Many people “worry” that Apple will abandon their professional applications (Final Cut Pro X, Aperture and Logic Pro X) because they don’t make much money for the company. Ironically, the same argument can be made about Media Composer: it is not core to the company’s primary business . In reality it’s more likely that Avid would abandon (or sell) Media Composer than Apple is to get out of the professional creative tools market.
The obvious question is how can I be so sure that Apple won’t abandon the content creation markets? It’s simply part of the company’s DNA. Apple consider themselves at the intersection of liberal arts and science – something that Steve Jobs repeated regularly and that has been confirmed by Tim Cook.
So, in essence, it really doesn’t matter to Apple whether or not the professional content creation apps are profit centers (although I’m pretty convinced they are), they will always be part of Apple – at least until their DNA changes!
Unfortunately I can’t say the same about Media Composer and Avid. In the most recent financial statements the contribution to consolidated net revenue from “professional video editing products” (these days Media Composer) is down to 11%, dropping about 1% per year. That was also while Media Composer was still $2500. With the new lower price, the contribution to consolidated net revenue will likely be much lower. Based on a simple interpretation of (admittedly) nearly three year old information Media Composer’s revenue will drop to about $26 million a year from around $67 million in 2011. (2011 is the latest 10K filing.)
That’s fine: that’s not where Avid makes its money, which is largely from big video infrastructure projects: the media enterprise. That’s where the company has evolved, but do they need to keep Media Composer?
The same quick back-of-the-envelope calculations that suggest the pro apps are quite profitable for Apple isn’t quite so positive for Media Composer. While the costs of developing Media Composer have dropped after the recent (complete) rewrite over many releases, they’re still very high to be amortized over only around 25,000 seats a year. (It’s probably lower as upgrade revenue isn’t split from new sales and I’ve assumed all new sales.)
So, while Final Cut Pro X is almost certainly a profit center for Apple – although a small one in their context of profits – I doubt that Media Composer is a profit center for Avid. With the new lower price it’s almost certainly not profitable for Avid as a product line.
Fortunately for the passionate users, Media Composer has strategic value to Avid (as Final Cut Pro X does to Apple) and I seriously doubt that it’s going to go away, particularly now that Avid’s financial position is improving. However, I do think Apple are more committed long term to Final Cut Pro X than Avid is committed long term to Media Composer.
I also don’t think either are going away any time.