The Brightcove Case

Brightcove, Inc. (B)
In October 2012, Brightcove was a different company from the vision that its CEO Jeremy Allaire
had laid out in 2007. On the one hand, Brightcove had scaled back its original multisided platform
ambitions. By early 2009, the company had shut down its consumer destination site, Brightcove.TV,
as well as its advertising and syndication marketplaces, and had become entirely focused on its
white-label software platform serving online video publishers.
On the other hand, Brightcove had significantly expanded its software platform business. At the
end of June 2012, the flagship software platform product, Video Cloud, was serving 4,697 customers
in over 60 countries, including media, retail, technology, and financial services companies, as well as
governments, educational institutions, and nonprofit organizations. In the six months ended June 30,
2012, those customers had relied on Video Cloud to deliver an average of approximately 674 million
video streams per month, which the company believed to be more video streams per month than any
other professional solution.1
Riding the growth of its software platform, Brightcove conducted a successful initial public
offering in February 2012. The IPO brought the company $55 million, bringing the total raised since
founding (including four earlier founding rounds) to approximately $150 million.2 Its stock price
gained 30% on the first day of trading, finishing at $14.30 per share, valuing the company at $391
million.3
Brightcove was still not profitable but was getting closer to break-even. During the second quarter
of 2012, it lost $4.3 million on $21.6 million in revenues. These numbers compared favorably with the
second quarter of 2011, during which Brightcove had lost $6.9 million on $15.3 million in revenues
(see Exhibit 1 for financials).
1 Brightcove Inc., Form 10-Q, filed August 3, 2012, http://investor.brightcove.com/secfiling.cfm?filingID=1193125-12-
335124&CIK=1313275, accessed October 2012.
2 Janko Roettgers, “Brightcove IPOs, stock closes 30% up,” GigaOM, February 17, 2012, http://gigaom.com/video/brightcoveipo-stock-up/, accessed October 2012.
3 Ari Levy, “The Small IPO Isn’t Completely Dead,” Bloomberg, February 22, 2012, http://go.bloomberg.com/techdeals/2012-02-22-the-small-ipo-isnt-completely-dead/, accessed October, 2012.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
713-436 Brightcove, Inc. (B)
2
The Video Tools Business
The composition of Brightcove’s customers had changed dramatically. In early 2009,
approximately 90% of Brightcove’s revenues came from media companies, most of them located in
the United States. In contrast, at the end of June 2012, 60% of revenues were coming from non-media
customers, which included companies as diverse as Electronic Arts, Honda, Oracle, Carnival Cruise
Lines, Epson, and Nestlé Purina. International customers accounted for 36% of revenues.
Brightcove’s impressive growth was due to two major strategic initiatives, undertaken between
2010 and 2011.
The first one concerned product design. Until 2009, Brightcove had focused exclusively on online
video for personal computers (PCs). Starting in 2010, the company made a bet on the explosion of
cross-platform (i.e., PCs, smartphones, tablets) video applications and engaged in a multiyear project
to redesign its product accordingly. Most importantly, it entirely rebuilt the architecture around the
HTML5 standard, thus abandoning its original bet on Adobe’s Flash. Brightcove also integrated data
analytics and made its product compatible with advertising networks. As a result of this massive
product redesign effort, Brightcove was able to attract big media companies that were developing
their Internet video solutions in-house. These companies finally came to the conclusion that it was
prohibitively costly to keep up with the evolution of online video technology, and it would be
cheaper to adopt Brightcove’s Video Cloud software product.
The second initiative was to make the software platform accessible to small and medium-sized
companies. Brightcove offered an entry-level product—Brightcove Express—which started at $99 per
month and allowed one user one account, 50 videos, and 40 gigabytes of bandwidth. This product
had several thousand customers, including small companies and small teams or projects within large
organizations. Brightcove was naturally hoping to upsell customers of this entry-level product to its
professional or enterprise products, priced at $10,000 to $30,000 per year (see Exhibit 2 for the options
offered). Its upselling efforts were becoming successful: in 2010, it had upsold approximately 30
customers, while in 2011, the number jumped to 125; and in the first six months of 2012,
