Worcester Business Journal

10 Worcester Business Journal | August 6, 2018 | wbjournal.com Cutting the cord After slashing its workforce, SeaChange hopes to rebound through streaming services like Netflix BY GRANT WELKER Worcester Business Journal News Editor I n the fast-changing world of streaming video, Acton soware company SeaChange Inter- national was for a while not predicting correctly where the market was leading. From a high of more than $170 million in revenue in 2009 and 2010, income cratered to $80 million in the 2018 budget year. Making matters worse, costs never fell accordingly, leading to a $71-million loss in 2017. Costs were reigned in substantially last year, falling by more than one- third in the 2018 budget year. Now, even as revenue remains largely flat, SeaChange climbed out of the red last fiscal year and is bullish on taking advantage of a rapidly growing streaming video industry, as viewers increasingly watch Netflix, Hulu, Roku, AppleTV and the like. Netflix alone reported more than 130 million subscribers last month and more than $8.8 billion in revenue in the most recent year. "What's really driving SeaChange is we've been successful at innovating products that meet these changing de- mands," said Ed Terino, the SeaChange CEO who took over in 2016. A fall in recent years e past few years have been bumpy for SeaChange, which was founded in 1993. From 2010 to 2018, revenue dropped by more than half as the company remained focused on cable operators and set-top TV boxes, areas losing market share. To service the streaming market, the company is now focused on providing a soware platform to manage content, advertisements and user experiences. "As it evolved," Terino said of SeaChange, "the company didn't change as quickly as it needed to to service that market." Along the way, SeaChange has reduced its workforce from more than 700 to less than 300. Two of its units, broadcast servers and storage, and media services, were sold in 2012 for a combined $32 million, paring its work- force by more than 300. A soware office in the Philippines once housing 170 workers was shut- tered, as were smaller storage and soware offices in New Hampshire and Pennsylvania. Ten locations where soware development was taking place globally when Terino took over as CEO were reduced to just three: Acton; Warsaw, Poland; and Eindhoven, e Netherlands. e 124,000-square-foot Acton headquarters, which now has about 120 employees, was sold last fall for $1.5 Ed Terino, SeaChange CEO Sea Change headquarters in Acton. The company sold its office space before leasing it back during cost-cutting. Stopping the bleeding SeaChange finally cut its operating expenses enough in 2018 to meet its falling revenues. Coupled with other financials, the company reached a $13.5-million profit in 2018. Note: Figures are rounded to nearest hundred thousand. Source: SeaChange International $50M $100M $150M $200M '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Revenue Operating costs $162M $149.2M $80.3M $85.7M The SeaChange International Booth at the Cable Show 2012 event in Boston. The company is shifting its focus away from cable toward video streaming. million. e company has leased back space in the building. Aer years of mounting losses, SeaChange returned to profitability in its 2018 budget year, which ended Jan. 31 – more due to such sharp cuts in costs than a rise in revenue, which remains far below its peak, and thanks in part to a $17.1 million one-time income tax benefit resulting from this year's changes in federal tax law.. SeaChange is finding more challeng- ing pricing today and more competition in the field – from the likes of Bos- ton-based Brightcove, Comcast, Swedish multinational Ericsson and the Chinese media giant Huawei. Turning to areas of growth But there's encouraging signs for SeaChange. Streaming services like Netflix continue adding customers, and more adults say they watch television through streaming online. For adults 18 to 29 in a Pew survey last year, 61 percent said they watch pri-

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