|Media 100 & Pegasus|
A Creative COW Industry Report
Intelligent Assistance, Los Angeles, California USA
In 1994 Media 100 revolutionized the video post production industry by bringing broadcast quality finishing to the computer desktop for the first time as the initial step in democratizing video. Can they do it again? How does the new Mission and Vision fit with the original vision that drove Media 100? Or was the sale of Cleaner and other software products to focus on the "Pegasus" project a mistake?
The Sale of Software Products & Revelation of "Pegasus"
As pretty much everyone knows by now, on the 30th of August, Autodesk Inc. announced that they had signed an agreement to acquire the software product line from Media 100 Inc. For $16 million in cash Autodesk's Discreet Division will be the new owner of Cleaner, Cleaner Live!, CinéStream, IntroDV and EventStream -- essentially the products Media 100 acquired through its purchases of Terran and Digital Origin. That sale completed on Friday October 5th.
In tandem with the sale to Autodesk, President and CEO of Media 100, John Molinari revealed to the investment community that the company was well underway with a 'next generation product' with the internal code name of 'Pegasus'.
For Media 100 Inc, the sale allows them to focus on developing their next generation of products and bringing them to market.
Selling the software products now, to fund that development leaves Media 100 in a solid position, with (currently) $20 million cash on hand and no debt. At current 'burn' rates, they are in a very comfortable position to complete development on that next generation of products and bring them to market with sufficient resources to market and support the product as they build sales.
See "The Sale and Revelation"
The Vision and Course
Media 100 Inc has always followed a clear vision that was clearly spelled out by John Molinari in 1994 in the article "Blood Secrets" - originally in Videography Magazine and reprinted here at Creative Cow by permission -- and they should only be judged in how well they have adhered to that vision and bought it to fruition.
Media 100 has in fact, closely adhered to the "Blood Secrets" vision. They have realized their vision of bringing high quality video editing to 'the rest of us' and created the 'Finish on the Desktop" market that is now taken for granted.
However the market has moved on and Media 100's products, while filling their original vision, are now aging. That should not take away from them the fact that they had the vision to see high quality editing being done on the computer desktop when no one else did and bought that vision to reality.
I believe we're now seeing the beginnings of a new vision that will build on Media 100's expertise. That new vision is, in the words of John Molinari: "a new equipment category that will change the industry". Which is exactly what Media 100 was when it was introduced in 1994 -- a new equipment category that changed the industry. If Media 100 are to once again change the industry and realize a new vision they must be judged on how successfully they implemented their original vision.
The Streaming Market
Media 100 always planned, from the 'Blood Secrets' days, to support alternate means of distribution. The purchase and incorporation of Cleaner was part of the implementation of that strategic vision. It was also a good investment in the days of "Internet Hype".
Like so many other companies, Media 100 believed the Internet uptake would be much faster and much deeper than it was and have been somewhat hurt by the downturn in that sector. As a relatively small corporation, Media 100 had to make the decision where to focus limited resources to give them maximum chance of building value for shareholders. The time it would take to obtain a return on the ongoing investment of resources on Streaming and on the next generation products made a decision for one or the other inevitable.
However, if streaming isn't Media 100's core focus for the next few years, what is? Is it editing?
The Editing Marketplace
The editing market is in a transitional phase. What once was a high priced industry with strong barriers to entry is rapidly becoming a commodity.
Although Media 100 were first to market with sufficient quality to finish video on the desktop, the rapid deployment of the DV-based technologies and native DV editing has left Media 100 at a disadvantage in the very market it created. Others have implemented low-cost editorial solutions on the desktop.
Media 100 retains some strategic advantages -- an easy interface; integrated hardware and software; easy integration of composite, S-video, component, DV and SDI source material in one timeline; automation (via AppleScript on the Macintosh platform) -- and still presents a quality mid-market solution on the Windows platform with iFinish. Still, I believe it will have a diminished role in the entry- and middle-range of the NLE marketplace. Other solutions provide better value propositions for traditional NLE markets, particularly at the introductory and middle levels.
With the financial imperative toward lower-priced solutions for editing, the market that Media 100 has been so successful in the past, seems to be moving away from their reach.
The Products and Partnerships
One of the most interesting aspects of the development of the "Pegasus" project is that it started development in 1998 acording to the reports. All Media 100's strategic alliances and product purchases have been made since 1998. Coincidence? Perhaps, but it is possible that there was more strategic thinking behind the acquisitions.
