Streaming has taken over the media industry. Companies such as Netflix (NASDAQ:NFLX) and HBO are investing billions on content, while Apple (NASDAQ:AAPL) and others are going for music streaming customers.
But what company is supporting all this content? Meet Avid Technology (NASDAQ:AVID). The company is the foundation of media creation, and might be a great investment during this content boom. Here is why.
Avid Technology sells software and hardware tools to music and video creators. It has three main product lines: audio, video, and cloud.
Audio contains their Pro Tools, a selection of software tools for musicians. Along with this software the company also sells hardware to help with editing and recording. Their customers in this sector are professional musicians, film studios, and live event sound teams.
Avid also has a new music distribution service called Avid Play that allows musicians to bypass music labels and keep 100% of their earnings when they upload to services like Apple and Spotify.
Avid is attempting to transfer its Pro Tools customers to payment plans. In the first quarter of this year, Pro Tools reached 208k paid subscriptions, which is up 55% y/y.
Avid’s video flagship is Media Composer. It is the standard software in the professional video editing sector. Avid also provides video storage solutions through their NEXIS product, and is working to move its storage products to the cloud. Media Composer subscribers reached 62k in the first quarter, up 41% y/y.
Avid’s third business is its media platform geared toward newsrooms. Its top product here is Media Central, a software that helps newsrooms communicate, manage stories, and broadcast across different platforms. Like its other sectors, the company is working to move Media Central customers to a cloud-based solution that will help reporters work from different locations.
Financials And The Future
With its big switch from selling software to a subscription model, Avid has begun to see strong across the board growth, as shown by the robust double-digit-percentage increase in the numbers of subscribers. While some of its products declined in 2020, giving an overall revenue drop compared to 2019, subscription revenue grew and was higher by 61% in 2020.
In the first quarter of 2021, subscriptions reached $25 million and were 26% of total revenue, vs. 9% back in 2018. Executives expect subscriptions to get to 50% of total sales by 2024. This change is important because subscription sales provide better economics. Investors should witness subscription sales marching upward as a percentage of revenue in the next three years, which would show that the company is doing well on its cloud transitions.
With the trend of huge budgets in content creation, including the return of live shows and entertainment, and a move toward more profitable subscriptions, Avid could be a great long-term investment into the growth of streaming content.
Author: Scott Dowdy