Word broke last week that Los Angeles billionaire and former telecommunications mogul Gary Winnick was back in the game, taking a majority stake in startup streaming service Qello.
While Winnick declined to discuss the deal in depth or disclose how much he paid for his stake through a representative, he did confirm the transaction took place. That kicked off speculation about whether the founder of computer networking company Global Crossing Inc. had bought into another multibillion dollar company in the making.
“He’s a smart guy, and with tech he’s usually at the forefront of things, not at the back of the pack,” said Lloyd Greif, chief executive of downtown investment bank Greif & Co. “The vision he had with Global Crossing was nothing short of amazing, and he’s done a lot of tech investing since, but usually under the radar. It’s nice to see Gary do something a little more high profile.”
Qello is an over-the-top streaming provider in the mold of Netflix Inc. or Hulu, meaning that it does not require users to have a traditional cable television subscription to access content. The company allows users to livestream concerts through partnerships with content producers. Reuters, which first reported the Qello deal, said Winnick was looking to partner with other entertainment outlets such as Viacom Inc. and MGM Studios Inc. in order to expand the platform’s offerings.
Greif said Winnick is likely to position Qello as a platform for consumers to access streaming services rather than use the company as a vehicle to acquire content outright.
“What he’s trying to do is get there first and convince content creators to use his portal,” Greif said. “His side is distribution, making sure the technology is cutting edge, and getting producers to buy in in order to get their content out in the best way possible.”
The deal could represent a turning point in an old debate about whether content or distribution platforms are more valuable, according to Muizz Kheraj, managing director of West L.A. investment bank FocalPoint Partners.
“A lot of people seem to think content is king, but that debate seems to happen on a pendulum,” Kheraj said. “Consumers are eventually going to gravitate toward an over-the-top platform that is consistent. Ultimately there will be one access point where you go to for your content.”
Kheraj said Qello had been gaining steam in the last several months, signing a deal with Sony Corp. to stream content through its PlayStation 4 gaming network.
“It’s still an early point (for Winnick) to get in, but the platform has a pretty good reputation in the industry,” Kheraj said. “They’re maturing as an over-the-top platform at a time when companies are jostling to be the distributor of choice.”
Clearlake Goes for Cloud
Santa Monica private equity shop Clearlake Capital Group has purchased online legal document service provider NetDocuments for an undisclosed amount.
Clearlake Managing Partner Behdad Eghbali said in a statement that the firm’s investment in Lehi, Utah-based NetDocuments would spur further penetration into the legal market.
“We are excited to partner with the talented NetDocuments management team as we make a significant growth investment in the Company,” Eghbali said. “Our partnership will facilitate further investment in development and go to market for the Company’s leading document management, email management, and collaboration solutions, and accelerate the legal and compliance industry’s transition to software-as-a-service solutions.”
NetDocuments Chief Executive Matt Duncan said the transaction would enable the company to expand its operations on several fronts.
“We are thrilled to partner with Clearlake to accelerate growing the company, both organically and through acquisitions,” Duncan said.
Jakks Re-Ups Disney Deal
Toymaker Jakks Pacific Inc. has renewed a multiyear licensing agreement for more than 50 Walt Disney Co. entertainment properties for distribution in China.
The deal announced last week comes after years of mixed sales results for the Santa Monica company. Those struggles were punctuated by a 5 percent year-over-year drop in sales to $707 million in 2016 from $746 million a year earlier, as well as a weak fourth quarter, according to an annual report released last month.
The quarterly result surprised Stephanie Wissink, managing director and senior research analyst at Piper Jaffray & Co., who noted that Disney is an important client, accounting for 50 percent of Jakks’ business – as much as $350 million in revenue last year. Fourth-quarter net sales were $167 million, up 2 percent from $163.4 million in 2015.
“The sales pace was not a surprise, but Q4 reflects frustration in variability performance of licenses moving around,” she said.
Jakks has had a partnership with the Burbank-based entertainment giant in different markets for the past 12 years. It wouldn’t provide financial details of the latest agreement renewal. The toymaker expects to roll out products in China this year under the deal, using manufacturing facilities in Asia for production, according to a spokeswoman.
Staff Reporter Henry Meier can be reached at [email protected] or (323) 549-5225, ext. 221. Staff Reporter Shwanika Narayan contributed to this report.