The partnership with Nothing Real (Shake) would have been useful in understanding what was required in developing fast compositing software; the merger with Terran would have bought Metacode and encoding engineering into the company; while ICE and Wired bought parallel processing and MPEG hardware expertise respectively.
Did Media 100 learn from the market leaders to bring needed expertise to the Pegasus project? Possibly. It is entirely plausible and a very common approach in software and computer hardware development. And I like to believe that purchases are often made for strategic rather than opportunistic reasons.
Although we'll never know, you can read more of the speculation in "The Strategy of the Purchases and Partnerships".
What is Pegasus?
"Pegasus" is the internal code name for the long-rumored 'next generation editing hardware' from Media 100. Pegasus is not a product name, nor is it officially announced. What is written here is based on well-sourced rumor and two addresses that John Molinari, President and CEO of Media 100 Inc. made to the investment community. The first in August when the announcement of the sale of the streaming software products to AutoDesk was made, and the second on October 11 reporting the Third Quarter 2000 financial results to the investment community.
However, while a lot can be inferred by close attention to what has been made publicly available I do not have inside information, nor have I seen the product. If I really knew anything I would be under a Non-Disclosure Agreement and not able to say anything.
Once again, Media 100 Inc. plan to bring their hardware and software expertise to:
- [create a ] "new equipment category that will change the industry"
- [Pegasus'] " introduces and defines a new equipment category with visual effects and editorial performance unmatched at any price."
- " combined with delivery of product via broadband internet."
Based on direct comments and inference, the products that are released from the Pegasus project will be something like a cross between Symphony, Flint and the integrated effects in Discreet Edit* with both editorial and effects capabilities in a modular software interface aimed at facilities and cable stations for a turnkey price a fraction of those systems it will be competing with.
It is a completely new hardware design with a new software interface with, at least optional modules for, compositing, text, graphics, paint and animation. Or in John Molinari's words:
- "Bring blazingly fast processing to integrated editing and effects; make it work with existing tools and facilities to keep it affordable. That's what customers want."
- "That's Pegasus, and that's just for starters."
- "Workflow Integration, Speed, Quality, Price. They are the breakthrough advantages."
The Pegasus project is built on a completely new hardware engine using 3 PCI boards with 7 new Application Specific Integrated Circuits (ASIC) designed by Media 100's engineers.
It runs on standard personal computers rather than the proprietary or Unix based solutions of its 'competitors'. It genlocks with high accuracy and has an internal clock stable enough to use as a system master.
According to John Molinari, the one hardware 'engine' will be the basis for a number of future products and includes a real-time embedded software platform. Internally it communicates at 240 MB/sec and is uncompressed 10 bit throughout. And processes at "up to" 32 bit internally.
- "Pegasus is D5 on the Desktop"
I would hope that there will be a High Definition future for the media engine. The throughput is certainly fast enough and would be required if they are to:
- "Set a new standard for digital quality."
My guess is that it will be released as a standard definition product and a High Definition version will follow some time during the life of the media engine, when there is a market demand.
Software & Interface
Pegasus is an "uncomplicated" platform for visual effects design and realtime nonlinear editing.
The software interface has been hardest to get a handle on. Probably partly editorial, partly compositing/graphics and quite possibly modular since modularity was mentioned by John Molinari. Certainly modularity would be consistent with previous marketing from the earliest versions of Media 100 onward.
That it has elements of a Non Linear Editor and elements of some form of compositing interface is very likely from the comments that have been made. Exactly how that will be implemented, and whether the software will be modular for the user to pick and choose, or modular in design for easy updating is not at all clear at this time.
The software has been developed in conjunction with a number of alpha sites -- potential end users who have traveled to Media 100's headquarters in Marlborough, Massachusetts to advise on software features, workflow and interface design. Software development and feature-set was undertaken after a very thorough review of existing products
As I mentioned in the section on "Is there still a business for Media 100 in editing?" the types of visual looks that are being required of editors are changing. My comments were originally written in late August and September, before John Molinari made these same kind of comments in his October address:
- "The trend is toward Editing jobs that require more visual effects."
