By Greg Bensinger 

Amazon.com Inc. is putting itself at the center of the Web video boom.

The Seattle retailer said Thursday it agreed to acquire Elemental Technologies Inc., which helps media companies convert video to be played on the Web and on mobile devices. The all-cash deal is valued at about $500 million, which is roughly five times the company's revenue, according to a person familiar with the deal's terms.

Amazon declined to comment on the terms of the deal.

Streaming and Web-based video are becoming key battlegrounds for technology companies as more consumers are seeking to cut their cable bills in favor of a la carte offerings. Amazon and Netflix Inc. have been competing for customers through original content as well as deals for the portfolios of Time Warner Inc.'s Home Box Office, Walt Disney Co. and others.

Elemental counts HBO, Disney's ESPN and the British Broadcasting Corp. among its hundreds of customers using its video conversion technology.

That means Amazon could become a central player in the rush to feed consumers video on any device and at any time. More consumers are seeking specific content from their tablets and smartphones as opposed to watching television. Amazon manufacturers tablets optimized for viewing video and streams film and TV shows as a perk to its $99 Prime delivery membership.

The takeover, expected to close in this year's final three months, would represent Amazon's biggest deal since it bought videogame streaming site Twitch last year for around $1 billion. Amazon will fold Portland, Ore.-based Elemental into its Amazon Web Services cloud computing division.

Amazon beat out Ericsson AB, which had a deal in place to buy out the company, according to a person familiar with the matter. Cisco Systems Inc. had also considered a bid for Elemental, this person said.

Spokesmen for Ericsson and Cisco had no comment.

Amazon's AWS is one of its faster-growing units, providing computing power and cloud storage for startups and some bigger firms like Netflix. The unit had $3.39 billion in sales in this year's first half, a 65% jump from a year earlier, and it doubled its operating income to $655 million.

Nine-year-old Elemental had raised about $44 million from Telstra Ventures, General Catalyst, Norwest Venture Partners and Sky PLC, a customer and unit of 21st Century Fox Inc.

Write to Greg Bensinger at greg.bensinger@wsj.com

 

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(END) Dow Jones Newswires

September 03, 2015 20:00 ET (00:00 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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