The acquisition of OTX by Zelnick Media and Bob Pittman's Pilot Group closed Thursday, with Strauss Zelnick slated to become new chairman of the online market research firm previously owned by iFilm. Deal, valued at $30 million, is being financed by Pilot, while Zelnick will serve in an advisory management role. Founder and CEO Shelley Zalis will continue to run OTX and maintains her minority share. Pilot will not be involved in the management of the company.
Deal was negotiated in part by iFilm board member and former MCA president Skip Paul, who has previous business relationships with Pittman, the former AOL Time Warner chief operating officer who ankled in 2002.
OTX was founded as part of iFilm three years ago by Zalis, who previously worked in traditional market research. Company has since grown to become the biggest division of iFilm, with 80 employees and $20 million in revenue in 2003. It counts among its clients most of the major studios and several networks. Zalis said that growth helped spur a desire to separate from iFilm, whose other divisions are an online film portal and the Hollywood Creative Directory.
"The real issue is that we've outgrown our parent company and needed to step up to a new level," Zalis explained. "But I didn't want to be part of a big corporation that would stifle innovation. I wanted a private equity management firm that would give me a platform to grow on."
She added that because OTX is already profitable, she doesn't anticipate using Zelnick and Pilot to tap into significant new capital for growth. Company plans to use existing profits to fund an expansion of its technology and services for entertainment clients. Its activities include online trailer and advertising testing, tracking studies and media scheduling.
"We think OTX is going to be able to take advantage of the fragmenting media landscape of the future," said Zelnick Media West Coast partner Scott Siegler, citing the ongoing integration of advertising with entertainment content. "The macro trends of media evolution bode very well for this business, and we think we can help provide the resources to get that message out."
Deal leaves iFilm without its most profitable business but with significantly beefed up cash reserves thanks to its share of the $30 million purchase, which it shared with Zalis. CEO Adam Frank said he has no specific plans for the new cash, but is optimistic about the prospects of both remaining divisions.
"The sale was not tied to any specific strategy in terms of altering our remaining businesses," he stated. "We're just proud to have been part of building OTX and of what we think is a great result."
There has been some previous speculation that iFilm was also looking to sell the Hollywood Creative Directory and focus only on its consumer business, but Frank said that while he would always consider options, iFilm is now investing in new HCD products such as a recently launched music industry guide.