The cutting edge

As the cost of processing video images falls and the digital video technology relies less upon proprietary video industry giants such as Sony, Panasonic and JVC, opportunities are opening up for computer resellers - particularly those with a history of selling into graphics-based industries.

In the past two years, a number of key technological developments have made editing video on desktop computers viable, bringing costs crashing down and opening up opportunities for dealers to exploit. Observers are suggesting that these developments could be as dramatic for the video editing industry as desktop publishing (DTP) was for printing.

The professional video post-production market has been computer-based for some time. Back in the late 1980s, developments by companies such as Avid in compression technology and input/output features made desktop computer-based editing a reality.

It was Avid's Media Composer that revolutionised the industry. Post-production houses began to switch from expensive, proprietary hardware systems manufactured by Sony and Panasonic to cheaper, Mac-based hardware running software-based editing packages.

Since then, standards such as Apple's QuickTime, which allows video to be compressed to run on desktop hardware, have become the de facto standard on the desktop. Other significant developments that have championed the cause include the Firewire interface card, which boosts hardware support for system-hungry video, allowing it to be processed much faster.

In much the same way as the DTP revolution started out on the Macintosh, digital video editing has its roots in a market that is familiar with Apple. And although developments in video processing on NT machines are closing the gap, the Mac remains the platform of choice.

But whatever the badge on the box, the growing demand for cheaper video, fuelled by the growth of corporate video, interactive multimedia and digital broadcast channels, means a lot of firms are looking to equip themselves with digital cameras and editing packages.

It's now possible, for example, to edit compressed video on a workstation such as a G3 Mac or a corresponding NT box worth about #1,500. Video editing products such as Adobe Premier retail for less than #600 and are considered adequate - at least for corporate video editing standards.

Add to this the latest digital video (DV) camera formats, such as Panasonic's DVCPro or Sony's BetaSX or DVCam, and it's now possible to take video from a low-cost camera, starting from about #2,000, and feed it into a desktop computer - without having to convert from analogue.

James Sanson, managing director of distributor Computers Unlimited (CU), says its digital video division, set up two years ago, is the company's fastest growth sector. Alan Wood, product manager for digital video at CU, believes the market is a natural evolution for Apple resellers and distributors of Mac-based products.

Wood adds: 'Mac was the platform of choice for Avid. Then a few years later, Media 100 came along and chose the Mac market. Although Microsoft has come into the sector more recently with development money for cross-platform systems, resellers and distributors in the Mac market have a better established mindset for selling into this space and understand the customers better.'

The top end of the market is still dominated by companies such as Quantel, Avid and Media 100, selling broadcast-standard video systems that start at about #20,000 and go up to the higher end Quantel systems, which still cost in excess of #100,000.

Wood believes the professional end of the market is still prohibitively specialised, adding that it's still 'much too focused for the Ingram Micros and Computer 2000s of this world'.

He says: 'It's a very different kind of market from the more mainstream desktop computer sector. The more established video customers are used to their traditional video dealerships - companies such as Mar Com and Boxer Systems based in London's media centre, Soho - and customers coming into the market are much more media-oriented. They are used to a very high level of support.

'For example, you need fairly sophisticated demonstration facilities on hand and highly trained staff with experience of working in a video editing environment.' Vendors selling into this space - which include Avid and Media 100 - require these facilities as a prerequisite for reseller accreditation.

The logical first move for computer dealerships in this market are in what Wood terms the 'prosumer' area: 'It's lower margin, but much higher volume. There's been massive growth in demand for products that allow you to edit to semi-professional quality at home, but are aimed at enthusiasts who have more time and money to spend than consumers. But these products are much cheaper and don't require the level of support that a professional post-production house would need.'

Although Wood acknowledges the margins can't rival those of the professional market at the moment, he believes there is room for an extra 'tier' of resellers, servicing semi-professional customers that can't afford the level of support a big post-production house would expect, but still require expertise in this area.

He adds: 'I think the growth in corporate video production companies and the increasing tendency of TV production companies to have low-end video editing kit in-house means there are opportunities to specialise.

But you have to be prepared to expand fresh markets. It requires serious investment facilities in demonstration kit, in specialised staff and in accreditation.'

Another potential pitfall, says Wood, is the cultural difference between selling into, say, a repro house and a media company. 'There's a huge variation in the types of companies you'll be selling into. At one end of the scale are corporates in suits and ties, but at the other end is the Soho market, which is jeans and T-shirts and much less formal than most computer salespeople are used to.'

Steve Carter is business development consultant for Holdens, a reseller that began life as an Apple Centre and increased its focus on the digital video market. He agrees with Wood that resellers aiming to carve out a niche need to do their homework.

'If you start selling into a market with an established sales channel, there always tends to be some resentment from the customer,' says Carter.