approximately 80 customers had upgraded. Allaire viewed the conversion of customers from entrylevel to enterprise-level products as key to Brightcove’s success.
On August 14, 2012, Brightcove acquired Zencoder, a startup specializing in video encoding, for
$30 million.4 Upon the completion of the deal, Allaire said, “We believe the Zencoder acquisition will
advance Brightcove’s position as a leading cloud platform provider that not only provides rich, endto-end solutions for digital content publishing and distribution, but also offers scalable standalone
building blocks for developers to build custom systems.”5 Additionally, Brightcove decided to keep
Zencoder’s encoding and Video.js services as separate product offerings.
4 Galen Moore, “Brightcove posts 41% sales growth, snaps up Zencoder for $30 million,” Boston Business Journal, July 27, 2012,
http://www.bizjournals.com/boston/blog/mass_roundup/2012/07/brightcove-to-acquire-zencoder.html?page=all; and Jolie
O’Dell, “Online video bigshot Brightcove acquires Zencoder,” Venture Beat, July 26, 2012, http://venturebeat.com/2012/07/
26/brightcove-acquires-zencoder/, both accessed October 2012.
5 Brightcove, Inc., “Brightcove Signs Definitive Agreement to Acquire Zencoder,” press release, July 27, 2012, http://www.
brightcove.com/en/company/press/brightcove-signs-definitive-agreement-acquire-zencoder, accessed October 2012.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
Brightcove, Inc. (B) 713-436
3
Beyond Video
In November 2011, Brightcove released App Cloud, an entirely cloud-based product that allowed
developers to more easily develop and distribute mobile applications (apps) on the iPhone and
Android platforms. App Cloud offered cloud-based visual app creation tools, which made
development easy even for less technically proficient developers. It also provided content
management services (e.g., the ability to update apps without having to resubmit them to the
respective App Stores), and content optimization features (e.g., the ability to optimize for different
bandwidths). Finally, it offered real-time analytics, i.e., the ability to track the number of unique
visitors, their sessions, geography, and location within the app as well as time spent in each location,
etc.
Brightcove used a “freemium” pricing model for App Cloud. The entry-level App Cloud version
was free: it contained the basic software development kit, tools for testing and debugging, as well as
some basic analytics capabilities. Premium versions of the product, which included the advanced
content management and optimization features, as well as the real-time analytics, ranged in price
from $99 per month to thousands of dollars per year, depending on the number of user accounts and
sessions demanded (see Exhibit 3 for App Cloud options).
Prominent early adopters of App Cloud included broadcaster heavyweight NBC and cable
programmer Discovery. NBC used App Cloud to power its NBCU Screen It Emmy app for the iPad,
and Discovery adopted App Cloud in order to develop and manage dual-screen catch-up TV
services.
New Vision
Allaire’s new vision was to become the Salesforce.com of content apps on the Internet. He
commented:
One question is how to win in the market for professional video. We are hoping to achieve
that with the Video Cloud strategy. But the other, broader question I ask myself is: what else
would it take to become a great software company? I believe that great software companies
have several common traits. They are horizontal businesses. They are very good at getting
customers to upgrade from entry-level to enterprise-level products (e.g. Salesforce). They offer
portfolios of complementary products (e.g., Microsoft with Windows and Office; Adobe with
Macromedia and Acrobat). And they offer great developer platforms. This is where our App
Cloud strategy comes into play.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
713-436 -4-
Exhibit 1 Condensed Consolidated Statements of Operations (unaudited) (in $ thousands, except share and per share data)

Source: Brightcove, Form 10-Q, filed August 3, 2012, http://investor.brightcove.com/secfiling.cfm?filingID=1193125-12-335124&CIK=1313275, accessed October, 2012.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
Brightcove, Inc. (B) 713-436
5
Exhibit 2 Brightcove Express Options

Source: Company website, accessed October 2012.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
713-436 Brightcove, Inc. (B)
6
Exhibit 3 App Cloud Options

Source: Company website, accessed October 2012.
This document is authorized for use only by Emeritus Institute of Management (Programsupport@emeritus.org). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.