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So if Avid goes under, then what?
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[Bernhard Grininger] “But I don’t see any remarkable synergy effects if Blackmagic acquired Avid either!”
I do.
[Bernhard Grininger] “What should BMD do with old MC-algorithms (those under the hood) and over-priced server-hardware,
that couldn’nd be converted well into easy to use and fair-priced consumer style products;
thats what BMD usually does. “BMD would have no reason to keep everything alive. I think the over priced server hardware is going to be eclipsed over time and Avid’s business model for it (it is their big revenue stream) isn’t sustainable for any other company.
If Avid’s price is low enough, they might be a bargain purchase. MC/Symphony would give BMD an added customer channel. They’d mark down the price and, my guess, tie it to their hardware (think Resolve). They’ve shown they have a business model for turning a profit on relatively low cost software (and hardware – Teranex). ProTools would give them entry into audio post. They’d handle all this just as they did with Resolve. It would fill out their product line and get them into and end to end turnkey solution (now with camera for acquisition as well).
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[Oliver Peters] “The video edit software, ProTools, ISIS/Unity (shared storage), Euphonix and news room products all seem to contribute equal percentages to the bottom line”
And that bottom line has been in the red for many years now. While they’re not losing as much as some years back, a Q1 2012 loss is more than half of what they lost for the entire year for 2011.
[Oliver Peters] “take a look at Quantel. They have restructured over the years and run a fraction of the workforce that Avid does. They have focused solely on the pro market. Although they have a small footprint, they are still the dominant company in DI, Stereo3D post and also offer leading solutions for news editing and cloud editing.”
But it seems Avid isn’t following that model. It may also be that Quantel doesn’t have any viable low cost competition so they own their niche or at least a good portion of it.
Avid, I believe, will be facing lower cost competition in their hardware markets, I believe. If not, they can shed some more and target that. That they seem to be reluctant to do it is either a mistake or maybe they are also feel that their going to get hit in that market, which may be why they’ve toyed with other markets in recent years such as “prosumer.”
Yes I could see them going the way of Quantel but if that’s the solution, they aren’t doing it (yet). Maybe the whole MC/Symphony crossgrade strategy is a big fail for them. All accounts are that it lost them money. Maybe they expect to make it back on high upgrade pricing, which people have always groused about.
While there certainly ways out for Avid, they’ve shown no signs of moving towards them beyond shedding employees. If they have a core business that’s profitable, they’re having a hard time hitting it. They’ve had one marginally profitable quarter in the last 22. The only thing keeping them afloat is cash on hand and lack of debt. Those, btw, are key things when it comes to being a desirable acquisition for somebody.
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[Craig Seeman] “BMD would have no reason to keep everything alive.”
The crucial question here is what would cause BMD more cost:
– To make other strategic aquisitions with perfect synergy effects (like TheFoundry would be),
and fill up the gaps in ecosystem with latest technologies,OR
– To make an aquisition of Avid with a huge amount of not needed assets,
forced to lay off people (with all legal issues), to EOL tools causing negative PR,
to consolidate not-so-state-of-the-art technology with own technology and causing
more costs than BMD’s business model could return.
Economically this doesn’t make any sense to me.For BMD, Avid could become an economical disaster!
Of course, only my personal opinion 😉Best regards,
Bernhard -
[Craig Seeman] “But it seems Avid isn’t following that model. It may also be that Quantel doesn’t have any viable low cost competition so they own their niche or at least a good portion of it.”
I don’t think that’s true. On the DI front, cheaper options include Scratch, Filmmaster and Resolve, among others. On the news side – Avid, GVG and others. In fact, Quantel at NAB introduced some lower cost (for them) solutions to deal with their own market pressures. The key ingredient is that Quantel has successfully marketed a value-added product line and restructured costs to match.
[Craig Seeman] “The only thing keeping them afloat is cash on hand and lack of debt. Those, btw, are key things when it comes to being a desirable acquisition for somebody.”
There are some scenarios as to how this could play out. One is to go back to private ownership. Possibly with venture capital backing. That’s essentially what Quantel did to get out from under Carlton a few years ago (leveraged management buy-out plus VC infusion). VC ownership is the current situation for GVG.
Another thing to consider in looking at a sale is that it’s not an all-or-nothing deal. You could, for instance, sell off just the NLE software to a company like BMD. Then re-package Avid as a services-solutions vendor dealing with enterprise customers for turnkey news/SAN/edit installation. That’s the IBM model.
– Oliver
Oliver Peters Post Production Services, LLC
Orlando, FL
http://www.oliverpeters.com -
[Bernhard Grininger] “To make an aquisition of Avid with a huge amount of not needed assets,”
It depends on the price and value. Avid may give BMD a much more lucrative customer base than The Foundary. Avid’s base is willing to spend significant money and, on the facility level, may be looking for complete integrated workflow that BMD would be able to offer them.
[Bernhard Grininger] “forced to lay off people (with all legal issues),”
Avid’s doing that. The lower the payroll the better the acquisition value. That no debt load and a very valuable customer base make them an excellent target.
