The market for video editing systems (turnkey and add-on) is not a new market. Companies such as Avid, Discreet, and Quantel have been providing video editing solutions for years now. What is new is the explosion of midrange products shaking up the industry dynamics. Company stocks in this sector have been doing incredibly well lately. Pinnacle and Media 100 are both Wall Street darlings at the moment. Additionally, companies such as Accom posted strong results for the first nine months of 1999. Even privately held companies have done well. Matrox has seen revenue in their video group almost doubled.

This growth is due to a number of factors that are simultaneously having an impact on the industry:





1.Pricing for equipment has drastically fallen. As a result many companies have created new product lines based around mid-ranged desktop systems. Now for the first time, comparable technology is available on sub $10,000 systems that had cost over $100,000.

2.Lower pricing means more users are getting into the market. As a result it is creating an entire tier of desktop professional video users which include everything from corporate, education, government and most importantly the digital content professional/web designer.

3.High-speed modems are enabling streaming web video content.

4.Supporting technology and tools, such as digital video camcorders, are also now within the price range of more users.

Some of the major vendors of digital video editing systems include:

• Avid
• Discreet
• Fast Multimedia
• Matrox
• Media 100
• Pinnacle
• Panasonic
• Quantel
• Softimage
• Sony Electronics

By the end of 1999 the total market for digital video editing systems, which includes all add-on and complete turnkey systems reached over $611.7 million in revenue. By 2004, we project this figure will increase dramatically to $2.8 billion, thanks to the exponential grow in the midrange market. The following chart outlines revenue projections for the video editing market.

Digital Video Editing Market – Market Projections (in revenues)

The high-end and midrange systems differ in several ways. Most notably, the average price of a high-end system is roughly $162,194 and these systems typically run off IRIX-based machines. The midrange systems on the other hand have an average price point of $8,723 and are NT-based systems. This pricing has actually fallen quite steadily since the beginning of 1999, and the most popular systems are still priced above the average at $12,999 to $14,995, at least for the moment. We can expect to see prices in the midrange continue to fall over the course of the next 12 to 18 months.

The total compounded growth rate for the video editing market is 29%, 6.9% for the high-end and an impressive 43.5% for the midrange products. The midrange already outpaces the high-end in terms of total installed units with 59% of all units on the market. Impressive growth in the midrange is also apparent in that 87% of all new units sold in 1999 being midrange units.

| The current leader in the high-end video editing market is Avid with 42% of the market, that includes total sales of Softimage’s DigitalStudio. In the midrange Pinnacle is the current market leader with 41% market share, followed by Media 100 with 20% and Avid with 12%.

The following pie chart outlines the user profile of current video editing systems today.

User Profile Breakdown - Digital Video Editing Market

Together the traditional markets for video editing which include broadcast, post production and film make up the bulk of today’s systems with a combined 47% of the market. However, the growth markets as we begin this year will be corporate, government, education and most importantly, the emergence of web design for streaming video content. At the moment web design for video applications only makes up roughly 1% of the total video market, but as the industry moves to provide video content over the Internet, vendors are scrambling to developing applicable tools.

We expect this year to be when the video editing market takes off. Expect to see present companies reposition themselves in the face of these new growth opportunities with the introduction of new products, features and pricing strategies. We can also expect to see many new entrants poised to focus on specific segments of the market, particularly in the streaming video space. Needless to say, this is a market worth watching over the next 18 months, and the possibilities are endless at the moment.

Please note that this research does not include any consumer video editing systems. A Market Spotlight on the consumer video market will be made separately.

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The Principal of M2 Research, Wanda Meloni is a market analyst covering digital media trends and technology. She publishes market research reports focusing on the graphics and digital media markets. Reach her at wanda@m2research.com.