On ValueInvestorsClub.com, there is a writeup on AVID which argues that 4K will drive the adoption of Avid products. 4K basically refers to film and/or video formats that have four times the pixels than HD formats. However, the reality is that Avid products cannot output at 4K resolution. Currently, a subset of Avid users are forced to use another product for their 4K conform/online editing/finishing needs (e.g. Resolve, Autodesk Smoke, etc.). If the project must be delivered in 4K, current Avid products cannot do the job.
- Avid’s high-end DS system supports 4K. However, this product line has been end of lifed (August 2013).
- Avid’s Media Composer family does not support 4K output.
Final Cut Pro X’s stumbles
The VIC writeup states: “Luckily for Avid, Apple had some recent stumbles with an update to Final Cut Pro, and customers have really soured on it.” The actual story is a little more complicated.
When Final Cut X (FCX) was originally released, it was completely unusable for a large portion of professional users (this market is extremely small and generates very few sales for Apple). These users needed two key features:
- CMX-style EDLs. The EDL, or edit decision list, is a format that allows a project to be transferred from an “offline” editing system to an “online” editing system. The format is so old that EDLs used to be stored on floppy discs. The high-end professional market has esoteric needs.
- The ability to work with SDI hardware cards.
FCX removed both features. On top of this, Apple bungled the launch by announcing that old versions of Final Cut Pro would cease development and would no longer be supported. (It would later reverse course and continue to offer technical support for the previous version.) High-end professional editing systems were effectively end of lifed without any advance warning. This was poor execution on Apple’s part as Apple showed a complete misunderstanding of the high-end professional market. Apple should have given its users advance warning.
However, subsequent software updates to FCX had added these key features back in (*the use of third party tools may be required). FCX is once again viable for high-end professional use. Weirdly enough, FCX will likely overtake Avid in high-end professional markets despite alienating these users. FCX supports 4K while Avid Media Composer does not.
As well, the high-end professional market no longer matters to either Avid or Apple. Avid’s Media Composer sells for four figures. Previously Avid’s bread and butter was in selling high-end professional systems for five and six figures. Due to the very small size of the high-end professional market, that market hardly affects Avid now that it is selling Media Composer for four figures ($1300 for Media Composer, $400 for support, $749 for the Symphony add-on, etc. etc.). Final Cut X sells for $300.
The bottom line
In general, the lesson is that few people understand the industries that they analyze.
*Disclosure: Pretty bearish on AVID but I have no position in the stock at the moment.