Avid 1997 Annual Report Download - page 8

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PART I
ITEM 1. BUSINESS
Avid develops, markets, sells and supports a wide range of disk-based systems for creating and manipulating digital media
content. Avid’s digital, nonlinear video and film editing systems are designed to improve the productivity of video and film
editors by enabling them to edit moving pictures and sound in a faster, easier, more creative, and more cost-effective manner
than traditional analog tape-based systems. Avid also develops and sells digital editing systems and newsroom computer
systems for creating content in the digital news production market for delivering news content to air. Avid also develops
and sells digital audio systems for the professional audio market. Avid’s products are used worldwide in production and
post-production facilities; film studios; network, affiliate, independent, and cable television stations; recording studios;
advertising agencies; government and educational institutions; and corporate video departments.
In January 1995, Avid effected a merger with Digidesign, Inc. (“Digidesign”). Digidesign is a leading provider of computer-
based, digital audio production systems for the professional music, film, broadcast, multimedia, and home recording
markets. In March 1995, Avid acquired through merger Elastic Reality, Inc. (“Elastic Reality”), and Parallax Software
Limited and 3 Space Software Limited (together “Parallax Software”). Elastic Reality and Parallax Software now form
Avid’s graphics and effects group. This group develops a range of image manipulation products that allow users in the video
and film post-production and broadcast markets to create graphics and special effects for use in feature films, television
programs and advertising, and news programs.
The text of this document may include forward-looking statements. Actual results may differ materially from those
described herein, depending on such factors as are described herein, including under “Certain Factors That May Affect Future
Results.”
Digital Media Content Markets
Digital media are media elements, whether video or audio or graphics, in which the image, sound or picture is recorded and
stored as digital values, as opposed to analog signals. For example, a letter prepared on a computer using word processing
software is the digital media representation of a typewritten letter. The word-processed letter example also illustrates some of
the characteristics of digital media, such as flexible editing, the ability to create different versions, simple production of
multiple identical copies, and easy integration with other digital media types, such as charts and graphics. These
characteristics generally provide digital formats with advantages over their analog equivalents. However, creating and
manipulating digital content typically requires new digital content creation tools; for example, the typewriter has given way
to dedicated word processors and, more recently, to desktop computers running word processing software.
Digital formats and tools have largely displaced analog formats and tools in many markets, such as word processing,
electronic spreadsheets, desktop publishing, graphics, and electronic and mechanical design. Because of more challenging
technical and cost hurdles in handling digital forms of film, video and audio signals, markets that rely on these media types
have begun to migrate to digital formats and tools only in recent years.
As technical advances in digital media content creation tools have made this migration possible, users have become able to
create more complex content that may incorporate several elements of digital media. For example, many video games now
include live action video, detailed 3D graphics, and high quality audio, all created, manipulated, and played back in digital
form. Feature films, such as Titanic or Jurassic Park, integrate sophisticated computer-generated special effects into
traditional live action shots.
The Company participates currently in three principal end-user markets in which there are well-established analog, or tape-
based, content creation processes and which are transitioning to digital, or disk-based, content creation tools. These three
markets are (i) video and film editing and effects; (ii) digital news production; and (iii) professional audio.
Avid’s video and film editing and effects market consists of professional users and users in the corporate office, government,
education, and consumer markets. Professional users produce video and film material, such as feature films, commercial
spots, entertainment and documentary programming, industrial videos, and music videos. These users are typically employed
in independent production or post-production companies, which are firms that rent out production and post-production
equipment and professionals on a project basis. Professional users are also found in television facilities, film studios, and