company officials said. NDS provides VoD services for Yes Satellite in Israel and recently partnered with Changhong to develop digital TV applications for China’s cable market. It also is providing MediaHighway middleware and VideoGuard conditional access for Key Technologies DTH service in South Africa. VideoGuard has been deployed in 116 million devices globally and MediaHighway in 135 million. Since in some cases NDS is providing the entire software stack in STBs in international markets, combing these with BlackArrow “will be much easier,” Narwid said. “It will be much quicker to add the monetization component to drive sales,” he said.

While BlackArrow and NDS jointly develop software, the companies will maintain separate customers. BlackArrrow was deployed with Arris’ ConvergeMedia targeted ad platform and Sigmas Solutions’ audience measurement in a test with Bresnan Communications broadband networks in Billings, Bozeman, Helena and Missoula, Mont. Bresnan has 320,000 customers across Colorado, Montana, Utah and Wyoming. BlackArrow also has a trial deployment with Fox Cable Networks.

NDS is an “investor and strategic partner and we will continue to use them when it makes sense,” Denhart said. “But both companies are going to have to continue to pursue their own plans. We don’t dictate the ideal scenario of all the partners we would like to use. At the end of the day, there are legacy systems that both companies have to deal with and manage."

While BlackArrow has strong ties with Comcast, its demonstrations with NDS have been based on Enhanced TV Binary Interchange Format (EBIF, developed under CableLabs’ OpenCable project). The EBIF content format represents a collection if widgets and byte code specifications that define multimedia pages. The multimedia pages are similar to web pages, but are specialized for use in an enhanced or interactive TV system. Comcast, along with several other cable operators, formed Canoe Ventures. Canoe launched two years ago with a goal of building a system for delivering targeted ads to cable customers. Canoe’s deployment has been postponed several times as the focus shifted to interactive ads. “Operators are going to make decisions on what works and advertising reach is going to be one of the first questions,” Narwid said. “EBIF is going to answer that quickly because it gives you the broadest reach.”