Takeovers a plenty - still no profits
What went wrong? Well, my perspective is rather skewed. My knowledge of the company is largely confined to its consumer division but that side of the business did end up bringing in around two-thirds of the net sales value. Trouble is, it also produced, as best as can be read from the published figures, at least a proportionate share of the losses.
Pinnacle appeared to have the knack of acquiring interesting companies at close to knock-down prices. Some times it did so simply to grab market share. At other times it was to acquire technologies. Occasionally, it was to get both.
Unfortunately, Pinnacle was seldom able to integrate the products, the people or the technologies in such a way that they produced a profit or products that worked the way they were supposed to do.
Video Director (June 1996) was the first notable purchase and, although its technology formed the basis of Pinnacle's big-selling Studio range of consumer products, these all too often failed to work as promised, right up to an including the current version 9 – though this fact was seldom pointed out in reviews published in magazines, whether specialist or general computer titles.
Studio's problems largely stem from its age and the fact that new programming code simply gets piled on top of old. This has been going on for so long that the only logical solution is a virtual ground-up code rewrite. Pinnacle has admitted to me a couple of times that this is needed.
Well, it turns out that something of the sort will happen with version 10 of Studio. Although Studio 10 won't be based on all-new code, it will, I understand, be using essentially the same code-base as Edition, the editing/authoring program that Pinnacle sells in a range of versions - from prosumer to broadcast - and which should be inherently far more stable.
Digital GraphiX' Deko titler (1997) turned out to be rather less buggy was – still a mainstay in consumer and pro products. Then came miro, whose DC and DV ranges of prosumer analogue and digital editing cards running Adobe Premiere were big sellers and in different forms remained so for a number of years.
Trouble is, they suffered reliability problems that had already been frustrating many purchasers, and owners were finally left high and dry by Pinnacle's inability (or unwillingness) to support the cards under Windows XP – a move that cynics saw as a ploy to generate unnecessary replacement hardware sales.
In 1999, Pinnacle laid out $11.5million of stock for Truevision. This was in part to remove from the market the Bravado 2000 card - it was being bought in from Radius yet still made Pinnacle's DV300 card look over-priced. But it was also to gain access to Truevision's higher-end technologies (including High Definition), industry partners and support systems - and the Targa cards that stemmed from the deal remain key to Pinnacle's higher-end ranges today.
The purchase of Synergy for its Hollywood FX software in 2000 looked like a steal at just $200K, but this was another program that in its various iterations frustrated a lot of users and too often suffered from installation (and uninstall) problems.
Pinnacle laid out around $68m more in 2000 in cash and stocks largely for higher-end outfits - Puffin Design, Digital Editing Systems, Montage Group, Avid Sports, PropelAhead, Uncut Audio and Minerva Networks – which partly explains its massive losses in that financial year.
FAST Multimedia, followed towards the end of 2001 for $6.4m and the Edition editing technology that came with it was seen by some pundits (myself included) as a cheaply-acquired sparkling jewel in Pinnacle's tarnished crown.
What Pinnacle failed to do in a timely fashion, though, was give the program an overhaul so that its interface conformed to the Windows-standard. Instead it followed the Studio route and crammed in extra features.
Pinnacle also shot itself in the other foot by stopping support for Adobe Premiere. The idea was to force users of its mid-market hardware to migrate to Edition rather than upcoming version of Premiere Pro. But keen pricing aided by cheap upgrade offers for users of Premiere and Studio didn't seem to produced the desired result.
Even ignoring how people felt about having a gun pointed at their heads again, though, that's understandable. The overhaul of Edition's interface only happened at the tail end of 2004 with the launch of the all-too-buggy V5 – so there'd been a three-year delay during which too many prospective purchasers remained wary about the non-standard look and feel of Edition. Oh, and the bug-fixes for V5 themselves took about three months to arrive.
