Media Firm Dumps Content Business, Buys Monitronics

Security more predictable than content delivery (Frost & Sullivan)

Ascent Media Corp. (Nasdaq: ASCMA), a content provider that serves cable companies, broadcast networks and other media-related enterprises, is dumping those businesses and getting into home security instead.

Englewood, Colo.-based Ascent is acquiring Monitronics, the second largest residential security monitoring firm in the U.S., in a deal valued at $1.2 billion, including about $413 million in cash.

The announcement follows Ascent’s recent sale of “the substantial majority” of media-related properties in its Ascent Media Group (AMG), which provides content and creative services to the media and entertainment industries in the U.S., UK and Singapore. Those divestitures left Ascent virtually bereft of value until the acquisition of Monitronics, announced on Dec. 17.

Dallas-based Monitronics provides monitored business and home security system services to more than 665,000 residential and commercial customers via independent dealers.

Ascent was attracted to the security company’s recurring revenue, which is more predictable than Ascent’s own fees from cable companies and other media customers. While content management, distribution and monetization have become increasingly inconsistent over the past couple of years, the security monitoring business remains relatively stable.


Source: Monitronics/Ascent

Ascent says in a statement, “Monitronics’ long-term monitoring contracts provide high margin, monthly recurring revenues that result in predictable and stable cash flow.”

Monitronics delivered revenue of $272 million and EBITDA of $187 million in its fiscal year ended June 30, 2010, increases of 16% and 22% respectively over 2009. In the 12 years from fiscal year ended June 30, 1998 to fiscal year ended June 30, 2010, Monitronics generated 22% compounded annual growth of revenue.

In contrast, for the six months ended June 30, 2010, Ascent revenues were $204 million compared to $229.5 million the previous year. In the same six-month periods, the loss from continuing operations before income taxes was $28.6 million in 2010 and $23.2 million in 2009.

During a Dec. 20 investor call, Ascent CEO William Fitzgerald said the Monitronics acquisition was “a complete shift away from the AMG Media services business and into a very predictable and financially leveragable recurring revenue business—the residential security monitoring industry.”

Monitronics CEO Mike Haislip told Security Systems News that Ascent “understands the RMR [recurring monthly revenue] business. They’ve been in cable TV. They understand how our business model works.”

So the big question is: Is Ascent poised to serve the cable industry with a home security offering? Comcast/Xfinity is one high-profile cable company taking the leap into home security, but the group says they are setting up their own monitoring facilities.

Then again, Comcast has a legacy – albeit an unsuccessful one – in the home security business.

Other cable companies, not to mention ISPs, telcos and energy utilities, might not have the foggiest idea how to enter the security business.

If Ascent can tap that customer base, will Monitronics dealers benefit? Will they lose out? Or it just be business as usual for an already successful security monitoring station?