Production Expert

View Original

Avid's CEO Jeff Rosica Speaks About His Plans For Avid

Last month, Avid’s CEO Jeff Rosica was interviewed on a podcast, which uncovered more about Jeff’s philosophy of running Avid including who they perceive their customers are, their changing business model towards software subscription and Software as a Service, how they are changing their sales and marketing away from large events and trade shows, and what is the most misunderstood aspect of Avid.

About The Interview

In this article, we are going to focus on some excerpts from what was an hour-long interview. If you want to watch the full interview then above is the video or you can listen to it on Apple, Spotify, or Podbean.

We want to make it clear, right at the start, that we have not been asked by Avid to write this article, this is not the way we work here at Production Expert. We came across this interview in our research and realised that there were points of interest for us as users and Avid customers that we felt it was appropriate to share with you and also to dig a little behind the statements to see from what is in the public domain, to see how Avid, is changing its focus since Jeff became CEO in 2018.

This podcast interview followed Avid’s 2nd quarter earning announcement and came from Investment Advisers ‘Cove Street Capital’ as part of their Compounder series in which they pose the sort of questions they would ask as part of their diligence process. Normally we wouldn’t cover investor related news, but in this case, the interview by Ben Claremon revealed some interesting points on how Avid operates and the changes Jeff is making, what we felt were worth sharing, along with some of the details from Avid’s Q3 2021 earnings announcement, which were only released earlier this week.

In the extracts from the podcast interview by Cove Street Capital, we have left the timing in so you can see where the clips were taken from and you are to hear the excerpts in context if you wish.

About Jeff Rosica

Jeff Rosica was appointed Avid’s Chief Executive Officer (CEO) and President in February 2018. Jeff joined Avid as Senior Vice President of Worldwide Field Operations in January 2013. In January 2016, he was appointed Senior Vice President, Chief Sales and Marketing Officer and, in December 2016, was appointed President. From early 2002 until joining Avid, Jeff served in various capacities with Grass Valley, LLC, a broadcast equipment supplier, most recently as Executive Vice President, Chief Sales and Marketing Officer. Prior to that, Jeff was Vice President and General Manager of Phillips Broadcast from 1996.

When Jeff was appointed CEO and President, he said…

“I am honoured and excited for this opportunity to lead Avid through this important moment in the Company’s history. The outlook for Avid is strong, and I look forward to working with the leadership team, the Board and our incredibly talented employees as we execute on our strategic priorities and continue our journey to be a best-in-class company and leader in our industry”.

With Nancy Hawthorne, Chairman of the Avid Board of Directors saying…

“Jeff’s deep experience as an industry expert coupled with his impressive knowledge of Avid’s business and strategy make him the natural choice to lead the Company”.

In September 2018 at IBC in Amsterdam, there was a very different event held by Avid, which showed that his style and philosophy would be very different to that of his predecessor. It was interesting that for this presentation Avid chose a more informal setting, with no technology, no Powerpoint presentations, no slick videos, just a passionate man wanting to share his vision for the future. Throughout this article, we will jump back to what Jeff had to say, just 6 months into his appointment as Avid’s CEO. At IBC 2018, Jeff acknowledged that there was already a massive shift and disruption going on across the industry that is significantly impacting the business of Broadcast, Media & Entertainment…

Our industry is already many years into the disruption—it’s the “new normal”. Attracting or retaining an audience in a shifting viewer landscape is putting pressure on participants and the industry is experiencing new levels of business complexity, the likes of which this industry hasn’t seen before. This shift or disruption is not just impacting the business aspects of media but also a profound impact on all operational functions, and how production teams and creatives get their best work done. The industry wants more efficient workflows to get work done faster, easier and with less resources with better tools with much more powerful collaborative capabilities.

Who Are Avid’s Customers?

During this podcast interview, picking up on the “massive shift and disruption going on across the industry”, Jeff was asked whether in a new world where anyone can take videos on their iPhone and edit them using free software, has Avid tried to pivot to cater to the prosumer or maybe even the amateur user?