- "The trend away from traditional NLE toward advanced effects is creating new requirements"
The products based on Pegasus will most likely appeal to those doing that more 'rich' edited content that is common among modern broadcast content. Many Media 100 users are equally After Effects users where Media 100 is their editing tool, After Effects their compositing and animation tool and Boris RED or Commotion for integrated paint effects. This future platform is likely to encompass and expand on those capabilities, adding to them realtime performance.
Realtime performance will be impressive. To deliver on what has been suggested, it will have to have several channels of uncompressed video at 10 bit quality. But unlike other systems offering these features, I expect that the Pegasus based systems will do all that with:
- "myriad effects in realtime, unlimited layers with concurrent effects".
Although in the same sentence and likely to be interpreted as unlimited layers, it is unlikely that even something with the power of Pegasus will do unlimited layers in realtime. But "myriad effects in realtime" on each or all of the layers is well within the bounds of expectation. Particularly considering that the parallel processing technology in ICE (now owned by Media 100) already renders all effects on a layer in the time it takes to render the slowest. A next generation of that technology, with custom ASICs rather than the off-the-shelf TriMedia chips used by ICE should provide "myriad" real time effects on one or more layers simultaneously.
Currently, the amount of realtime compositing power is only available for considerably more than the projected pricing for the Pegasus products -- 5 to 10 times more, which would indeed make Pegasus a breakthrough in price and performance as claimed:
- " costs a fraction of current solutions that do not match what it can do".
Integrated Metacode is an essential workflow requirement allowing everything from annotation for reference to archiving functions to content control and management through conditional access systems. That the products integrate Metacode is known. What is not known is what level of Metacode will be integrated and whether or not it will conform to any standard. It would make great sense for Media 100 to integrate support for the emerging Advanced Authoring Format Metacode and integration standard and be one of the leading providers of AAF integrated solutions.
Delivery over the broadband Internet remains part of Media 100's strategic vision. Pegasus is not only designed for stand-alone content creation but is predicated on broadband delivery of product over a broadband network. It is designed to
- "create content and deliver content"
The stated target was "content designers" not editors. That should be considered in the context that, for some time now, Media 100 have defined their customer base as "Content Creators" rather than editors. So I don't believe it can be inferred that there are no editing tools. Media 100 has had ample time to consider what editorial tools content creators require. In fact, "unsurpassed editorial performance" was specifically mentioned.
It is designed so creators can
- "work as fast as they think"
Pegasus is clearly not related to any current product and is not vaporware. With 40 systems working in Alpha at Marlborough ready for a mid-2002 release, it certainly seems like a real product.
New Category - New Mission
John Molinari was very specific that Pegasus was not just an evolutionary development of the current product line:
- "new platform and software architecture for fast, fluid, interactive design"
- "a new digital standard for quality and delivery"
- "introduces and defines a new equipment category"
- "visual FX and editorial performance unmatched at any price"
He was equally forthright that the Pegasus product represented the
- "Key to returning the business to growth and profitability as the focus of the next few years"
Pegasus clearly is intended to drive the Media 100 brand, and profit via its new hardware architecture, new software (including embedded real-time software) and a complete support infrastructure. Media 100's dealers are to be key and integral to the company.
By selling the software product line, he feels that the company can now focus on one key mission and that mission is Pegasus.
Media 100's traditional market was in entry and middle-market systems.
- "Development of Pegasus adds to our existing product efforts which address the entry and middle range of the traditional NLE marketplace."
With little room to succeed in that traditional NLE market that Media 100 was instrumental in creating, Media 100 are moving into new markets.
- "We believe [Pegasus] will be attractive to some of our current Media 100, iFinish and ICE users "
Elsewhere in his public statements John Molinari suggested that their typical user in first release would be:
- "Cable TV Stations; Independent content providers and facilities that service them will buy our products today."
These markets are indeed new to Media 100 in so far as they have not been the core target of the existing product range, although there has definitely been penetration into those markets.
These markets are also away from the exclusive focus on 'democratizing video onto every desktop' while at the same time remaining true to the vision of making high end features available at breakthrough budgets.
Summary: Will This Horse Fly?
If all that Media 100 are providing is a new NLE interface and improved hardware then they are probably going to run into the trend to low-priced, software-based solutions I discussed in the "Is there still a business for Media 100 in editing". If that was all they were providing, then I believe they would be producing a wooden horse.
