Kirk Arnold, Avid Executive Vice President/COO, talks about Avid's openness, the professional market, and the hunger for high quality content.
When it comes to business strategy, you have to have a lot of insight and a little bit of luck. When Gary [Greenfield, CEO/president] and I arrived at Avid four years ago, we immersed ourselves in where our customers' businesses were going and how we could support them. It became pretty clear early on in our evaluations that the need to support an open system was a fundamental requirement. For our customers, it was a brave new world. The workflows were becoming increasingly complex and the requirements to have flexibility and agility to keep up with the rapidly changing business models demanded that we open up our system so our customers could adapt to technology changes and new distribution models.
This led us to realize that it wasn't just about opening up to other types of technologies and platforms. We also had to pull apart hardware and software to allow for different types of system configurations. We believe strongly in integrated workflows and the ability to optimize Avid's point-to-point connections in an open ecosystem. We'll always work to optimize the tightest integration between Avid's systems because that optimization creates efficiency and ease of use, but we also want to be open to customers' preferences.
With regard to the recent move of editors from Apple Final Cut Pro to Avid Media Composer, the reality is that Apple is a great partner of ours and we have a very strong commitment to support the Mac client as a primary client. We respect Apple as a competitor and partner. Our conversations with customers are not negatively infused; many of them remain committed to Apple workstations, phones and so on and we will continue to work closely with Apple on many fronts. Apple's recent changes to Final Cut Pro gave us a great opportunity to re-engage customers who perhaps hadn't had a chance to engage with us in the recent past. Customers recognized our clear commitment to the professional.
[Reality TV production company] Bunim/Murray is a wonderful example. They were ready to make a move and upgrade their platform and that coincided with an opportunity to re-engage with them. The fact that we're now an open platform that embraces the flexibility they want made a difference. A lot of these customers have opted to take advantage of that, and we're excited about that. But we're just as excited to engage these professionals about where we're headed. What's new is that they're really listening. Some aren't ready; they're happy where they are. They may have made a big investment and are amortizing it. Some are experimenting with part of the workflow.
One of the interesting pieces of the journey is our recommitment to the education market. Many of these educators are committed to developing professionals in their institutions, and the core of our strategy -- our commitment to the professional -- has resonated with them. They want to teach their students using the tools they need to be professional. They're aggressively looking to make Media Composer available to their students. That's been really gratifying and exciting.
The John Lennon educational tour bus
Our commitment to music education is also strong. Avid is the primary sponsor of the John Lennon bus. As an example of the kind of work they do, in 2011, the bus went to Alabama after the destructive tornados and they did a music video on the bus. We're unbelievably passionate about the creative community. Half of our employees were filmmakers, editors or musicians. Reaching into the education community gives students a chance to look at Avid and see a face that's very different to what they thought. Some of it is branding but most of it is about the interaction, whether it's on a website, our Facebook page or a concert. A lot of young kids are very energized with the message and this is a chance to introduce ourselves to them.
The John Lennon bus: "We Rise" -- The Inspirators (Birmingham, AL)
Inside the John Lennon tour bus
Our customers are making a long-term commitment to us and we to them. What many customers want to be sure of is that we're deeply committed to the professional market. And we are. Every company has a strategic priority, and for us it's the professional market, starting with Media Composer and ProTools.
We service three segments: our consumer business, our post and professional business and our media enterprise business. The latter two account for our professional business and we see growth in those markets as the industry of media consumption changes. That is our market.
We also see amazing growth in the professional space in emerging markets, like South America and China. Is it a complex market? You bet it is! But our customers around the globe are the most fantastic I've ever served, and I mean that deeply. I spent 25 years in IT serving financial and insurance services. This customer base is so passionate, and they invest time with us in a way that far exceeds anything I've experienced.
We have customer advisory boards in all of our sectors, in every major region across the globe and we meet them twice a year. They give us so much time. I had one board member fly to me at his own expense to talk to me about an idea. They recognize that if we can help them, it can have enormous impact. And that means that when they're not happy, we know it quickly and our commitment is to respond quickly.
I do think that the important point is that Avid has a unique advantage. If you're doing this as a side business, you're going to struggle. You have to be in this with the client in way that no other industry I've served demands. This is all we do. We don't do tools for anything else. That focus allows us to see the future with a great deal of enthusiasm. A lot of things are driving growth and opportunity.