[00:09:36] Jeff Rosica: The way I would talk about Avid is that we're not trying to be the top brand in prosumer or consumer space, we're really about serious media creators. Now that could be someone who is aspiring. That can be someone who's just starting out. That can be someone who is, making music from their basement or their garage. But it's people who are serious about their craft, serious about, wanting to make music or making a video or tomorrow's feature film. And so we are focused on serious media creators, whether those are individuals or they're companies that are in the business of making media, but it's not just your typical Disney's or Netflix and people like that. We focus on people where this is a serious craft that they're trying to pursue again, whether it's for personal reasons or for business reasons.

There's been a lot of change in the way next-gen creators create their content. And so for us, the way we adapt is making sure our tools evolve and that the way that we evolve our company, the way people want to create content, it really is about helping create professional tools for serious media creators.

In 2018, at IBC, Jeff explained that the user base in broadcast and media was changing; younger users with different expectations and demands; open, mobile-first, app-led world. Back in 2018, he acknowledged that Avid needed to think through this more and act differently and we need to work together in new ways…

The industry still very fragmented with way too many technology suppliers vying for their share, with significant vendor complexity and high costs of integrating, deploying and maintaining so many disparate systems.

Avid’s Response To Competition

Back to 2021, and later in this podcast interview, Jeff was asked how Avid handles the competition under his leadership, especially the new start-ups and agile ‘ankle-biters’, which if you let them get bigger and bigger can creep up and suddenly, you have a real competitor.

[00:12:23] Jeff Rosica: People ask me what keeps me up at night? Not big competitors. I don't worry about Adobe every day. I worry about those little as you call them ankle-biters, the people who are getting innovative and they've got a small team innovating.

The requirements around our customers have changed drastically in the last few years, and they've really accelerated during the pandemic. So making sure that you're listening to your customer base and making sure that you're keeping a close eye on the competition and innovating.

You've gotta be willing to take a hit on the revenue line of a product that's been here a long time to build for the future. You gotta do it with intelligence and with timing, but I don't think you should be afraid of going after, new young things that are gonna replace the oldest things.

Jeff was asked about balancing innovation with the costs of bringing a product to market as the perception was that “engineers called the shots”.

[00:15:21] Jeff Rosica: First of all, engineering and innovators are important. You gotta be solving something right? Innovation for innovation's sake is not important. Innovation that's going to solve a problem for a customer are going to enable an opportunity for a customer that's what's important. And if you can make the best connections that are out there, you're going to get rewarded from your customers.

One of the ways we've done that is I've implemented much more business planning, much more strict ways that you look at, where are we going to spend R & D dollar. The other thing though, is that you've got to create some healthy tension, you want voices at the table to discuss and potentially disagree so that you can get to a better place in the end.

The Ongoing Cottage-isation Of Our Industry

In 2018, in Amsterdam at IBC, Jeff reiterated that the demands from Avid’s customer base are for lower costs, simpler integration, faster deployment and easier to maintain systems and technical environments. As a result Avid has been taking some unique approaches in how we leverage technology, design our products, and think about our customers and users.

We need to carefully consider these market dynamics and trends in our strategy; working in unique ways with our customer, user and partner communities to ensure we’re aligned and properly prioritize our efforts to best meet their needs.

To round up his informal style of presentation at IBC in 2018, Jeff concluded…

Avid’s unique platform approach, and push for a fully open ecosystem behind it, is an important part of our strategy. Our strong partnership with Microsoft combines the unique, but complementary strengths of each company to create an industry-leading approach to revolutionize media workflows and lead the industry into an intelligent cloud world.

In this 2021 podcast interview, the interviewer picked up on how customers’ needs have changed and how that has been accelerated during the pandemic and asked Jeff what he is doing to evolve and to serve those needs even better.

[00:17:23] Jeff Rosica: Cloud-enabled SaaS business models, where you don't have to buy the hardware and you're basically renting the hardware and renting the software, that's been there a long time in a lot of industries, but for us in our industry that was starting to really mature.

We're moving to more of a gig economy where you've got really the gig workers contributing more and more. They've always been a part of our industry, but you saw it really even grow in their role in the industry. So the role of freelancers was important and that's been growing.

