|The leading columnist on nonlinear systems speaks out...
Will Their Mistake Hurt You?
A Personal View by Bob Turner
In Videography's Macintosh issue I railed against the management of Apple Computer. Since then, press releases continue to support my theme as do several computer magazine editorials. Now I want to rail against the insanity of Wall Street for there increasingly narrow focus on quarterly returns over the long-range strategy that is better for businesses, and the Boards of Directors that listen more to Wall Street than with what is good for the company.
What set me off this time? Aside from the 1001 things I read in the Wall Street Journal, it was the announcement that Curt Rawley is being replaced as President of Avid, and the "media experts" attribute the following reasons (which resulted in a major downturn in Avid stock):
- Curt Rawley has led Avid into an acquisition frenzy;
- Curt Rawley has stopped focusing on it's major profit center (post production) and went after broadcasting;
- Curt Rawley has spread Avid too thin or grew the company too fast and now does not have the resources to maintain it's technological edge in it's primary market;
- Avid spends too much in useless R&D, and the worst charge:
- Mr. Rawley has a created a poor strategy for keeping Avid on top!
HORSE HOCKEY! Before I go off on my diatribe, let me say that I have never "liked" Mr. Rawley. The results of one case of a "poor choice of words", once cost me my favorite client (He apologized, but I still found myself not only without work but several thousand dollars in the red, because of his "mistake"). Clients have told me of Avid speaking poorly of me on several occasions. In addition, I have received many complaints about what were perceived as "strong-arm" sales tactics and also some creative statistics reporting. As head of Avid, these circumstances did not put him in a favorable light, in my eyes. So the fact that he personally is a sacrificial (scape)goat for the Avid Board of Directors does not necessarily bother me.
What does bother me is that (ACCORDING TO FINANCIAL REPORTERS) he has been removed from his position for the previously stated reasons. The truth is that he has designed a very fine corporate strategy. If these financial analysts and reporters are correct, then decisions are being made by people who do not understand our industry as well as they do quarterly reports. This may have as adverse an effect on our future tools as it does on Mr. Rawley.
I think it is a fair statement that Avid is a (the?) leader in non-linear editing technology - especially in the higher-end of the marketplace. I assume that the Board wants Avid to remain there. Mr. Rawley understood that to stay on top, he had to do two things: Keep the products technologically ahead, and prepare the company for new editing paradigms. It was the major paradigm shift, switching from linear, off-line technology to non-linear technology that launched Avid. In this rapidly-evolving marketplace, by the time Avid appeared to win the off-line NLES post production market, the trend was to ON-LINE NLESs (which output a program rather than a list of edit decisions which are then edited on another suite of editing products). Those that did not develop for on-line NL technology soon disappeared. Avid made the jump. While the Avid name kept the company competitive, other manufacturers saw chinks in Avid's armor, e.g. a lack of on-line audio capabilities that an on-line NLES requires. Either Avid could fall behind while it developed a better audio sub-system, or it could acquire DigiDesign, a partner that fit perfectly with Avid's technology. Avid already utilized DigiDesign audio technology, and the company clearly had the talent and expertise to create what was required for on-line audio manipulation. This was an well-designed marriage, even if the result has yet to produce the desired "offspring".
Let's look at another acquisition, Elastic Reality. Why would Mr. Rawley deplete capital on that company? Even industry pundits and Wall Street know that while the high-end of the NLES market is successfully covered by the Media Composer line, Avid has not done quite as well with the lower-end market, where the Media Suite Pro product has competed. Approximately a year and a half ago, it appeared that Avid's lack of success in this lower end of the market might change with the introduction of the Windows-based Media Suite Pro, which was selected as one of the top products at COMDEX '94. Unfortunately, Avid had a problem with the product and did not deliver the system. Today, Real Impact is the progeny of Avid's Media Suite Pro for Windows. What needs to be pointed out is that Elastic Reality is the other parent of this cute newborn. It is the Elastic Reality video driver that gives so much potential to this Windows-based product (which I predict will be the first of a successful family of products in the section of the market where Avid was weakest according to "stock analysts" and financial industry "pundits"). Instead of investing in R&D to hopefully "fix" problems with MSP for Windows, Mr. Rawley made a reasonable investment in a profitable company and that purchase resulted in the technology needed to compete in that market segment that Avid was taking "hits" from on Wall Street.
Speaking about operating systems, Avid has been a leader of "Video on The Macintosh". At a press conference at NAB '93, Avid and Apple announced the investment to be made by Avid on a new PCI-bus, PowerMac-based Media Composer. Avid did make that R&D investment, but Apple would not let Avid even demonstrate a prototype "Tsunami"-based system at NAB '95! Avid lived up to its part in the deal, making the big man-hour investment, and Apple hurt Avid. I guess Mr. Rawley is guilty of believing in Apple, but so are a lot of others. Then to complete the job Apple did on Avid, all PowerPCs became hard to deliver at a crucial time and Avid had products without platforms. This, to me, makes Mr. Rawley's earlier decision to make Avid available on alternative platforms (the PC and SGI platforms) an auspicious decision.
