MobiTV, one of the biggest suppliers of technology to smaller cable companies looking to downsize their roles in the video business, is getting bailed out of a financial bind by its biggest customer, T-Mobile.
According to a flurry of filings tied to MobiTV’s late-February bankruptcy filing in Delaware, the Emeryville, California, video-tech vendor generated about $13.5 million in revenue in 2020, but sustained an operating loss of about $34 million. MobiTV is now asking the U.S. Bankruptcy Court for the District of Delaware to allow it to borrow $15.5 million from T-Mobile so it can pay its employees, keep the lights on and keep going. It has also hired a representative, FTI Consulting, to oversee its restructuring and sale process.
“Although the company projected significant and material subscriber and revenue growth for 2020, the COVID-19 pandemic and related stay-at-home orders materially impaired the company’s growth opportunities,” said a declaration by MobiTV chief financial officer Terri Stevens that was included in the Chapter 11 filing. “As a result, the company found itself with limited liquidity and at risk of default under its debt agreements.”
Received a PPP Infusion
According to the filing, MobiTV’s losses were only partially offset by $3 million in Paycheck Protection Program (PPP) loans from the federal government.
“Prior to the petition date, the company engaged in extensive negotiations with the pre-petition lender and T-Mobile regarding, among other things, a potential auction sale process in the context of a Chapter 11 proceeding,” Stevens wrote. “Ultimately, the company, the pre-petition lender and T-Mobile mutually determined that, among the strategic alternatives to be considered, the company should prepare for a potential sale process that could be implemented through the filing of Chapter 11 cases to maximize the value of the company.”
MobiTV designs and sells technology, some of it cloud-based, that allows pay TV operators to transition to app-based video platforms. T-Mobile is using MobiTV’s tech in TVision, the virtual pay TV service it launched in November.
But the company’s roots in the cable business run deep. Notably, MobiTV’s technology is also being used in Sparklight TV, the new app-based video platform being developed by Cable One. It has an agreement with the National Cable Television Cooperative (NCTC), which represents 850 small cable operators, and its smaller MSO and telco clients include Mississippi’s C Spire, Windstream Communications, Vast Broadband and MCTV.
As these companies have ditched increasingly lower-margin traditional quadrature amplitude modulation (QAM)-based video services, they’ve relied on MobiTV’s turnkey solutions, which let them supply their customers with app-based solutions they can use on popular off-the-shelf OTT devices like Roku.
MobiTV lists 76 full-time salaried employees on its payroll, as well as 10 hourly workers. It counts 125 customers in its bankruptcy filing, along with $19 million in assets and $75 million in liabilities.
Among its biggest debt obligations, MobiTV owes $4 million to cloud computing company Rackspace, $3 million to Silicon Valley Bank and $2.9 million to patent pool MPEG LA.
Founded in 1999, MobiTV has raised more than $213 million through numerous venture capital funding rounds. The company’s plan to continue operating — and even increase its marketing spend amid the restructuring process — must still be approved by the Delaware court.
CEO: Company’s Still in Business
On the day of its Chapter 11 filing, MobiTV chairman and CEO Charlie Nooney sent a letter to clients, assuring them that the filing “does NOT mean the company is going out of business. We will continue to provide live and on-demand video solutions to our customers and will continue to review our services through the case proceedings.”
MobiTV reports having 125 customers. The company declined to say more about the 2020 downturn beyond the statement that it was hit hard by stay-at-home orders and other pandemic-related conditions.
“The company derives its revenue from contracts with its subscription television customers, T-Mobile, and certain other broadband and cellular service providers, who utilize the company’s IPTV application,” Stevens wrote in her filing.
T-Mobile launched its TVision in early November under great fanfare. But almost immediately, the platform received pushback from programming partners, including Discovery, which accused T-Mobile of confining their channels to tiers in ways that didn’t meet the terms of their program licensing contracts.
T-Mobile quickly pivoted, moving 33 networks that were previously available only in the $10-a-month Vibe tier to the more robust Live packages at no extra cost to the customer.
Did T-Mobile tank TVision’s margins when that happened? That’s tough to say. But when the wireless carrier announced fourth-quarter earnings early in February, it didn’t mention its new pay TV platform even once.