[Bernhard Grininger] “to consolidate not-so-state-of-the-art technology with own technology “
Media Composer/Symphony have a valuable base. It’s a product line that BMD may be willing to do further development on. Even if some of the UI is old there’s certainly enough there to build on. BMD can be more aggressive that Avid is willing to.
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[Oliver Peters] “The key ingredient is that Quantel has successfully marketed a value-added product line and restructured costs to match.”
And Avid hasn’t and shows no signs of doing so.
[Oliver Peters] “One is to go back to private ownership. Possibly with venture capital backing.”
That would work. The shedding of pay roll and the lack of debt makes them a good target for “somebody.” The key piece is a viable business model. Without that they fail. So far they are without that as it stands.
[Oliver Peters] “You could, for instance, sell off just the NLE software to a company like BMD. Then re-package Avid as a services-solutions vendor dealing with enterprise customers for turnkey news/SAN/edit installation.”
This too would make sense. Again I don’t think Avid products will disappear. I think they are a good acquisition target and every step they are prioritizing seems to indicate that will happen at some point.
Avid, as they now exist, can’t be around much longer (2 years maybe) whether it’s under the same brand name, going private with venture capital, being bought by piecemeal or entirely by other established video company. It’s going to change.
For me the biggest question is how the services-solutions aspect will be handled.
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[Oliver Peters] “The key ingredient is that Quantel has successfully marketed a value-added product line and restructured costs to match.”
[Craig Seeman] “And Avid hasn’t and shows no signs of doing so.”
Avid has restructured. Isn’t that the difference between their GAAP losses and non-GAAP gains?
Avid is also marketing a value-added product line — it’s just that almost none of us here are their target audience. MC is really only a fraction of what Avid does. Why should they bend over backwards to chase Apple and Adobe for low-margin, lone-gunman desktop editorial when they can practically own both the hardware and software sides of collaborative editorial?
Walter Soyka
Principal & Designer at Keen Live
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
RenderBreak Blog – What I’m thinking when my workstation’s thinking
Creative Cow Forum Host: Live & Stage Events -
[Walter Soyka] “Avid has restructured. Isn’t that the difference between their GAAP losses and non-GAAP gains?
Avid is also marketing a value-added product line — it’s just that almost none of us here are their target audience. MC is really only a fraction of what Avid does. Why should they bend over backwards to chase Apple and Adobe for low-margin, lone-gunman desktop editorial when they can practically own both the hardware and software sides of collaborative editorial?
“True all that. Advantage Soyka.
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I am very confused on this reoccurring statement of “over-priced servers”. I need clarification – is the idea that hardware server prices will drop significantly or that Avid’s server prices in specific need to drop? I have found Avid’s price to be quite inline with competitors.
One of Avid’s problems is that they have not reeducated customers. They aren’t the locked-down, closed-off system that people came to know many years ago and their prices are not out of touch with competitors either.
Their marketing in general has been pretty lack-luster. Most people in this industry aren’t aware of the full Avid workflow and that’s an issue. We all gear lust and Avid has some of the lust-iest stuff.
If a company were to buy Avid, they’d have to keep a lot of product afloat. Broadcasters and large facilities that have bought into the Avid ecosystem by the millions of dollars will not take easily to product EOL nor would they look kindly to a consumer oriented company obtaining a very pro oriented one.
What is most interesting to me however is that most people clamored when Apple dropped the pro to focus on consumers and aren’t cheering that Avid is doing the exact opposite.
I’m not at all worried that any of Avid’s NLEs will disappear – Media 100 still exists in some form. Someone will buy that piece which of course is the part that most people associate Avid with. As stated many times, Avid makes it’s money off of ISIS/Interplay and services/solutions. The comparison to IBM may be an extremely apt one.
Jack Guthrey
Carolinas Account Representative
Marshall Graphics Systems -
[Walter Soyka] “Avid is also marketing a value-added product line — it’s just that almost none of us here are their target audience. MC is really only a fraction of what Avid does. Why should they bend over backwards to chase Apple and Adobe for low-margin, lone-gunman desktop editorial when they can practically own both the hardware and software sides of collaborative editorial?”
I agree with this generally but Avid doesn’t have a clear business model. The whole crossgrade lost them money. Why bother with it if it’s not a viable model? These are the serious mistakes they keep making. MC/Symphony should really just be the NLE tool that goes with Unity/Isis system sales. They may want a wider base if they feel that the more people are comfortable with the NLE the more likely they’ll buy Unity/Isis.
If people are buying MC/Symphony and going with other storage solutions, that’s not serving Avid’s financials. That people are finding other viable storage options with Avid’s “front end” NLEs, that indicates a problem (IMHO) also.
The question is, as Adobe and Apple progress, to what extent that might hurt Avid in the future as such users are not going to be buying Unity/Isis . . . or they’d be using MC/Symphony.
One (partial) solution, may be to tied MC/Symphony more closely to Unity/Isis in some fashion. The problem is, they’re doing what they’re currently doing and they keep losing quarter after quarter. Imagine 22 quarters and they still haven’t figured out which way is up. They keep shedding employees as their primary solution. This time they shed product lines as part of it. That may not be a bad thing but it doesn’t address the fundamental business model that needs to change.
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