The present and future of post production business and technology | Philip Hodgetts

Archive for March 2005

The acquisition of Pinnacle will greatly strengthen Avid’s Broadcast video offerings, the area of their business that has been strongest in recent years but will create challenges in integrating product lines and cultures. It is a move that brings further consolidation to the post production business.

Pinnacle has been in acquisition mode for most of the last five years acquiring, among others, Miro, Targa, Dazzle, Fast and Steinberg (sold on to Yamaha recently). It has a diverse line of products in major product lines:

  • Broadcast Tools – Deko On Air graphics products (Character Generators) and MediaStream playout servers;
  • Consumer editing software and hardware – with 10 million customers;
  • Professional Editing – The Liquid product line acquired from Fast; and
  • Editing Hardware – Cinewave and T300 based on the Targa acquisition.

Pinnacle has achieved nine Emmy Awards for its Broadcast product lines.

There will be conflicts and opportunities for Avid. It presents Avid with a new opportunity to create a consumer brand and Avid CEO David Krall has announced that a new consumer division will be formed analogous to the M-Audio consumer audio division acquired last year. M-Audio is the consumer parallel to Avid’s Digidesign professional division. The acquisition also consolidates Avid’s position supplying the Broadcast markets, making the company more of a "one stop shop" for a broadcast facility. There is definitely engineering work to be done on integrating the two technology lines, but there are no particular challenges there, and savings are to be made in streamlining sales and marketing. In broadcast there are only pluses for Avid.

Consumer

Bringing the Avid brand into the consumer market has a slight risk of diluting the Avid editing brand – if consumers edit on "Avid" what’s special about professional editors? However, by carefully managing product brands over company brand, as has been done with M-Audio, there should be an opportunity to bring some of those retail customers up to Xpress or Adrenaline products as their need grows, similar to the way Apple have a path for their iMovie customers to move up to Final Cut Express or Final Cut Pro.

Hardware

Avid and Pinnacle have had a long relationship on the hardware side – Targa supplied the first boards Avid used for video acquisition and the Meridien hardware was designed to Avid’s specifications but manufactured by Pinnacle as an OEM. Whether Avid has any use for the aging T3000 hardware product line (like Cinewave based on the Hub3 programmable architecture that was the primary driver of the Targa purchase) is debatable: Avid have embraced the CPU/GPU future for their products and are unlikely to change course again.

Cinewave

It almost certainly spells the end of Pinnacle’s only Mac product – Cinewave. Rumors were spreading independently of the Avid purchase that Cinewave was at the end of its product life, possibly spurred by changes coming in a future version of Final Cut Pro that no longer supported direct hardware effects. Regardless of whether or not there was any foundation in that rumor, Cinewave is an isolated product in that product group and based on relatively old technology. It is a tribute to the design flexibility and engineering team that essentially the same hardware is still in active production four years after release. Whether the product dies because it’s reached the end of its natural life, or because Avid could not be seen to be supporting the competing Final Cut Pro, it’s definitely at an end.

Liquid

There is, however, one part of the integration that simply does not fit: Pinnacle’s Liquid NLE software. Avid are acquiring an excellent engineering team – the former FAST team out of Germany – but the two NLEs have no commonality. Integrating features from one NLE into another is not trivial as code-bases are unlikely to have any compatibilities, and attempting to move Avid’s customer base toward any Liquid editor is unlikely to have any success at all.

Avid could simply let the product line die. The Liquid range has not exactly sold like hotcakes. This scenario would bring the best of the features and engineers into the Avid family and we’d see the results in 2-3 years as engineering teams merged.

They could, of course, leave Liquid alone – set it up as a division within the company and leave it be. Avid have done that with Digidesign, Softimage and M-Audio. No radical changes and slow integration of technologies where it makes sense. Liquid have probably taken few customers from Avid to date – few Composer customers have moved to Liquid. Instead, Liquid has acquired new NLE customers or people moving "up" from other NLEs. Liquid’s strongest customer bases are in small studios and in broadcast markets.

