At first, when both Apple and Avid pulled out of IBC and then NAB, a number of industry pundits suggested it presaged the doom of those trade events - and was a comment on the shows' weakness as methods of reaching broadcasters and professional users.
But, it has become clear now that it is that segment itself and not the quality of the trade shows that is in trouble. Since the NLE concept was first introduced by Avid, Adobe and some others — now over 20 years ago — it has seen a strong and almost unbroken run of expansion, and despite a few hiccups, this has meant a tremendous income for the major suppliers. It seems clear that such a positive run can no longer be sustained. Video Editing World 2008 shows a slowdown.
There is no question but that the, billion-dollar annual, editing systems space is undergoing a traumatic realignment and it is affecting all the major players. And, creating an extended purchasing decline. This is due to market saturation, excessive competition and a glut of editing system solutions.
It all began with a heating up of the competition between Avid and Apple approximately six years ago. Apple has continued to grow FCP sales and to saturate the market with hundreds of thousands of FCP licenses. And, therefore, Apple continues to dominate the editing seats. Apple says it is now over a million licenses of FCP to professionals.
We would say that is a bit overstated, but clearly there are a lot of units out there. Factoring against further Apple growth is market saturation. What was Apple’s real game? Probably, it was to sell many more Macs to professionals. Now that it has amply succeeded, it may have cooled on serving that space and even have it planning to bail out.
Then there’s the situation at Avid. Already the slump there has caused a change of top management in the past year, up to the CEO level, by a board of directors bent on profitability. Belatedly, Avid admitted that the acquisition of Pinnacle Systems by the previous top managers was ill conceived.
And, we would add, also failed to slow Apple. Could it divest it? Perhaps, that could be part of the plan, going forward. But, the main issues now are: how to get Avid back into a leadership role in a troubled post space and what to do to get there.
Rumours suggest that either Avid is for sale or on the cusp of once again making some strategic acquisitions. Paring down the range of models is in order. Avid may be outpaced at the moment – slightly – by total Apple FCP sales, but it remains the dominant company of the editing market based on its ability to earn prodigious dollars and to some extent its diversification of products.
So, when those other product genres – such as storage, graphics or audio software -- are counted in with the Avid editing genre share, it still looks very formidable as a company. So, we aren’t counting them out any time soon.
We are not in the habit of discussing brand shares per se, but we can say that we see muted expectations over the next few years because of the saturation of editing systems and gradually declining average prices.
That means less money being spent in the editing equipment market overall. If the number of systems suppliers were to remain the same, bad news. But, we don’t think that will be the scenario. Instead, we see this as a likely period of supplier compression, so it won’t need to be less profitable. But, there will undoubtedly be fewer suppliers to choose from.
Douglas I. Sheer is CEO and chief analyst of DIS Consulting Corporation in New York and can be reached at email@example.com.