Since it was founded in 2000, San Diego-based Verimatrix has raised about $50 million in institutional venture funding and spent untold hours of software programming to address a relatively simple problem nagging the pay-TV industry for more than a decade. As Verimatrix CEO Tom Munro puts it, “We keep people from watching television without paying for it.”
These days, however, the security issues confronting Verimatrix and the pay-TV industry have only become more complex.
Munro estimates there are 110 million consumers in the United States who pay to watch television provided by cable, satellite, and other TV service providers (with an estimated market penetration of 90-plus percent). At the same time, the number of U.S. consumers who are watching TV online, using Netflix, iTunes, Hulu, and other Internet video services has exploded—with the fast-rising total estimated at somewhere between 40 million and 70 million, according to consultant Bill Rosenblatt of New York’s Giant Steps Media Technology Strategies.
Meanwhile, cable TV operators like Time Warner, Comcast, and Cox Communications are moving to offer their subscribers “Everywhere TV” that allows them to watch any digital video content on any device. And of course, electronic device-makers have been busy developing an estimated 1 million different types of gadgets that consumers can use to watch digital content anywhere.
Verimatrix fits into this industry maelstrom by developing encryption software and related security technologies for pay-TV networks. In some respects, Verimatrix’ task has gotten easier as ever-increasing bandwidth has enabled the industry to move increasingly to a “pure digital” format, and away from more specialized electronic devices, such as Blu-Ray players. Riding this trend, the company has been successful in creating piracy protection software for Internet-Protocol Television (IPTV), and today more than half of the company’s business is in so-called unmanaged networks, such as Netflix, which provides streaming video “Over the Top” (OTT) of a cable- or satellite-based broadband Internet platform.
“The nice thing about our solution is that it’s based on software, and not on a hardware, card-reader type of security technology,” Munro says. He describes Verimatrix as