We clearly see opportunity for the core editor market and, more importantly, the opportunity to extend beyond the editing market to offer new products and services. Storage is one area. We have highly optimized storage for post and enterprise customers. That market is exploding. The shift to digital requires a lot more capacity -- not just long-term archiving but the ability to manipulate media as you create it. The days of tape are quickly disappearing. In our case, our storage is optimized to be uniquely high performance for the media market. We don't sell it to the banking or aerospace industries. That's an example of where we find growth as we extend into the workflow. We think we have the best storage in the market.
We're under tremendous pressure to accomplish new things more quickly. Our customers need to be able to use every minute and hour to be more efficient and competitive and do high quality work. Stereoscopic 3D is one of those areas where we need to support our customer. We think it is going to be a very important market. While not ubiquitous, it has a good sustained demand curve over time. I just saw a statistic from Future Source that projected that by 2015 half of the US households will have 3D TVs. In Europe, they're more tentative but, particularly for sports, it's going to be important. What we've done with 3D is put what we believe are the most powerful core 3D editor into Media Composer for the price of the license. That means that our customers either specializing in 3D or doing 3D work periodically maximize their productivity and don't pay a penny more.
We offer other tools to help clients optimize their workflow. For example ScriptSync allows them to work with media assets more efficiently, to save real time and money in the workflow. And the Avid marketplace gives customers access to stock footage while they're working. That kind of capability really targets the client's need to be as fast and efficient as possible
One of the things we've been spending a lot of time talking about in the customer advisory boards is that the life cycle of the media industry has shifted from being highly controlled by distributors to being consumer-driven. That has completely changed the game. Fifteen billion devices -- phones, tablets and so on -- will be connected on the Internet by 2015. I already sit in front of the TV with my iPad, computer and phone and I don't consider myself leading edge. The consumer is in charge, so our customers have to think about how to create once and distribute as many times as possible, efficiently and without costing a fortune. We're focused on extending our product portfolio to meet that need. We acquired a company for media asset management to make it easy to track finished media to allow for reuse and improved efficiency. The MAM market is a full-fledged opportunity in the media enterprise and broadcast space and we're working to bring that to mid-to-smaller post houses. That's a hugely important change.
We've also been having conversations about standards. The shift to multi-platform distribution means we want to make it easy for our customers to embrace standards. These workflows are extremely complicated to do and we have to solve it in a way that doesn't cost the industry a fortune.
The other interesting thing is that the appetite for content is exploding. Are we going to go home and watch YouTube all night or is there an interest in quality content? We did research with customers and what's become clear is that there is an enormous appetite for quality content. That's very, very important news. The infrastructure we all service needs to become more efficient but there is also an enormous marketplace in this new ecosystem. If we were all watching user-generated content, that would have been a huge threat -- but it's the opposite. We have to be efficient but we believe quality content will matter for a long, long time.
Supporting content creation anytime/anywhere is also an exciting area we're investing in. Kevin Tent, A.C.E. -- who just won an ACE Eddie for best edited dramatic feature film for editing The Descendants -- was editing that movie with Media Composer on a laptop while he was on an Amtrak train going coast to coast.
Alexander Payne and Kevin Tent editing The Descendants on an Amtrak train. Photo by Charlie Brogdon-Tent
There are a multitude of similar examples. When we announced ProTools as a software-only capability, our customers said, "This completely changes my life. I can go home to my family and work. I can be on site and work." The power of that to the industry is huge. We put the premium of openness and software -- but also on new ways to connect back to your content creation environment. We're working hard on enabling network or cloud connected collaboration tools to collaborate with people in remote locations and bring it all back to the virtual environment. We're working hard on that solution and we hope to have some exciting solutions to announce later this year.
The emphasis on high resolution also impacts us. It's probably more keenly felt on the very high end, and we absolutely believe it will continue. The good news is that the architectures of the hardware and software are allowing us to do more and more. You saw what we did on the ProTools side with incredible high-end and scaled ability to process at a level of complexity we never had. With 64-bit on Media Composer, there is a lot more we can do. You need a lot of power to support higher resolution, and the evolution of hardware and software will allow us to do that. We're making that investment.
The consumer is deciding so you have to be able to react to that. We have had a lot of conversations with our very large customers. We don't know what we don't know. But, one thing we do know is that regardless of the explosion of electronic devices, TV consumption last year was actually up. Nobody is throwing the TV away.
The good news is that folks who can adapt and be agile can take advantage of the hunger for content. The opportunity is there. My sense is that our customers have gone from being perplexed and a little cautious to very excited. There's a big sense of possibility -- not the threat of change but rather a future that people are excited about. Our decision to open up our platforms four years ago has proven to be critical to that. Our goal is to have the tools that afford these customers the agility they need to be successful in that future.
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