The significant surge in content, as well as the increased number of channels, platforms and devices that content can be viewed on, has created new challenges for media and entertainment companies, according to Avid Technology CEO Louis Hernandez, Jr.
“You have this massive explosion in content creation,” he said Jan. 18 at the annual Needham Growth Conference in New York. “In the last 10 years, on a per-capita basis, we have at least 400 percent more choices per person than we did 10 years ago,” he said.
He pointed as an example to the huge number of shows that Netflix has said it plans to create this year and the massive amount of money it intends to spend to acquire content, saying that plan “dwarfs the top five media companies combined.”
The “massive influx of new choices” that viewers have provides both good and bad news, he said, explaining: “The good news is if you’re in the content creation business, you’re very busy. The bad news: competition has intensified significantly. What’s changed even faster is the rate at which we consume media – how we consume media [via multiple] formats, devices, channels…. The good news about this is you can reach audiences in more different ways. The bad news is most of these new channels to reach audiences are either less attractive or unknown, and in no case are they more attractive today…. The economics behind each of these is worse.”
And that new content isn’t all just cat videos. The consumption of rich media content specifically has grown 50% per capita in the past 10 years among viewers, Hernandez said.
“The challenge is if your job is to create 400 percent more content and 1,000 percent more ways to consume it” and all you have is “a 3 percent budget increase, that is a reality that our clients are facing” globally at media companies, he said.
What it comes down to is that media companies must now create the best, most compelling content they can using the latest and greatest tools –including augmented and virtual reality, as well as editing tools — to make more engaging stories that will allow them to be more competitive, he said. At the same time, they need to reach more people by making content available via more channels and devices than before, and they’re competing with companies in many cases that have investors who can afford to lose money while acquiring viewers, he said. Meanwhile, media companies must also spend less money than they have in the past to do all that in many cases, he said.
“That is the challenge that Avid has set out to solve through the Media Central platform,” he said, noting his company’s cloud-enabled media workflow platform can run on premises or via the public or private cloud.
Avid now provides services to about 140 companies in all, he told the conference, noting it operates in a “very large market that’s undergoing significant transition today.” Every day, after all, “there seems to be a new headline about the changing media landscape,” he said, pointing to companies recently in the news, including Disney with its plan to purchase a large percentage of 21st Century Fox’s film and TV assets for $52.4 billion.
Also, “everybody’s participating and getting interested in the media segment and it’s being very disruptive to our heritage clients,” Hernandez said.
But Avid has “the right products at the right time” for this growing media market and its management team has provided “very consistent execution” over the last five quarters, CFO Brian Agle told the conference.
Avid realigned is “cost structure to drive growth and profitability,” Hernandez pointed out, adding the company also “shifted significantly to a recurring revenue model.” Only about 13% of revenue was recurring before he joined in 2013, but now the company has 70-80% revenue visibility going into a quarter, he said.
Avid is “focused on profitable growth” now, shifting its concentration from some “very strong but low-growth areas that were very mature” to add applications to participate in higher-growth areas, and there’s still opportunities to participate there, he said. In the process, Avid has “expanded our addressable market,” he said.