GenArts CEO Katherine Hays received a call one day from Bill Collis of the Foundry - a call which led to GenArts buying all of the Tinder plug-ins. The move all but cements GenArts position as the dominant plugin company for high applications such as Nuke and Autodesk systems. But why did the Foundry want to drop its profitable plug-ins and how will GenArts get a return on all its recent acquisitions? Mike Seymour speaks to both companies to get the detai
Effective immediately, GenArts will assume all development, sales, marketing and support of all Tinder and Tinderbox products. This will allow both GenArts and The Foundry to each focus on what they do best. GenArts hopes this will facilitate customers to standardize on the tools from GenArts that are essential to everyday compositing pipelines.
There was no doubt when we asked Bill Collis if the Tinder Sparks were profitable, his single word answer came without hesitation, "Yes!" So why would the Foundry off-load its entire Tinder line, (while retaining Furnace, Keylight and Ocula)? GenArts recently purchased Wondertouch, adding to their previous purchases of SpeedSix Rapters and Monsters. GenArts already has 27,000 customers from Disney to the Mill, from Lucasfilm to Framestore... so where is the growth for GenArts?
In late 2008 we posed this question, "GenArts is a pivotal player in the image processing plug-in market, but are they happy to stay on the sidelines as a plug-in supplier?" The answer 14 months later is that rather than enter the mainstream application market - they are seeking to dominate the plug-in market.
The details of the deal are not published but as the Tinder Plug-ins are profitable they would have to be purchased at a multiple to the discounted cashflow they would generate, so for example if they generate a million dollars a year then the price would be some multiple of that discounted for inflation and allowing for the cost of getting that money from GenArts investors. This can be something approaching 5 to 10 times price to earnings. This means we will be well into this decade before the Tinder Sparks pay for themselves - assuming no new costs and that they continue to sell at present levels. For GenArts to make any money - and for their investors to see a profit, Hays must have a plan. Only three options seem viable:
* broaden the market to areas the Foundry never engaged such as the nearly 1.5 million legal FCP users
* increase the price (and risk selling less),
* find some way of making more of the technology (out guru the Foundry's Gurus)
We put this to Katherine Hays. "Firstly, we dont intend to increase the price of Tinder, ...to your other two points, we see the opportunity to do both, we intend to expand our development team to invest in further innovating around Tinder, the Tinder technology and the Tinder Brand,... and part of that may in fact include reaching out to a broader audience." Tinder already has a 90% plus market share of the Autodesk Spark market but the overall plug-in market is dominated by AE, FCP and other areas GenArts is yet to dominate.
One concern for users may be GenArts itself owning so much of the plug-in market. We asked Hays if all this expansion had resulted in unsupportable levels of debt? "We are a private company - so we do not disclose our financials but we are a profitable company and we have a positive cashflow, so that does help fund all sorts of growth, " she replied.
"We didnt NEED to sell Tinder (ed. to GenArts ) - but it made sense," explained Bill Collis. The Foundry will continue to sell Furnace and Ocula (neither of which were ever for sale) and it is not walking away from plug-ins per say - just focusing on higher end image processing plug-ins. Simon Robinson, Chief Scientist at the Foundry, commented, "I see us growing the plug-ins team and announcing new plug-ins soon which shows that commitment." Collis expanded, "The Foundry has grown massively in the last two years and we are now focusing on two areas - in the plug-in area it is image processing so more Furnace, more Ocula, and at the other level on applications with, of course, Nuke but we are also launching two new applications at NAB, so there is lots of exciting growth and to be honest Tinder has just been ignored by us, it's not in a key area we want to focus on moving forward."