Even though Avid have let Digidesign and M-Audio compete, even although there is some overlap, it’s hard to imagine keeping a full product line that directly competes with the flagship products – on cheaper hardware at lower cost. Hard to imagine, but not impossible. It would be the most consistent behavior based on past acquisitions but one that would require a delicate balancing act to retain the new customers Pinnacle are bringing to the fold, without risking cutting into the more profitable Xpress, Media Composer and DS products.

Transaction

The transaction values Pinnacle at $462 million based on Avid’s closing price yesterday and will be handled by a combination of cash and shares. Avid will pay about $71 million in cash and issue 6.2 million new shares to the holders of Pinnacle stock, who will then make up about 15% of Avid’s shareholders. The transaction has been approved by the Boards of both companies but must still be approved by regulators and shareholders and is not expected to close until the 2nd or 3rd quarter of 2005.

The companies expect savings in regulatory costs, marketing and sales. We can expect little to change in the short term except probably, some volatility in Avid’s stock price as people try and work out what it all means.

NAB is going to be interesting this year.

Perhaps it’s my background in video production and my strong desire to match media and message, but I’ve been seeing some incredibly inappropriate ways of delivering a message “visually”. The specific example that prompted me to write is this one . The piece is actually a very interesting pseudo documentary looking back at how media changes – perhaps its content is blog-worthy some other time. What annoyed me about it was that it was being used as an example of a “good use of Flash” when in fact I thought the visuals were so poor that, in all probability, the choice of a visual medium was a mistake: if you don’t have visual content, don’t do visuals is a good rule of thumb, I think.

Another example of, imho, really lame visuals used to waste time and attempt to make a silk purse out of a sow’s ear is this marketing hype. Again, Flash used but poor quality visuals (blown up way too big), super slow pacing and a message that, to me is cloyingly saccharine. (On the last point I am probably alone – it’s been very successful as a viral marketing piece so it must appeal to a lot of people.)

What bothers me about these pieces and about a lot of podcasts is that they are incredibly inefficient. One regular podcast I once listened to (on the topic of Final Cut Pro et al) takes about 20 minutes a week to listen to, for what would be a 3 minute read on a web page because the podcaster simply reads a script (or seems to be reading a script). OK, it could be listened to during a commute or at a gym where the 20 minutes wouldn’t be an imposition but surely, if you’re going to do an audio medium it should be produced as an audio medium?

Ditto visual medium – I always have hated making a “video” for a client that was essentially an audio program that had to have visuals forced onto it. (Like the piece at the head of this article.) Have we forgotten the imaginative power of radio? I’ll bet the movie version of War of the Worlds due out soon has none of the impact of the original 1938 broadcast. There are great radio documentaries produced that would make awesome podcasts, instead we get lame “read my script” or “come into my office and chat” podcasts that have zero production value. The Media 2014 example has great writing, the audio production is excellent and the visuals (which probably took the most time) add very little, imho.

This is what worries me about vlogcasting – even basic video production requires some time – more time than most people want to put into a blog or podcast, so what’s going to happen? Gigabytes of bandwidth occupied by badly lit, poorly edited shakey-cam that is virtually unwatchable? It’s already happening: download the Ant vlogcasting client and try and find something worth your time watching. Little evidence of strong writing or great production there – at least in what I’ve found (and if you find something great, ping me on it so I can share the excitement).

Where’s this going? – well, there’s still going to be a role for production skills for some vlogcasting, particularly if we adopt channels of information models via subscription. (The “RSS, Vlogcasting and Distribution Opportunities” blog entry is back, after editing.) It’s another example of how production specialists will need to adapt, and advise clients on what the most appropriate distribution methodology is. Just having basic production skills won’t be enough, but they will be a marketable commodity and profitable when part of the full service we offer customers on their communication needs. Also necessary will be the judgment and sense to tell customers that they don’t need “a video” but rather a website or brochure will work better for them. Savvy people will have those skills as well – if not personally, within their network.

Earlier I wrote about podcasting and the rapid uptake. Well, there’s every indication that video podcasting, of some sort, will follow. I think this is a tremendous opportunity for content creators because podcasting isn’t about broadcast but in fact an opt-in subscription service. In any discussion of these subjects it keeps echoing in my mind that RSS – is really simple subscription management (and yes, conditional access is possible) and Blogs.

