Avid confirmed today in its quarterly earnings call that it has undergone a restructuring, laying off approximately 10% of its workforce in the process. With a headcount of 1,944 employees as of today, the move affects about 200 Avid employees. The cuts were across “all areas of the business”, excluding sales and marketing positions.
The announcement was part of an earnings report that observed a GAAP net loss of $8.0 million dollars for the third quarter on revenues of $165 million for the three-month period ended September 30, 2011.
Depending on your viewpoint, this news could either come as a big surprise, or just be what was expected next from this major manufacturer of digital media content tools.
Or it could be both.
Days After a Major New Product Announcement
Surprised? You’re not alone. The timing is highly unexpected, especially to everyone in audio. Thousands watched a live pre-AES 2011 Webcast last Thursday from New York City as Avid’s corporate brass and top developers unveiled Pro Tools 10 and the new Pro Tools|HDX DAW, describing the dawn of an entirely next-generation system.
As usual, Avid’s declaration of bigger-better-faster was matched just as quickly by user concerns over the cost and timeframe to upgrade. And also as usual, Avid had to start dealing immediately with large-scale ill will over forcing a near $10,000 upgrade cost – minimum – on its HD customers, the fact that they would have three years to manage it notwithstanding. Forums are already in flames, and Avid’s Facebook page is seething with angry comments.
A game-changing product rollout, on the eve of the industry’s biggest tradeshow, is generally not a harbinger of restructuring and job cuts. But Avid’s executives may have known the latter were imminent that Thursday night, even as they played out a well-rehearsed routine.
All this came just one year after an equally landmark 2010, when Avid’s near-annual restructuring came in the form of a major rebrand for all audio products. First, Euphonix was acquired in the spring to beef up the work surface sector of the market. Then the poisoned Digidesign name was jettisoned for good, Pro Tools 9 was released, and three new HD interfaces (HD I/O, HD Omni, and HD MADI) were introduced, along with goodies like the Dave Hill-designed HEAT mixing plugin.
Improved customer service, support and overall empathy were also meant to be a part of the program for the industry-standard DAW. In a related development, Avid also simultaneously made it known through the Digi User Conference forum yesterday that it was offering a free 14-day Pro Tools 10 and Pro Tools HD 10 trial, starting next week on the Avid Website. Additionally, any customer who currently owns Pro Tools HD 9 is eligible to purchase the Avid Standard Support Plan for $599, which will qualify them for a free upgrade to Pro Tools HD 10.
The program effectively lowers the cost of an upgrade to HD 10 by several hundred dollars. It addresses post haste some of the heavy flack that Avid caught for the weighty upgrade pricing that accompanied last week’s release of Pro Tools 10.
The Continually Shrinking Avid
For anyone who has followed Avid Technology as a company (NASDAQ: AVID), however, today’s restructuring and staff reductions are, unfortunately, a logical turn of events.
This is a corporation that laid off 120 people in 2010, and 410 employees the year before that – 15% of its staff at the time. It was all a part of five rounds of Avid layoffs that took place between 2006-2009 alone, and a reflection of the company’s overall declining financial health.
Don’t forget that Avid’s product lines also span essential video editing and finishing systems (DS, Media Composer, Symphony Nitris). The VENUE live consoles are in the mix, as are a raft of popular audio brands that the company acquired over the years, notably M-Audio, System 5, and Sibelius. Clearly, none of these lines have been making enough of a difference to stop Avid from its ongoing advance in the wrong direction.
What the Future May Sound Like
Obviously, an additional restructuring is not a black hole from which there is no escape. But no one knows today how their relationship with the company will be affected – many of their connections were with the myriad talented media industry professionals who are now contemplating pink slips, and their families’ well-being in a troubled industry.
And how will Avid handle a probable tsunami of customer inquiries in response to this latest development? If you thought people had questions about their Pro Tools 8.5 educational license/HD crossgrade to PT 10 and HDX, along with compatibility of their RTAS plugins with the new AAX format (or vice versa) …well, imagine their curiosity now about ongoing support for their current and perhaps future systems.
But unless Avid has also simultaneously hired an army of phone- and Web-support know-it-alls – somehow trained in the US or overseas on every possible scenario that accompanies this latest SEC-mandated announcement – who’s going to answer everyone’s questions? Is a new, incredibly helpful Website with pages of FAQ’s going to be launched tomorrow?
200 people are gone. That’s a lot of phones going into permanent voicemail, potentially leaving the user base and their livelihoods in a slowly onsetting limbo, with increasingly serious questions about the future viability of their main audio infrastructure provider.
Within audio’s already fragile ecosystem, the impact may not stop with Avid’s now ex-employees (and the overworked ones that remain).
Dozens of software developers were happy to be invited to Avid’s AAX plugin format development party as early as possible. But many of them make plugins for Pro Tools and nothing but Pro Tools – if consumer confidence in their primary platform is further shaken, what does this bode for these developers’ future sales? And if they can quickly diversify the DAWs they plug into, who do they place their bets on first?
On that note, it’s interesting to think which of Avid’s audio competitors might benefit most from the company’s latest setback. If studio owners, producers, engineers, mixers, audio post facilities, and artists want to hedge their bets and switch to the other leading software/hardware audio platform there’s…well, there’s nothing that compares.
Logic, Digital Performer, Cubase, and SONAR are all fine DAWs, but at and above a certain professional level, they’re serving as a front end for a Pro Tools system that hums efficiently in the background – one more extension of Avid’s category killer.
Indeed, should Avid continue to struggle or even one day disappear, one of the other DAW’s may emerge as the new crowned king.
But, like the U.S. Presidency, does anyone in their right mind really want that job? Avid doesn’t seem to be hacking it even with a highly evolved, fully integrated software/hardware industry-spanning solution. Maybe it’s better to just be part of the chaotic swirl of sequencing software and interfaces that would reign, sans Avid.
Remember, Avid isn’t gone. It’s just grown smaller still. But things may feel a tad more nerve-wracking in the months to come, the next time that Pro Tools system suffers a big crash.
Until things grow clearer, expect everything in Avid’s signal path to have extra noise.
— David Weiss