iVast sale highlights MPEG-4 woes

Digital media start-up iVast has quietly ceased U.S. operations, highlighting the challenging market for multimedia products based on the emerging MPEG-4 standard.

The Santa Clara, Calif.-based company closed its domestic operations last month, according to iVast executives, who said they let go about 35 people from engineering and operations. iVast continues to employ about 22 people in the United States as part of its international operations, which were purchased in January by Moirai Media Solutions, an India-based company that develops video on demand and other digital broadcast products.

Next week, Singapore-based DG2L is expected to announce that it will purchase Moirai Media and its iVast assets, according to sources familiar with the plans.

DG2L sells a high-definition digital cinema video system based on MPEG-4, a next-generation standard for compressing digital files so that they can be more efficiently sent over Internet Protocol networks. The acquisition will give the company access to iVast's approximately 180 global customers, which include Yahoo, Sony, China Telecom and Dentsu. iVast also runs offices in China and Tokyo.

The moves come amid weak demand for MPEG-4-based products, belying some of the hype over technology that offers substantial compression improvements over the current MPEG-2 standard used by most digital cable providers and DVD manufacturers. MPEG standards are developed and approved by the Moving Pictures Experts Group.

Ben Silva, a former iVast employee who is now vice president of worldwide sales for Moirai Media, said iVast struggled in the United States in part because of reluctance among U.S. companies to back new technology and use it.

He said new MPEG-4 video compression technology known as H.264 has gained substantial buzz in the last two years, hurting sales as vendors waited for new MPEG-4 implementations supporting the latest improvements. To accommodate the evolving market, iVast opened its product line to support the delivery of video encoded in MPEG-1, MPEG2, H.264, Microsoft's Windows Media 9 and high definition.

Silva added that 85 percent to 95 percent of iVast's revenue came out of the Asia-Pacific region. As a result, it made sense to move the operation closer to its customers and outsource engineering jobs to India and China.

"The North America market was not there to sustain" MPEG-4, Silva said. He added that the market won't pick up until "the U.S. stops waiting for the next best thing."

Gerry Kaufhold, principal analyst at In-Stat/MDR, a research firm in Scottsdale, Ariz., said that there's tremendous interest in MPEG-4 around the world, but it's taking some time for widespread adoption. Because it is such a wide-ranging standard, there's some uptake in understanding its capabilities and licensing.

The delays have helped Microsoft gain traction for its competing Windows Media formats, Kaufhold added. "In the near term, Microsoft appears to have the upper hand."