To draw some parallels with traditional media: blogs are the journalism and writing and RSS would be the publishing channel (the network). Blogs and podcasting are bypass technologies – they bypass traditional channels. If pressed for an explanation for the truly astounding growth of podcasting and blogging to a lesser degree, I would hypothesize that they are to some degree a reaction against the uniformity of voice of modern media, where one company owns a very large proportion of the radio stations in the US (and music promotion and billboards) and news media is limited to a half dozen large company sources with little bite and no diversity.

The “blogsphere” (hate that word but it’s in common use) broke the CBS faked service papers during the last Presidential election campaign, and even in the last few weeks has been instrumental in the firing of a high level CNN executive and revealing the “fake” White House journalist and his sordid past. Collectively at least this is real journalism – and more importantly, it’s investigative journalism of the sort that isn’t done by traditional news outlets.

Blogging is popular because it’s easy and inexpensive. Sign up for a free blog on a major service, or download open source blogging software like WordPress (like I use) running on your own server. In a few minutes your voice is out there to be found. In my mind it harkens back to days of Wild West newspapers where someone would set a printing press and suddenly, be a newspaper publisher. But unlike a newspaper, blogs have an irregular publishing schedule. You can bookmark your favorite blogs and check them (when you remember), or you can be notified by your RSS aggregator application when there’s a new post (the URL for the RSS feed for this blog is in the bottom right of the page if you want to add it to your favorites).

Podcasting is easy and inexpensive unless your podcast becomes popular – then the bandwidth expense becomes considerable. Podcasting is a superior replacement for webcasting or streaming that does not have to be in real time. It’s produced and automatically delivered for consumption when it suits the listener. Those are the key attributes that, in my opinion, contribute to its success. There’s no need for a listener to tune in at exactly the time it’s “broadcast” – listen or miss it – or even to remember to visit some archive and download. My own experience on DV Guys totally parallels this. DV Guys has a nearly-five-year history as a live show (Thursday 6-7 pm Pacific) but has always been more popular through its archives pages.

Shortly after the advent of podcasting we set up a podcast of the live show available by the next day. Since then DV Guys has enjoyed more listeners than at any other time in its life. People tended to forget to visit the archives site weekly, or every second week. Even visiting every couple of weeks was too much of a commitment for a show that, while entertaining and informative, wasn’t at the top of everyone’s “must do” list. But with a podcast DV Guys is ready, available whenever a listener has a few moments – at the gym, during a commute, while waiting for a meeting or at an airport. DV Guys, like most radio, is consumable anytime. Importantly, it puts the listener in control, not the creator, of the listening experience.

Podcasting audio has another advantage – it’s easy to create. Almost as easy as blogging but not quite so easy. There are, consequently, proportionally fewer podcasts than there are blogs, because of that higher entry requirement. Even then, most podcasts are simply guys (mostly guys) talking into a microphone from a prepared script, or a few people together talking around a microphone. More highly produced podcasts are rarer.

The simplicity of publishing a blog means that it can be published for as few as half a dozen people – in fact there are people looking to use blogs and wikis as part of a project management tool. Podcasting can reach thousands but in broadcast terms that’s a tiny niche market.

Here’s a new truism – almost all markets are niche markets. What these new publishing models do is aggregate enough people in a niche to make it a market. There’s a lot of money to be made in niches. Particularly in the US, where there are a multiplicity of cable channels, small niches in the entertainment industry can be aggregated with appropriate low cost distribution channels, into profitable businesses. There are a lot of niches that are too small to be have their needs met by even a niche cable network, so cable channels get subdivided, or there’s no content for small niches.

RSS, low cost production tools and P2P is your new distribution channel. This is the other side of the production revolution we’ve been experiencing over the last 10 years, when the cost of “broadcast quality” content has dropped from an equipment budget of $200,000 upward (for camera, recorder and edit suite with titling and DVE) to similar quality at well under $20,000 (and many people doing it for under $10,000). At the end, a computer (or computer-like) device will be one of the inputs to that big screen TV you covet and you’ll watch content fed via subscription when it suits. If it’s not news, it can come whenever, ready to be watched whenever.