'In much the same way as in early days of DTP, it used to be hard work dealing with the repro and print markets and the video customers also have an established channel.'

He adds: 'People have got used to certain relationships. The way we approached it was to say: "We can't claim to understand every facet of your business but we do know about the technology. We know how to support computer systems in a way that the older video guys don't and we can hold your hand as you move into non-linear markets".'

At the top end of the scale are the Soho-based niche resellers, including Tyrell Corporation and Root 6. Both of these companies employ staff who have worked in either post-production or product development. They are selling products worth up to #500,000 from vendors such as Discreet Logic and Softimage and, according to Scott Law, business development manager for digital media at Apple, they are making margins of up to 30 per cent.

Because these tools are often used in the fast-turnaround world of broadcast TV and editing commercials, 24-hour support is an absolute essential.

A sale can take months to complete, the customer will need a lot of handholding and support needs to be instant and constantly accessible.

Root 6 was set up at the end of 1997 to service a growing market for non-linear editing systems, primarily the Softimage real-time editing suite, DS. Marcus Hume-Humphreys, co-founder of Root 6, believes the high-end market requires a fundamentally different approach to selling. 'It goes beyond being a reseller,' he says. 'Although we are selling products, our role is really more like a consultancy.'

Root 6 staff are largely ex-Avid employees, although two have been working editors. Their customers require, for example, remote diagnostic systems on their products. Hume-Humphreys says: 'If a customer is working on an overnight edit and the system goes down, it's something we need to sort out then and there but there may not be an engineer available in the area.

We provide a remote support capability, where an engineer can dial into the system from outside. We put in the ISDN line and special software, so we're not tied to specific hours of operation. More often than not, we can solve the problem over the telephone, but it costs. And this definitely isn't the sort of support you could provide from a nine-to-five computer reseller's office.'

However, he adds, as the technology becomes less proprietary, the need for more specialised kit diminishes: 'Five years ago, online editing was always done on proprietary edit suites worth several hundred thousand pounds. Today, it's just as likely to be done on a Softimage/DS, worth about #70,000. In five years' time, it's likely that much of it can be achieved on a low-end NT box.'

For Law, the high-end market is something of a red herring. 'Although it's easy to be seduced by the high margins, most dealerships aspire to something a bit more realistic,' he says. 'The Tyrells and the Root 6s of this world are going for a very finite market. As desktop technology becomes more accessible, the high-end guys are just painting themselves into a corner.'

This may well be the reason why more of the professional video manufacturers are starting to open their products up to distribution. Last year, Media 100 opened its lower end qx and qxc product range to distribution. This year, Quantel, one of the stalwarts in the professional real-time market, began pushing its Editbox Platinum product through distribution.

As Rob Ettridge, corporate communications manager at Quantel, explains: 'We realised the corporate market was largely untapped and we weren't reaching these markets through direct sales.' The company appointed Techex to distribute the Editbox Platinum. It's a cut-down version of its Editbox product, but still aimed squarely at the professional rather than the prosumer market.

Another entrenched video manufacturer, Avid, is experiencing a channel shakedown following its acquisition of Softimage in the summer. Avid bought Softimage because it lacked a product in the 3D sector, but the company is currently facing the problem of two conflicting products that will need to be rationalised.

In the meantime, those dealerships that sell into a traditional Avid market are under siege from the newer resellers. A report from one reseller, who wishes to remain anonymous, believes the writing is on the wall for the traditional video dealerships.

'As more post-production companies spring up with a purely non-linear background, they are going to have less in common with the mindset that has been selling Sony and Panasonic kit for years. This is where dealerships from a computer background are in a good position,' he argues.

Law believes that hybrid graphics, interactive media and video skills and contacts will be key to this market. 'A lot of the newer, design-based companies in this space do a bit of everything,' he says. 'They might do a bit of contract publishing, a bit of interactive media and some corporate video as well. Many of these companies are new and have a computer-driven mentality. Because they don't have the analogue video legacy, it suits them to deal with someone who has computer know-how.'

Holden's Carter offers a warning, however, to dealers keen to get on the video bandwagon - it's still an untried market and there are a lot of unresolved standards issues holding back consumer confidence.

'There have been a lot of false starts for this market,' he says. 'Last year, for example, was hailed as the great year for desktop video, but it didn't really fly out of the door in the way we anticipated.'

Following a raft of digital video formats which were launched in 1996, Carter claims many customers have waited to see which of these will survive.

Of the six formats launched, a clear winner still hasn't emerged.

He believes this battle will eventually be won on two fronts - open standards and low prices. 'These are the really key issues. The video giants don't have a foothold in this market and it will all go desktop computer-based in the end.'

And a final word of advice for the reseller from Carter: 'Don't underestimate the support issues and do your homework.'