CAN A TV TECH COMPANY SUCCEED WITHOUT NAB?

It’s been a tough year for Avid, the company that pioneered nonlinear video editing and helped spark the file-based workflow revolution in TV production.

Some poorly digested acquisitions and glitches with key products led to the quarterly losses, a sinking stock price, layoffs of 150 staffers and the ouster of CEO David Krall.

But the Tewksbury, Mass.-based company believes it is poised for a turnaround in 2008 with former board member Nancy Hawthorne now at the helm as interim CEO, a heavier emphasis on system integration and an aggressive marketing plan that does not include an appearance at NAB.

More than half of Avid’s revenue derives from professional video and the man charged with growing that hefty segment is Graham Sharp, vice president and general manager of Avid Video.

In this interview with TVNEWSDAY, Sharp explains why it makes marketing sense to avoid the “hellish din” of the Las Vegas Convention Center next April and to offer workflow solutions rather than just discrete products.

And edited transcript follows:

If not NAB, then what?

We’re not prepared to sort of give details on the plan at the moment, but I’ll give you some of the highlights. Let me start with the motive behind the decision.

Two things: we did a customer survey. Most people in the industry know that our customers are not particularly satisfied with Avid because of quality, which we’ve fixed. But a lot of it is also around customer engagement. They feel we’re not listening to them, we’re not talking to them. So park that thought there.

Then there are other surveys that we’ve looked at in terms of the way that customers are buying in the industry and found that there has been a shift to using the Internet to make buying decisions, which is a very critical element. I forget the numbers to be honest, but like 80 percent are now saying that they use the Internet to guide their buying decisions.

Even in the broadcast end?

The first thing people do when you talk to them is look at your Web site to see what services you offer. It’s amazing how the Internet dominates. So we sort of weighed all those things. We did a lot of analysis on the cost per engagement at trade shows like NAB. I’m not prepared to reveal how much we spend and how many leads we got, but, suffice it to say, for the cost per engagement at a major trade show, you could basically take every single customer you spoke to out for a slap-up meal and a bottle of wine each.

So we started asking: Is this the most efficient way to get to customers? Another element is we have a very broad, diverse customer base. At one end, we do multi-million dollar deals with big broadcasters and, at the other end, we’re selling independent producers $1,500 software.

So we need different marketing strategies for different segments. We found that that a significant amount of our marketing budget was just being spent on one event and we weren’t really getting to some of the people we wanted it to get to, like the broadcasters. The customer touch was very unsatisfying because we’d spend an hour shouting at the key broadcaster in this hellish din that has become NAB.

So we sort of added all those things together and decided that we could spend our marketing dollars a lot more wisely with the key driver being to get much closer and more intimate with a customer—you know, talk to them, get more local, etc.

This is not about Avid reducing its marketing spend. In fact, I can absolutely guarantee you that we’re going to be spending more money in marketing next year than we have historically. But we’re going to be spending it in a broader range of vehicles—much more intimate vehicles—that get to the customer locally, deliver a much more gratifying experience where we can have much more one-on-one time with people.

But why not have a smaller presence at NAB?

Well, that’s the challenge, right? We’re thinking of having a kind of a fun customer event and we’re thinking of having some presence in the city to show technology, but as soon as you start doing that, everybody says, Oh, yeah, Avid’s in trouble, the booth’s half the size it was last year. So, if they’re going to say that, we might as well just not be there at all.

Right. They would say that. You said you aren’t prepared to lay out your plans now, but can you give me a couple of examples of how you’re going to get up close and personal with your customers?

The key elements are to, first of all, deliver value in everything we do, dramatically improve the company engagement and do a lot more local events, do a lot more around the Web, get way more involved in our user groups than we used to.

The reason we’re being a bit hesitant is because it’s not just like, OK, we’re not doing NAB and we are going to do this one thing instead. It’s way more diverse than that. It’s much more complete. It’s going to spark every kind of delivery mechanism from the Web to events to advertising to seminars to whatever. It’s multiple things that go throughout the year. We’re going to roll the whole plan out in the early part of the year.

Avid does about $900 million in business each year. How much of that comes out of the TV station community?

We have three divisions. We have a video division, we have an audio division and we have a consumer division, which goes under the Pinnacle brand. Suffice it to say that the video division, which I run, is about slightly more than half of Avid’s total turnover. And within my portfolio—$460 million, $470 million, whatever it is—about half of that is TV stations.

What are your goals for next year? What are the products you want to drive in 2008?

2008 for us is all about delivering complete workflows to customers. As part of our growing up, we went from point products to solutions. We need to focus more on completing those workflows and delivering complete solutions. By that, I mean plugging the gaps in the workflows we have by embracing third parties and also by adding the services that you need to deliver those complete solutions.