The relative difficulty of producing watchable video content will further limit the numbers (as happened from blogging to podcasting) and the current state of video blogs will make experienced professionals cry. That should not stop you planning for your own network. Instead of “The Comedy Network”, the “Sci-Fi Network” etc, prepare for a world of the “The fingernail beauty network” or “Fiat maintenance network” or “Guys who like to turn wood on a lathe network”, et al. Content could be targeted geographically, or demographically. There are very profitable niches available. Two that I’ve been involved with, at the video production level were for people who like to paint china plates (challenging to light) and basic metalwork skill training. There’s no need to fill 24 hours a day 7 days a week with this network model. When new content is produced, it’s ready for consumption when viewers want. We do something similar with our Pro Apps Hub where we publish content from out training programs piecemeal, as it’s produced, before we aggregate the disc version.

Note that I am not, basically, talking about computer-based viewing. My expectation is that software and hardware solutions will evolve into something usable as a home entertainment device. “TV” is a kick-back, put your feet up experience, video on the computer is a lean-forward pay attention experience. While both could be used for the end target of this publication model, what I’m really talking about is content for that lean back experience.

Now, I don’t expect “Hollywood” (as a collective noun for big media) to embrace this model early, or even ever, but that doesn’t mean it’s not going to become viable. The most popular content will probably still go through the current distribution channels, however they evolve. It also doesn’t mean we’ll be restricted to small budget production either. It could (should) evolve models where the viewers were in much closer touch with the producers, without the gatekeeper model.

For example, the basic skill training video series I produced back in Australia was niche programming. There were, effectively, 75 direct customers in the small Australian market (smaller, I should point out, than California alone). No customer or central group had money for production but each one had $150 – $300 to buy a copy of a product. Since these were very simple productions requiring a small crew and being produced in a regional city, each project had about a 30% profit margin. If the same proportions applied to the US market, the budget would have doubled but the profit would have quadrupled or more.

Take another more current example. Star Trek Enterprise has been canned but the last season had 2.5 million viewers an episode with a budget of $1.6 million an episode. If each viewer paid 75c for the episode, delivered directly to their “TV storage device” (somewhere between a Media PC, Mac Mini or TiVo) then the producers would turn a profit of $200,000 an episode or 12.5% margin on what they were getting from the network. At 99c a show, that’s nearly 50% more revenue than was coming from the network. And the audience isn’t limited to just the US market – that same content can be delivered to Enterprise fans anywhere in the world. As the producer I could live on 13 episodes at $200,000 profit above and beyond previous costs (which presumably included some salary and profit). Moreover, producers wouldn’t be locked into rating cycles and the matching boom/bust production cycle.

It doesn’t matter if each high quality (HD if you want) episode takes 20 hours of download “in the background”. When it’s complete and ready to watch it appears in the play list as available.

Bandwidth would be a killer in that scenario – even with efficient MPEG-4 H.264 encoding, a decent SD image is going to require 1-1.5 Mbits/sec and HD is going to want 7 or 8 Mbits/sec. Assuming 45 minute episodes (sans commercials) that’s around 700 MB an episode per person, or in HD about 5 GBytes, per subscriber. Across 2+ million subscribers that’s going to eat my profit margin rather badly without another solution. There are technologies in place that could be adapted.

Assuming the bandwidth challenge is resolved. What’s left?

Two things mostly: the device that stores the bits ready for display on the TV and software to manage the conditional access (you only get the bits you bought) and playlists. Something like a video/movie version of the iTunes music store. We’ll need to wait for a big player like Apple or Sony to wield enough muscle for that, but in the meantime, we see the beginning with Ant but as a computer interface and without the simplicity and elegance of a Dish/Direct/TiVo user interface. But it will come.

Will you have your network business plan ready? I’m working on mine already.

Wired has another take. Videoblogging already has a home page and for a bit of thinking on the flip-side, how this might all work for the individual wanting to aggregate a personal channel, Robin Good has a blog article on Personal Media Aggregators in one of my favorite (i.e. challenging) blogs.

March 2005
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