Jeff went to say that it isn’t just about the changing role of freelancers, what we have called the cottage-isation of the industry, it’s also about remote working where the people you want to work with aren’t the same town, or country or continent…

I don't want to necessarily work with a person in Los Angeles or in New York or in London where I am. I want to work with somebody in South Africa, or I want to work with somebody in Singapore. How do you do that? Or maybe, I'm in London, but they're in Cambridge and I don't want them necessarily to have to live in London. . What the pandemic did literally almost with a light switch is everybody had to be working from home within hours, days, weeks.

And I think what people realized is it worked, we still made that song, we still got that content on Netflix, we got it on the air. So I think that it taught people, some lessons, to try new things quickly and a lot faster than if they would have done it, at their own pace.

I want [to be] able to work from anywhere, work with anyone and work on any content and they wanted to deploy any way I'd like, whether it's on-premises in the cloud, hybrid, whatever. I think that is now a permanent fixture in our industry, for sure.

The Change From Perpetual To Software Subscriptions

Not unsurprisingly, the subject of SaaS (Software as a Service) came up in the interview and Jeff was asked to talk about Avid’s transition from perpetual licenses and hardware to a business model that is much more focused on SaaS which includes the thorny issue, for some, of software subscriptions…

[00:20:03] Jeff Rosica: It's a big journey. I'd say the good news is that Avid is well into the journey now, but we're still in the early days of the journey ourselves. It's been a very successful part of our business. It has helped us transform the financial stability of the company and the trajectory of the company financially. But it's a big piece of work. I'd say we're probably a quarter of the way in, we've got a long way to go and a lot of opportunity for our company going forward, but it's a transformation at all levels. It's a transformation of your tech stack. It's a transformation of your business models. You have to go through a period of change when you're going from an upfront model to an ‘on-demand’ or a ‘pay-as-you-go’ model and you've got to get customers through the journey and their perspective on how they want to buy things and deploy things.

It's something that in the end is a win-win for everybody. We found that it becomes a win for our customers because they get more flexibility in how they buy and how they deploy and what commercial models that they utilise. It's a win for the company, obviously because it's a recurring model and a more stable, recurring model because as the company gets more towards the recurring revenue and less on the perpetual or the one-time kind of purchase model, it's a real benefit to the company's financials.

So what do Avid’s financials look like?

Let’s start with a table from Avid’s Q3 2021 Results presentation. It shows the revenue for each quarter for the last 18 months…

See this content in the original post

Let’s take a look at these in graphical form.

We start in the top left with the subscription revenue, which is the top line of the table above, which shows a growth in Avid’s revenue from Subscriptions as a whole and we can see a steady growth until the 2nd quarter of this year. The good news is that it would appear to have been a blip because the Q3 results are the best yet, showing a continuing growth in the revenue Avid gets from software subscriptions.

In the bottom left, we can see subscription revenue in purple and Perpetual revenue in green. The takeaway from this is that subscription revenue was double perpetual revenue in Q3 of 2020 rising to over 5 times in Q3 of 2021. Whatever you may think of the option to pay for Avid software like Pro Tools on subscription, it is clear from these figures that Avid is benefiting from increased revenue and with that, comes the option to spend more on development, secure in the knowledge that the revenue will keep on coming. The other takeaway is that these ratios, would explain why Avid is offering Inner Circle Rewards of over $1600 worth of free software, but only to people with current subscription plans and not to people with perpetual plans.

Moving to the top right, this puts subscription and maintenance revenue together. Maintenance revenue as Francois Quereuil who is now Vice President Audio, Product Management, told us in his interview earlier this year is the income from support and update plans, taken out by perpetual license holders. What is interesting here is that maintenance revenue is still higher than subscription revenue and doesn’t seem to be dropping either.

The graph on the bottom right shows the revenue from the sales of hardware and integrated solutions, a significant part of which are large scale storage solutions.

Coming back to subscriptions, what about the breakdown of the subscriptions by product. The next graphic shows the number of subscriptions of Pro Tools, Media Composer, Sibelius and Media Central.

This graph shows the number of Cloud-Enabled Software Subscriptions and now includes the actual number of paid and active seats under multiseat licenses.

You can see that in the last quarter of 2020, the number of Pro Tools software subscription plans broke through 200,000, with Pro Tools taking the lion’s share and it remains the fastest-growing subscription product line Avid has. Avid has also reported that there was a net increase of around 19,300 paid subscriptions in the third quarter of 2021, with a 35% year on year growth. On the storage side, Media Central Flx subscriptions, which started in the last quarter of 2020 have grown to around 9000 which is a 22% growth quarter on quarter.