Your interim CEO Nancy Hawthorne was saying much the same thing in Boston a couple of weeks ago. Are you morphing into a system integrator company of some kind?

I wouldn’t say “morphing into” because that suggests that we’re walking away from products. We see the way to grow our business is by offering complete solutions that include our products as well as other people’s products and services.

Obviously, we still have a focus on our product business. Look at the transformation that IBM went through in the '90s. It went from being a product company to what people would call a services company. But, guess what, their product is bigger than it was in the '90s because taking the solution-selling approach pulled through more products. So, we are still a product company.

So when you make a presentation to a broadcaster, you’ll have your products, but you will be offering an entire solution?

What we’ll say to the broadcaster is: What problem are you trying to solve? We’ll capture what that problem is and then we’ll offer a complete solution—a one-stop shop. We’ll do everything. We’ll come in, we’ll put it in, we’ll even go as far as managing it for you from our servers.

And this is not something you’ve done in the past?

Well, you can probably tell from my accent that I’m from the United Kingdom and my role before running the division was to actually run the European business. It’s something we started doing in Europe and now want to roll out worldwide.

Hawthorne also mentioned doing such a deal with France24.

In the case of France 24, we were the prime contractor, managing all the subcontractors. In that particular instance, their video server of choice was Grass Valley. So we put the Grass Valley servers in, did all the system integration, everything. So that’s the kind of business that we’re interested in.

We’re interested in making all of the elements work together, making sure that the Grass Valley server talks to the Avid editing system and then making sure that the slow mo that comes off the server can be picked up and edited and sent for play out.

So there’s a whole element of integration, which is way more in line with the way IT companies do software integration rather than the way that the broadcast industry thinks of integration, which is very much the rack stack cabling type.

If I’m a broadcaster, why don’t I go to a third party like NTI, Azcar or Ascent Media?

Well, you could. They are our competitors in this space.

Broadcasting is a cyclical business because of the ebb and flow of political advertising. Does that mean it’s a cyclical business for you where spending is looser in even numbered years than in odd-numbered years?

It’s steadier than that. We get drawn into these discussions with our analysts, who try to ask us what’s the conversion rate of HD, what’s the conversion rate to file-based workflow. I wouldn’t say it’s irrelevant because these are technology drivers, but what you find with most broadcasters is that they have a five- or seven-year capital purchase cycle. They buy capital equipment, they write it off over five-to-seven or whatever their financial model is and then they buy some more.

I’ve been in this industry 24 years. That cycle hasn’t really changed. What happens is that when they come up to renew, they want to buy the latest technology. If the latest technology at the time is file-based workflows then, guess what, that’s what they’ll buy. If it’s HD, that’s what they’ll buy.

You’ve had trouble with some of your software over the last year or so. What’s been the problem and what have you done to fix it?

It’s part of Avid’s growing up, really, and the transition from being a product company to a solution company. The fundamental issue that we faced was we were doing a fair bit of testing on products, but we were then selling them as solutions and we were not doing as much testing in a customer workflow as we should have done.

So we would test individual products and make sure they all networked together, but we weren’t stressing them as a complete solution the way a customer would stress them. We had a lot of what I’d call interoperability bugs where, if you do something on the machine over there, it has some impact on a different machine over here.

That’s the nature of the software systems business. What we’ve done to clean that up is, starting early this year, put a lot of investment and a lot of focus on testing multiple products in the way that our customers use them. And once we did that, we uncovered a lot of bugs. We then immediately went about fixing those bugs so I think we’re at the point now where probably we have the most reliable solutions that we ever had as a company.       

Avid seems to be a classic case of a big high-tech company being nibbled to death by folks who find they can cobble together comparable systems with off-the-shelf software. For instance, some stations feel they can handle editing with Apple’s Final Cut Pro and a good computer.

There will always be the techy guys who put stuff together. My feeling is that in this kind of corporate world that we live in, it’s all about cost reduction, it’s all about efficiency. One thing we are doing is creating benchmarking around production efficiency. We go to a customer and we say, look, we’ll measure how efficient you are. We will then look at how efficient we can make you and we will sell the solution around a service level agreement that delivers that efficiency.

Now the guys that cobble solutions together can’t do that. So it’s all about risk and it’s all about business. If a customer is prepared to take the business risk of cobbling a solution together without a clearly defined outcome, so be it. But if a customer wants a clearly defined cost-saving outcome or efficiency outcome or improved productivity then I’m fairly confident that he will choose Avid because we will be able to prove that business outcome.

So it’s as much a financial buy these days as a technical buy?

A big wave is crashing over our industry and that big wave is IT. The buying habits in the broadcast industry will soon switch to the same buying habits that most IT investments have these days, which are ones of efficiency and return.