One year on from FAST, in 2002, Pinnacle paid $4m cash plus $3m in shares for VOB, largely for its CD and DVD burning technology. It then proceeded to introduce a selection of "Easy"-branded products that were even better able than Studio to bring a PC to its knees, since they cheerfully installed packet-writing drag-n-drop copying software even if other such low-level programs were already present and certain to cause conflicts.
There were three further acquisitions in 2003. In January, the audio software developer Steinberg took the Pinnacle shilling (more accurately $24m in cash and stocks) and although the fit looked good at the time, Pinnacle quietly finished offloading Steinberg to Yamaha for an undisclosed sum two years later – saying little more than that a range of cost-free cross-licensing deals were in place. Sound on Sound magazine, though, reports that the sale cost Yamaha $28.5million.
Japanese software distributor Jungle KK came onboard in July for about $4million cash and stock but was sold less than 18 months later – Pinnacle taking a one-off $6.6 million loss.
Also in July 2003, the Dazzle consumer video editing business was bought from SCM Microsystems for somewhat over $21 million in common stock. The price didn't seem excessive, given that the Dazzle brand – which specialised in external USB solutions - was generally thought to account for around three-quarters of the world's consumer sales of video editing products and was clearly a thorn in Pinnacle's side.
But, while Dazzle initially brought Pinnacle some extra sales volume, having so much power concentrated in the hands of one maker resulted in mass-market retailers deciding to look for other baskets to put some eggs in. Additionally, the pile-em-high Dazzle range had a number of less-than-perfect products that burdened Pinnacle's already over-stretch consumer support infrastructure – and problems integrating Dazzle hardware with Studio software added to the difficulties.
By the spring of 2004, the ongoing losses had forced down Pinnacle's shares to a point where someone had to go. Chuck Vaughan, who'd stepped into the breach as president and CEO was replace in both roles by an outsider, Patti Hart, with no track record in video editing.
Seemingly, the board and key investors wanted someone with big-company experience – someone who had managed a company the size that they wanted Pinnacle to be. Failing that, someone who was at least going to get them some return on their investment by engineering a sale - and not at a totally knock-down price.
Early 2004 also saw Pinnacle's introduction of its first network media player, ShowCenter, a gadget that allows the stills, video and music held on a PC to be enjoyed on a TV set or AV system in a different room, so the user can curl up on the couch and watch a DivX movie or a digital-stills slide show.
On paper it looked a great product but, in typical Pinnacle fashion, ShowCenter was rushed to market. It lacked support for fast wireless networking; the Pinnacle-branded wireless card the company sold to go with it was flakey; and there were too few other wireless cards that were compatible.
Over the years, Pinnacle failed to make the most of its acquisitions and repeatedly did things (in addition to treating users as beta testers) that rubbed consumers up the wrong way. And it seldom treated trade customers any better.
It seemed to believe, in effect, that you can fool all the people all the time.
Avid, hopefully, won't repeat those mistakes but the only way it's likely to get any return on investment is by turning Pinnacle into a company that cares for its customers, starting off by selling products that work like it says on the tin.
But does Avid even understands the problems that dog Pinnacle's consumer side? If it did, it's hard to believe it would have even considered bidding for Pinnacle. Or perhaps it hopes and believes that the code rewrite due with Studio 10 will make many of these problems go away - though, of course, Studio is not the only problem program in Pinnacle's budget line-up.
But, even if Studio 10 does arrive in the near future and does turn out to work reliably, additional investment will be required to put right what Hart, Vaughan and others couldn't.
This investment will need to be substantial, perhaps comparable, though not equal, to that of the purchase itself. And, if the turn around is not carried out speedily, competitors will jump in to fill the gaps the way they did after Pinnacle's take over of Dazzle.
Check out the debate here about this story on DVdoctor's forums. It involves, among other things, my being banned from and censored on Pinnacle's forums as a result of writing this story and stating that the next version of Pinnacle Studio would be based on Edition code.
Bob Crabtree