If, on the other hand, they are once again introducing a new equipment category with new capabilities, then even in times of shrinking budgets and low growth in the high-end of the market -- there are always opportunities for those who can more efficiently leverage their human and financial capital resources.
The Pegasus related products are targeted directly against current solutions for:
- "advanced content done on Unix or platforms that are proprietary."
That is, solutions from Discreet and Quantel.
- "Available solutions are expensive or underpowered, so customers cannot afford them or the solution can not be practically used."
Which translates to this: software solutions like After Effects and Combustion* are slow; hardware solutions like Flint, Flame, Henry, Editbox are expensive.
Production facilities and stations that reduce their capital requirements to less than 1/5th that of their competitors, or who leverage the lower investment to allow them to compete in new, higher revenue markets, will always be able to compete.
The trouble with those lower priced software solutions is that for a given amount of content 2-3 or more workstations with competent operators are required.
For example, a cable station or post production facility may have 3 workstations with 3 sets of software licenses and 3 motion graphic designer to do the volume of work that one 'Pegasus"-based system would be able to do with one motion graphics designer. It very quickly starts to make a compelling financial argument for that level of market, particularly compared with the prices of the probable competitors.
Conversely, real time feedback means more creative flexibility and exploration for those situations where the creativity is the ruling factor.
This is the same kind of dynamic that originally sold Media 100's -- high-end hardware at a fraction the cost and introducing a new class of product.
Pegasus is as much aimed at a new breed of content creators, as was Media 100 was aimed outside traditional video editing markets 7 years ago.
It will appeal to up-and-coming creative designers who work in multiple ways to create branding imagery for their clients communication needs and feed it to Tape, to DVD and to the Internet. Media 100 would have had a much easier marketing and sales task if they had managed to bring the technology to market 2 years ago, but if the price/performance ratio works, then there will be customers.
Can it be Profitable for Media 100?
It is possible to infer what investment has been made by Media 100 on the development of Pegasus by comparing their predicted and past R&D expenditures to isolate the Pegasus related from the investment in editing and streaming products.
Based on those publicly available figures filed by Media 100 for Research and Development expenses (apportioned, probable dealer margins and average sale prices) Media 100, Inc could be profitable on the venture with as few as 1000 unit sales when products ship. As most of that Research and Development has already been paid for, and Media 100 is currently debt free it will take very few units per quarter to take Media 100, Inc back to profitability.
On the current schedule I would expect that Media 100 will be certainly showing Pegasus related products at NAB 2002 in April next year.
- "A formal public announcement is likely in the early months of 2002."
Actual shipping still depends on a number of engineering decisions and actual feature freeze on the first generation of products. (As a developer I understand that "shipping" is a key feature to profitability.)
One thousand sales worldwide into the market that Media 100 are targeting is entirely feasible, in fact almost certain if they deliver on the promise. The potential could be probably up to an order of magnitude greater, or perhaps more and indeed:
- "Pegasus is the major growth opportunity."
Ultimately all hardware-based products will be subsumed by faster processors and faster operating systems, as indeed is happening with the markets Media 100 is currently in. It could reasonably argued they've had several more years from their existing technology than were reasonable, based solely on reputation.
Even if the Pegasus technology is obsoleted within 5 years, it will fill a significant market niche in the interim, making profits for both Media 100 and its customers. What the company does beyond that is something for management to determine as time progresses.
Media 100 are not abandoning any of their existing products.
- "Focus is on delivering Pegasus while continuing to support our current products and users."
The OSX release of Media 100i is well underway following the announcement at NAB 2001. Media 100i will be revamped with a new Aqua-based interface, OSX support and (probably) new features. The iFinish product will also continue to be developed and get new features in parallel with the development of the Pegasus-based products.
- "We are embarking on a new mission that leverages our strengths; targets markets that clearly exist today while positioning us to penetrate new markets, like broadband, as they emerge over time. We've changed the company to go after one strong opportunity despite the risks of doing something new and bold and despite the lagging economy and the atrocities of September 11, we are energized, confident, focused. "
Over the weeks I have been researching and writing this article I have had a lot of time to think about the implications and opportunity to discuss with associates. Originally I was somewhat skeptical that there was a market for the products, but now I have a much better understanding of the product, and the potential market, I honestly believe that yes, this horse could well fly.
Agree? Disagree? Visit the Cow's Media 100 forum for more discussion.
©2001 by Philip Hodgetts. All rights are reserved.
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