ObjectVideo Revenue Breakdown

By John Honovich, Published Aug 25, 2013, 12:00am EDT

ObjectVideo disclosed its 2012 revenue to be $18.9 million but what does that mean? Where does that 'rank' OV? Where is the revenue coming from? In this note, we examine OV's different business units, exploring their government contracts and analyzing the revenue potential of their ongoing patent enforcement / lawsuit campaign.

OV's Revenue Overviewed

OV's revenue grew an average of 14.5% from 2009 to 2012, increasing revenues from $12.6 million USD to $18.9. By contrast, OV's revenue was $8.4 million in 2006 [link no longer available], up 370% from 2003 revenue of $1.8 million (2003 was the year they 'broke through' winning best in show at ISC West). Over the 10 year period, OV grew at a CAGR of 26.51%.

Worth noting, OV reported 100 employees in 2006 but only 53 for 2012 (Inc 5000).

Comparing OV's revenue to the analytics market is difficult because of estimation issues and company revenue breakdown. Since analytics are frequently embedded inside cameras and recorders, there is a debate about how to measure analytic revenue with many counting the whole device (creating absurd projections like $1 Billion market size in 2012). Likewise, comparing OV to VideoIQ, for example, creates a similar problem, since OV offers no appliances while VideoIQ only sells appliances (i.e., cameras / encoders). Finally, OV's revenue is not simply or even primarily from analytic licensing.

Government Contracting

Government contracts almost certainly represent most, if not nearly all, of OV's revenue. The most prominent example is a $15.6 million intelligent agency contract that OV announced in mid-2012. However, public records indicate that OV has won over 40 contracts in the past 3 years (see a spreadsheet breakdown of each contract), including $13+ million in 2012 of which $5+ million were from the US Air Force.

Software Licensing

In the 2000s, OV used to tout how many video analytic channels sold worldwide (700,000, 800,000, etc.) but they have long since stopped that. We have not heard of anyone using or buying OV's software in recent years. Of course, certainly there must be some, and OV a while back indicated China was a growth market for them. However, given the lack of public partnerships on the software side and the huge volume of government contracts, we suspect their software business is a small percentage of their revenue.

Patent Licensing

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

Obviously, patent licensing is the big growth market for OV, having obtained licenses with more than 10 manufacturers, most recently VideoIQ. However, we suspect the short term revenue will be quite low.

Even in 2013, we would be surprised if OV's patent licensing revenue was more than $1 to $2 million. From what we have been told, rarely, if ever, are manufacturers paying royalties for sales prior to their agreements. Additionally, the per channel licensing seems to range from $0 to $5. We suspect that the number of channels impacted are in the hundreds of thousands as analytic usage overall is low (let's use 500,000 as a round number). Assuming 500,000 licenses and $2 to $3 average license, revenue would be in the $1 million range, a pittance compared to their government contracting business.

However, the big money making opportunity is in the future. Consider 10 years from now, the number of cameras total will be 3 or 4x higher (CAGR of 11 to 15% units) and certainly a far greater percentage of cameras will be using analytics (today it is tiny, perhaps 1 or 2%, by then it could be 20% or more). With even 3 times as many cameras and 10 times greater analytic usage, the patent licensing could be tens of millions of revenue annually.

Conclusion

While $18.9 million might sound like a lot for OV, considering their commercial struggles, their government business clearly powers them for now, and they have the potential of generating $100+ million over the next decade plus as the analytic market matures and they continue their enforcement efforts. What is great for them is that the manufacturers stand so divided and so quickly willing to fold to avoid short term litigation costs, that OV is setting themselves up for a potential huge windfall in the future.

Comments (0) : Members only. Login. or Join.
Loading Related Reports