I also believe that Mr. Rawley had the insight to realize that the next editing paradigm is rapidly approaching. This new model involves NLESs networking with VideoServers. To stay in the forefront of post production - especially the high-end of the film and post-production industries, three things needed to be developed: 1) video fileserver technology; 2) development of an extensive new toolset to best utilize this new technological model; and 3) integration with a) graphics compositing, b) F/X toolsets and c) "Digital Audio Workstation (DAW)" toolsets (whether integrated or just networked). We are talking about a LOT of R&D money! Yet, not to make an investment means that Avid would lose the industry lead and the consequences of that are not desirable for the company.
What was Mr. Rawley's strategy for this potential new set of circumstances?
- He partners with Silicon Graphics and gets them to foot part of the bill on developing VideoServer Technology. (Most engineers see the partnering with SGI as a good move.)
- Realizing that the toolset for post-production is the most difficult part of the equation, he: a) develops a partnership with Lucasfilms to develop the high-end, film/video post production toolset, and b) realizes that while this expensive development process may take years, more immediate returns on the research investment can be had by first developing VideoServer technology for the broadcast market, where the toolset needed is less extensive and the immediate demand greater. (Broadcasting had the immediate need of replacing Quad cart machines and similar expensive, high-maintenance technology.) I think this decision to go after the broadcast market was a brilliant piece of strategy. (So do the competitors - who are about 6 months behind Avid trying to do the same thing).
- The integration of the DAW "mix-to-pix" audio toolset could be assigned to the integration of DigiDesign, one of the more popular DAW systems in the industry - a "standard setter" with its present high-end audio workstation products. As to graphics compositing and visual F/X, Avid had already learned that it needed partners such as Adobe After Effects and Pinnacle for its present line-up - that it costs less to partner than try to re-invent the wheel which has some risks in both time invested and probable success. Elastic Reality had a good reputation with an SGI based platform, but offered only part of the solution. Parallax was another propitious match. They had the graphics and F/X expertise - especially on an SGI platform, they understood the needs of an editing/compositing system as witnessed by their Advance product, they were highly regarded by the high-end of the film/graphics/animation industries (ILM and other studios have multiple software packages), and they needed a merger to grow and prosper. Parallax had the skill set Avid needed to develop aspects of the SGI toolset.
The way I see it, Mr. Rawley's strategy was to do what you have to do in a step-by-step fashion to keep on top of this rapidly-evolving, competitive industry.
The CamCutter announcement (which was announced before it was ready and Avid has had troubles delivering what was promised), is another supposed boondoggle by Mr. Rawley according the financial press. The fact is that by announcing the product early, he helped the NewCutter product that was a crucial component to the "Avid Plan". One TV network administrator I spoke with at NAB '95 stated, "I think the new Tektronix Newsworks may have a few highly desirable features that are (so far) missing in NewsCutter - especially in audio manipulation and the ability to edit directly to the timeline from tape sources, but I am not going to commit to a system that is not compatible with the CamCutter or similar product". Not only did the CamCutter announcement buy them a year to add those features, but it also helped Ikegami who partnered with them on the product.
Yes this Q1 '96 is going to be a hard quarter for Avid. It will be a hard quarter for all video manufacturers because few customers make purchases the quarter prior to NAB with all the new product announcements. Yes, Avid spends more on R&D than the nearest competitor grosses. Yes, Mr. Rawley has acquired companies and partnered with others as an alternative to gambling on some R&D. Yes, he has focused on long-term strategies that may be difficult to sustain in the short term. Yes, Apple has caused Avid difficulties in the past year and probably the first half of 1996 as well. (Do you really think it was a mistake to initially partner with Apple, or continue that relationship when Apple fell (temporarily?) on hard times?) What I want the financial analysts to do is tell me where Avid would be in 3 to 5 years if these things did not take place.
Avid IS experiencing a significantly increasing level of competition, but the market is new and wide-open. The manufacturers of NLESs may have penetrated less than 5 percent of the potential buyers. But just as important: there is a high degree of likelihood that today's Avid purchasers will be tomorrow's Avid VideoServer users, and will continue to pay for maintenance contracts that create a steady income for future developments.
I think that there might be several criticisms that could be leveled against Mr. Rawley. I have a few personally, and I have heard more than a few complaints from others. But the strategy that he has implemented is nothing less than brilliant and I am tired of reading trash in the financial section of newspapers by people who do not understand our industry.
Bob Turner is a leading Non-linear editing system consultant and editor. As Contributing Editor, he does the Hands-On NLES reviews for Videography Magazine.