Avid at the centre: Interview with CEO Louis Hernandez Jr.

Avid's Louis Hernandez Jr
Neal Romanek
Interview
November 30th 2016 at 11:38AM : By Neal Romanek

In this talk with Louis Hernandez Jr, the CEO of Avid describes an industry that needs to change - but whether it will another question

When Louis Hernandez Jr. took the reins of Avid in 2013, he advocated an open-source revolution in workflows and opened the door to industry input via the creation of the Avid Customer Association. Some viewed the new Avid with caution. But with most vendor profits flatlining, the uptake of Avid’s Media Central platform grew by 47% in the second quarter of this year. We spoke with the Avid CEO about the company’s strategy for success and the outlok for the media industry.

 

We are in a volatile time for the media industry. What are the biggest challenges for content producers and the companies serving them?

As tools have become cheaper, content has exploded. As a result there’s a lot more competition in the media business. The good news is you can reach more people now, but the bad news is the economic model for reaching them is quite different from how it used to be.

Content consumption has gone up about 50% in the last ten years, which is an amazing statistic. Not many things in our lives can do that – we run out of time. Humans want to connect through storytelling. The problem is that the 50% increase in viewing doesn’t match the now 400% increase in content choices and availability.

I’m on the road 80% of the time, talking to clients mostly. Those running any of the major media companies always tell me some of version of the same problem. The need for quality is more intense than ever because the dramatic increase in content has created so much noise in the system. And you also have to make that content more available to more channels and devices which costs money, and yet the ad conversion rate is so much lower. Everybody feels like they are doing a lot more for a lot less.

That wrenching noise you hear is those big gears that used to be so profitable trying to transition into a much more distributed economic model where you have to be a lot more efficient. How do you participate when the economic model is changing radically and still be relevant to your community?

 

What has the role been for the Avid Customer Association, now that the organisation has matured?

Many people at first thought the Avid Customer Association was a vendor-specific organisation. But it is strategic leaders in the media industry trying to navigate together. We’re up to about 6000 members now. The reason the Association has become so vibrant - and some people – not us - were shocked by it – is that so much is changing.

I felt like somebody, anybody, needed to step forward and attempt to lead this. Also, I’m a software person. I’m not a hardware person. And that’s why we’ve built things the way we have.

This is an industry that has a heritage that’s rich and romantic

 

What do think of the work of AIMS and other standards bodies?

We’re AIMS members. We think AIMS is a great idea, but the issue I sometimes have with all these organisation is that standardising proprietary tools is not your answer. I think you’ll go from 25% cost of connecting down to 15%, which is good – but it should be zero. And if we all just used open platforms we wouldn’t need to have this discussion.

This industry is dealing with its heritage and is trying to standardise because it’s a business pressure. But if we were white-boarding it, we wouldn’t have all these blocks, it would be a more seamless connection. These open standard-based systems are prevalent in many other industries and also prevalent at earlier stage companies in the media industry.

We’re members of all those standards bodies – about 38 of them, which is part of the problem. One of those standards bodies is celebrating its hundredth anniversary this year. That’s not a good sign to me.

That wrenching noise you hear is those big gears that used to be so profitable trying to transition into a much more distributed economic model

 

More people than ever are able to make and distribute content. But is this democratisation of media paying off financially?

The democratisation of the creation and consumption of media doesn’t mean there has been economic democratisation. In fact, it’s the reverse. The yield term has gotten tighter, and fewer people make most of the money. So it’s an important distinction.

If you think about music, the top 1% of musicians make almost 70% of the revenue. Fifteen years ago, it was more like 40%. But the amount of content and choice is dramatic and the revenue allocation per is much more fragmented. And that’s true in all forms. So I want to make sure we don’t confuse the fact that there are more ways for you to consume and think that equals the economic reality.

I actually think that the reason you’re seeing such intensity, is if you’re not at the top of the yield curve, you’re having a tough time making it. Maybe you’re in a category of company where investors don’t mind that you’re losing money right now. Or you’re on the other side of the yield curve and you want to optimise what you’ve created.

The intention wasn’t to make it harder to become a storyteller, but that’s actually what has happened

 

You see this in the film industry. The thinking used to be that movie studios would have a portfolio approach. You’d have some indy films and some mid-market films and some big budget films. That’s pretty much gone. It’s all big blockbuster films for the major studios. Why? They’ve learned through this yield curve model that success with having a known brand with known music, known actors and a known director is much more likely and the adjusted failure rate is much lower.

You don’t have a lot of small films from the majors anymore and a lot of them have just shut down those indy brands. Music’s even worse. It’s become much more concentrated, in terms of who makes money. That’s the economic unintended consequence of the greater connection of creator and consumer through digitisation. The intention wasn’t to make it harder to become a storyteller, but that’s actually what has happened.

Avid at IBC2016

 

What is going to bring about the evolution that the media industry needs to survive?

I think the IT groups are going to force it – and non media-savvy IT companies - because that’s how they operate and that’s how most of the rest of the world operates.

This is an industry that has a heritage that’s rich and romantic, and it enjoyed a time when the niche was profitable enough that you could use what you perceived as best of breed proprietary systems and just connect them all together. I think those days are gone.

The two forces at work – and sometimes working against each other – are the culture of the organisations in the industry and theeconomic reality. I believe that there are very few organisations are changing because of a cultural bias toward being agile, it’s because economic reality is setting in.