Last Call for Final Cut? Part 2

This is the second of a three-part series on what effect Apple's (Nasdaq: AAPL  ) decision to replace Final Cut Pro with a less powerful program has had on the video-production industry. (Check out Part 1.)

Final Cut Pro was introduced around the turn of the millennium, and in only a few years it began to take away market share from the established leader in nonlinear editing, Avid (Nasdaq: AVID  ) . Final Cut offered features similar to Avid's Media Composer but at a significantly cheaper price. And that lower price made it affordable enough for colleges to use to train the next generation of video professionals.

But Avid was slow to react to this threat, and by 2007 Final Cut Pro had taken over nearly half of the professional editing market in the U.S., with Avid holding only 22%. By the spring of 2011, Apple announced that there were 2 million Final Cut Pro installations, a number that was growing at 15% a year.

Things were looking brighter and brighter for Apple and Final Cut, and pretty dim for Avid. I wrote last May that Avid was in bad financial shape, that it had lost money for the past five years and had surging inventories, that it had lost much of the mid-range professional video market to Final Cut, and that the only chance it would have, considering the expected upgrade of Final Cut, was if Apple really screwed it up. "Possible," I wrote, "but not likely."

Boy, was I wrong
Apple's release of Final Cut Pro X made me eat my words. The new program actually removed important features, and it wouldn't open projects edited in the older version of Final Cut. In other words, many professional editors found FCPX did not meet their needs. They couldn't afford to wait for fixes that may or may not come. They could still work with the old program, but the handwriting was on the wall: They needed to find another editing program.

Avid's take
Was this the golden opportunity that could revitalize Avid? I posed this question to Avid, and Ron Greenberg Sr., Avid's senior vice president of worldwide marketing, got back to me.

Ron Greenberg: As I'm sure you've read and heard, many professional users felt that Apple abandoned the professional market, and they haven't been shy about expressing this. 

The Motley Fool: Was there a feeling of "All right ... this will be good for us?"

Greenberg: When professional users learned about Final Cut Pro X, they were quick to look for another solution ... [and] have expressed that FCPX lacks key features they require.

TMF: What kind of benefits has Avid seen from any FCPX backlash?

Greenberg: Strategically, this has helped cement Avid's position as the leader in the professional video editing market, and since Media Composer is compatible with Mac OS, Apple users are smoothly making the switch.

TMF: Does Avid feel that Apple has handed it a gift of sorts?

Greenberg: The market dynamics are changing. It's still early, but we've seen strong interest from Apple Final Cut Pro users who are switching to Avid. And they need a supplier they can trust over the long haul.

The reality of editing reality television
Bunim/Murray Productions practically invented reality television back in 1991 with MTV's The Real World. Today it may be best known for Project Runway and Keeping Up With the Kardashians. It has been editing its shows with Final Cut Pro for more than seven years, but before that it used Avid.

I spoke with Mark Raudonis, Bunim/Murray Production's senior vice president of post-production, about the company's decision to go back to Avid after Final Cut Pro X was released.

The Motley Fool: What would you say was the one feature in Final Cut Pro X that [was missing] that you just couldn't work around?

Mark Raudonis: One of the main things that is missing is multi-cam functionality ... but that is something that we absolutely, positively have to have and use every day ... there are enough deal killers missing from the current version of X that we could not afford to wait ... it's the stuff that's missing and the lack of clarity whether it will ever be put back.

TMF: I'm assuming you've talked to other people in your industry. Can you sum up their feelings about this changeover generally?

Raudonis: There has been more noise generated by this event than anything I can recall in my career. It was passionate, vocal, and persistent. I'm not saying [FCPX] is a bad product. Apple has released the program that I believe they wanted to release and are targeting the audience that they want to target, and, unfortunately, that's not us. I'm just saying that this is an acknowledgment that their direction has changed. The audience, Bunim/Murray and companies like us ... are not necessarily who I believe they are targeting any more.

TMF: Before you decided to go with Avid, were you considering any other systems?

Raudonis: Adobe Premiere has come along very strongly ... [but] Avid was really our primary choice for this transition.

Can Avid turn it around?
If Avid can find enough large production companies like Bunim/Murray, which during peak times can get up to 100 edit systems working away, to switch over, then maybe the company can start putting up some positive financials again. The last time it turned a yearly profit was in 2005, just before Final Cut Pro started gathering speed. But we'll have to wait until early February to check out Avid's fourth-quarter earnings and see whether there's been some real progress made since FCPX was released last June.

For Part 3 of this series, I talked to Bill Roberts, Adobe's director of video product management, and with Erik Horn, creative director of Arts+Labor, an Austin, Texas-based production and marketing company that made the switch from Final Cut to Adobe's Premiere Pro.

When Bunim/Murray Productions switched to Avid, the company stayed with its Mac computers. But the Arts+Labor switch to Premiere Pro also incorporated a hardware change to Dell PCs. To find out why, don't miss Part 3, and to make sure you don't, follow me on Twitter at @TMFRadovsky.

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Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, creating a bull call spread position in Apple and a diagonal call position in Adobe, and writing covered calls in Dell. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2012, at 11:41 PM, peanutgalerygeek wrote:

    I actually think AAPL doesn't care that much. It's a big market to Avid but really nothing to AAPL. And the opportunity costs (need to divert valuable development bandwidth to a very narrow market) are astounding considering what is probably cooking in the pipeline. They will need every ounce of management time and senior developer time they can pull together without distractions.

    They may have cut those features out on purpose so that the product managers of those products aren't tempted to scope creep any future bug fixes or minor changes.

  • Report this Comment On January 30, 2012, at 8:48 PM, FreeRange1 wrote:

    Wow - the author brings out an example that represents the absolute worst thing that has happened in television - reality TV for the dumbed down masses.

    This story is far far from over as Apple has not abandoned this market but instead is dramatically changing the paradigm of editing. FCP X is only V1 and much much more is coming - like multi-camera support that these television hacks mention. For those who are patient a little longer, the rewards will be great.

  • Report this Comment On February 08, 2012, at 2:18 AM, goobergobble wrote:

    You might want to consider getting part three completed pretty quickly as a mere two days after this article was posted Apple released their update to Final Cut Pro X, which essentially makes moot most of the negative points raised here.

  • Report this Comment On February 08, 2012, at 1:26 PM, XMFDRadovsky wrote:

    goobergobble,

    All the parts have been published, and part three did just get out before Apple's latest FCPX update. This latest update which gives FCPX a multicam function I'm sure will be welcomed by those who have not chosen to switch platforms.

    However, that update came six months after FCPX's initial release, and the point of the articles was to show that professional editors could not wait for features that may or may not eventually come. Hence, the profiling of the two companies, Avid and Adobe, which would be in the best positions to take advantage of any platform changing.

    Dan

    Dan

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