No staff will be lost at the Foundry, but there will be a sharing of R&D ideas, patents and time, "that may involve loaning staff if needed," explained Collis, although no actual such moves are currently planned. In reality, the two R&D teams have been working together since the beginning of January in the UK. In fact, fxguide has found out that Karl Sims - the founder of GenArts visited the Foundry in the UK some time ago and was both impressed with what he saw and pleasantly surprised at the good fit between the two companies. Sims is known for his incredible engineering and development skills and he, and many of the other GenArts Team are friends with key members of the Foundry, such as founders Bruno Nicoletti and Simon Robinson, although Sims is now far less involved with GenArts than either Nicoletti or Robinson, who are still central to the Foundry's growth and innovation.
GenArts is expanding its R&D team "to invest more heavily in Tinder and Tinder development over time," Hays pointed out, and it is a key goal of Hays to target Nuke and the Nuke community, by both new marketing and engineering levels.
So why did the Foundry sell Tinder? To answer that one has to appreciate the vast growth and corporate changes at the Foundry. In the last few years it has successfully taken over the hard core Nuke Development and product, it has expanded into complex stereo image processing - building from its furnace Optical Flow analysis to its stereoscopic disparity maps (recently vastly improved in version 2 of Ocula). It has also been freed up in ownership and bought its own fair share of exciting technology such as the acquiring of Katana from Sony Pictures Imageworks (SPI), and the rumour mill has it that their own expansion into high end products like Katana is not over yet.
For Hays one of the growth areas for GenArts overall is the move by companies such as SPI from a model she describes as 80% in-house development of tools and 20% 'shrink wrapped' tools to a 20% in-house and 80% off-the-shelf. For those big houses with very high user counts, that represents "a 5X change," she explained. Of course, GenArts 27,000 users are not all working in the big 7 effects houses but the trend will help the Foundry perhaps even more than GenArts, after all one of the prime pieces of software that will be replaced in many companies is their 2D, high end compositing packages, and Nuke is the number one contender in that film space.
A further interesting move for GenArts would be to move the Tinder plug-ins to being far more GPU based. While most if not all of the Tinder plug-ins are already 64 bit, (except for Autodesk Sparks), it is easy to see why the Foundry may not wish to devote R&D resources to the task with so much on their plate, while GenArts already has a lot of experience here, from their own spectacular speed improvements to the new GenArts GPU accelerated Sapphire plug-ins.
What would seem like an obvious move is a move by GenArts to an even more online sales pipeline. For the time being GenArts resellers can immediately start selling Tinder plugins.
In fact, the collaboration between GenArts and the Foundry is not new. Both companies are founding members of the Open Effects Association, and are co-developers of the OFX programming interface supported by Nuke and several other host platform vendors.
GenArts will also become the flagship partner in The Foundry’s new third-party partner program for Nuke. GenArts will have an exclusive co-marketing relationship with The Foundry as a provider of plug-ins for Nuke and Nuke customers will have the option to install trial versions of GenArts plug-ins on initial installation of Nuke.
While a strategic partnership is a key part of the deal, GenArts gets no special access to Nuke 'under the hood.' "They can either be at OFX level or SDK - it doesn't give them any special access to our code," Collis explained, "but hopefully what it does mean is that the two engineering teams are actually working more closely together, so the hope is that the GenArts plug-ins will end up working really well - and any new posts they come up with will end up appearing fairly quickly on Nuke."
GenArts has explored rental, but only a small segment of the market, and Bill Collis confirmed that the Foundry has not seen real growth in rentals. "It is pretty flat... and we have been doing it for years... in general people really want to purchase and we see that with Nuke as well."
Media composer has been a big growth area for GenArts in the last year, there has been a big move to using pre-made transitions and effects - and away from spending hours crafting new individual transitions.
For many users there is a hope that GenArts will do with Tinder what they have done via their Wondertouch purchase and more strategically target the After Effects market. Either way GenArts has carved out an enviable position as a dominant force in the traditional plug-in market, while the Foundry has moved itself further into the application and high end space. Clearly the Foundry is aiming for the more complex, application high end visual effects tool, and perhaps as the Foundry is too much of a powerhouse hard core player to sell easily into the plug-in market of its own competitors. Certainly one could expect that Nuke's competitors would prefer to work with GenArts than the Foundry.
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