All of this shows why Avid is so keen to promote Software-as-a-Service products over hardware products.

The Future Of Trade Shows And Large Events

Towards the end of the interview, the issue of marketing came up and whether large trade shows like NAB, or IBC, or events like Avid Connect, which brought together Avid’s staff and customers will still be a core part of the Avid sales and marketing strategy in the future…

[00:40:20] Jeff Rosica: I've been asked that a lot, especially in the industry, I'm asked that. And I'm one of the people that took a pretty hard stance that even in 2021, we were not going to go to major trade shows.

In fact, I said it was premature for us to be talking about gathering tens of thousands of people together in a hall and jamming them together and thinking that everything's going to be okay because, the situation with the pandemic, isn't necessarily a straight line to recovery.

If I look at everything from how salespeople and even management crisscrossed, the world getting deals done, or how we went to these big trade shows, they were an outsized part of the investment we made in sales and marketing costs but I think the mix is going to change a lot because we learned a couple of important things during COVID. One is that content marketing and digital marketing and virtual type of events can be very efficient and very cost-effective.

I say, this as one of the CEOs of one of the bigger brands in our industry. This has permanently changed our industry. I don't believe big trade shows, even things like Avid Connect are never going to be the same. This is our big annual customer gathering but it's still only 1500 people and if we really want to get to a wider market. We need to get to 10,000 customers or 20,000 or a hundred thousand people or a million people, depending on the market that we're in.

Over the course of COVID, we've learned how to do more virtual events and how to engage in our community wider than just this big glorious event once a year in Las Vegas. I think our ACA board has said that they'd rather not do one big event, they'd rather do face-to-face events, they would rather do smaller, more intimate gatherings around the world and so I think, we'll never go back to it, the pendulum will swing a little bit, but I think we'll never go back anywhere near the way it was before.

To close the interview Jeff was asked what he thinks is the most misunderstood or under-appreciated aspect of Avid…

[00:58:33] Jeff Rosica: I have a different answer today than I probably would have said three years ago. There are still too many people that think of Avid, as what we used to be, this hardware company with a little bit of software.

When people get a close look at who the company is today and where we're going, I think people realize this really is the opportunity for, and the story of a growing subscription and SAS software business. And that's where our future is. And that's where we're growing as an organization. That's why we're becoming, as, as successful as we have been the last year or two, we're going to have some element of hardware and some of the old business model, but that's becoming a smaller and smaller part of the business as the software subscription and SaaS business grows as a part of the company.

There is no doubt once you look at the revenue figures, that Avid is on track to move to a Software as a Service based company. We suspect that the hardware line in the revenue figures is only kept as high as it is because Avid sells valuable large scale storage solutions, which generate significant revenue per unit.

More On Jeff Rosica’s Impact On Avid - Mostly Under The Hood

In listening to this interview there has been a lot of change going on at Avid, that as users we wouldn’t necessarily be aware of but go some way to show the work Jeff has had to do to turn around Avid and to try and divest itself of the old negative reputation it gained over the years before Jeff took up the helm.

For example when Jeff was asked about the culture in Avid and how it has evolved since Jeff has been in post…

[00:07:59] Jeff Rosica: I was pretty honest and open when I took the role, the situation wasn't great. I would say that I wasn't a big fan of the culture, even though I was in the organization, the senior role I was at the time, pretty unhappy with the way we were organizing and the way we were managing our culture and the environment of our company. So I would say it was in a pretty bad position.

If you look at external metrics like GlassDoor or other things that are out there, obviously that it was, I would say dismal metrics for the company. For me, I think that was one of the, there was a lot of things I had to jump on, but culture was an important one because if you don't have the people we're not going to get anywhere, it's, a company is a collection of a lot of things, but if you don't have the people, you've got zero. And so it really was making sure that I got the organization on a better plane quickly from a cultural standpoint. And we had to make a lot of changes, very fast to get that culture and to get the environment that we’re in, needed.

Later in the interview, Jeff was asked about the lack of acquisitions since he became CEO or whether it was a specific strategy to focus on internal R & D…

[00:22:12] Jeff Rosica: Because I spent a lot of years in M&A (Mergers and Acquisitions), I think people expected me to be on a buying spree the moment I took over CEO. No, look, I think that acquisitions aren't important of any tech company's growth journey. When I took over CEO, we had to clean up our own house before we started looking at, acquiring other houses and bringing them into the fold of the neighbourhood. It really was about getting the fundamentals right for this company. There was just a lot to get right about this company and making sure that we were really building a strong, stable, financially profitable cash-generating company that could fund its way there.

If you look at our own company from where we were and the debt structure we had, when I took over CEO to where we are today, it's night and day from that standpoint, even our financials. Now we're, on a great trajectory of generating positive cash flow.

We're going to always continue to invest R & D internally in the things that we think we can innovate around that we can do best, but there are areas where definitely technology acquisitions tuck-ins of companies smaller than Avid [can] bring the right technology or the right go to market or all the above that can help accelerate our roadmap or fill gaps that we think we have as a company that aligned to our strategy.

Another example is that Jeff has changed the way Avid incentivises people…

[00:37:33] Jeff Rosica: I believe in a couple of basic things. Number one is wherever you can get everyone aligned in the same thing so that nobody's misaligned to what we are so interesting. I'll tell you that everybody in the company who is a full-time employee that is eligible for a corporate bonus, everybody has some, whether it's five or 10% of their pay or 50% of their pay, they are on a corporate bonus. Now on the sales side, people who are, quota-based that's an evolving thing almost every year, that compensation is less now than if you sign a multi-year long-term agreement with a subscription-based to it and everything in between.

I think that the target setting and compensation have to be well aligned to where you're trying to take the company and you always got to tweak it every year and move it on the path that you're on to where you need to go. It's important.

Environmental, Social, and Governance

Another area the interviewer questioned Avid’s CEO, Jeff Rosica, about is the area in corporate-speak they call ESG, which stands for Environmental, Social, and Governance criteria. These are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

[00:51:42] Jeff Rosica: We gotta pick our priorities and do things, in the proper way, but I think for us, environmental subjects and social subjects have been very important. They're very dear to my heart, personally, not just as CEO, but also as a human being and our industry cares deeply about it.

We all talk about ESG from the investor standpoint, but our customer base, people in media, people who create content, they care a lot about the environment around and around social. And so it's an area around corporate social responsibility that we're focusing a lot on as a company. This has to be a priority. As corporate citizens, we have a role, we have a responsibility to do our part, but I think when you look at where our industry is and what they expect out of us and what they expect, people they're going to buy from people they're going to put their trust in.

Diversity And Inclusion

Diversity was another area the interview touched on, specifically in the context of hiring and motivating people…

[00:54:01] Jeff Rosica: DNI [which is an acronym for Diversity & Inclusion} is an important subject for our company. If you don't source wide, if you only source in your network and you're MIA, middle-aged white guy and ended up with a bunch of middle-aged white guys. Even though I do have a very strong network of women, I'm just saying in general, you've got to reach outside your comfort zone and make sure you're sourcing very wide. I think that the more you do that, the better success you're going to have.

I'm very loyal and very committed to our team but it also is a two-way street [in] that not everyone's right for every job and even someone who was right for a job one day may not be the right person for that job two years from now. It doesn't mean you get to have to go out the door and maybe it means they need to go do something else or take a different role.

It is also obvious listening to the complete interview as well as the comments Jeff made at IBC 2018 that Jeff has overhauled the ethos at Avid, the management is much more inclusive and collaborative. Despite what some might say, Avid cares much more about us, their customers and want to communicate with us much more. It is also clear that there is more to do and Jeff and the team at Avid are working hard.

Having listened to this interview many times over and with the additional research I undertook to put this article together, I am left feeling that Pro Tools, which is the tool I have chosen to use to earn my living, is in good hands in Jeff Rosica’s Avid. Of course, it’s not perfect, nothing in the real world ever is, but everything I have read and heard since that very different briefing at IBC 2018, just 6 months after Jeff took over as CEO, leaving me feeling that Pro Tools is just going to get better.

What do you think?

See this content in the original post