Last year, the newly combined Snell-Quantel appointed long-time industry veteran Tim Thorsteinson as its new CEO. Recently, TV Technology Editor in Chief Tom Butts sat down with Tim to discuss the latest on the Snell-Quantel merger—which resulted in a new name: Snell Advanced Media, or SAM—as well as the state of our industry and how important the upcoming NAB Show will be to SAM.
TV TECHNOLOGY: When we spoke at IBC, I got the sense from you that you really wanted to ramp up SAM’s presence in North America, you didn’t feel it was adequate based on past history with Snell and Quantel.
TIM THORSTEINSON: Right, it was pretty fragmented. Frankly, they (company employees) had to come back to the U.K. for stuff too often because we didn’t have the skill sets in the geography. For example, you need experts in the market that can articulate your IP roadmap and can consult with key customers. If you’re flying people in from elsewhere and they have funny accents, you don’t appear to be a global business. That’s been my experience in the past.
TVT: Do you feel the North American market is more provincial than other areas of the world?
THORSTEINSON: I find all areas of the world to be very provincial. The Japanese market loves people who speak Japanese. In the old days, people in Asia were quite impressed if somebody came from headquarters that had the “secret answer,” but it's less so today. I think you need to have competent, local people everywhere in the world if you want to grow your business. We try not to say anymore, "When they get up in the U.K., we'll be able to give you an answer." That's not the right answer.
TVT: Are there other things that have changed in the way business has been conducted in this industry in the last five years?
THORSTEINSON: It’s a lot less relationship-oriented. If you know people, they’ll take an appointment, which is nice, but it may be one.
TVT: The decisions are not necessarily made by the same people anymore?
THORSTEINSON: No, and the other thing is if you take somebody into an account, you can take one suit like me that has a band of knowledge, but the other person with me better be very technically competent because the customers are going to get right down to bit-rates and a level of technical detail that I'm done with in about 15 seconds. You can't have layers of guys in shiny looking suits; people aren't impressed with that anymore. They don't have the time because they're more thinly staffed than they used to be and they're under tremendous pressure.
The good news is every customer has different performance criteria depending on their application, and then you have to be price competitive and you have to have a support structure. It's just a lot harder than it used to be.
TVT: Is it because there’s less specialization?
THORSTEINSON: Yes, and there's less business. Notwithstanding all of the things you read from industry pundits, I think if you added up the capital budgets around the world for our available market, they're smaller. I've been in the middle of the industry consolidation for 15 years now, and there's still a lot left. There are still way too many suppliers. The customers are well served because there are lots of good suppliers. One of the challenges I think is that it's hard for the suppliers to invest and to drive forward the technology to the degree that we want to. Up until now, the industry's been mostly served by relatively smaller suppliers;, big $100 billion companies have not been providing equipment, our available market is approximately $5 billion. It's a difficult time in the industry because, one, you have all this technical change going on and, two, balance sheets and operating budgets are strained so it's hard for people to keep investing.
TVT: Do you think the move to IP is causing more insecurity among vendors?
THORSTEINSON: Definitely. There’s going to be a whole swath of revenue that goes away.
TVT: What do you mean by that? Are you talking about a move to commodity hardware?
THORSTEINSON: Twenty years ago at Tektronix, I would go to the board meeting and some board member would say, "Oh, we make a routing switch. Doesn't Cisco make a routing switch? Can't we be like Cisco?" Eh, it's not really the same thing. "Well, will a Cisco switch do what our switch does?" Peter Symes would write a white paper and three or four years later, it would happen again. It's happened four or five times. Well, guess what? Those switches are going to be able to operate like a broadcast router used to pretty soon, and what a lot of the suppliers are going to be selling is the “goes in” and “goes outs,” that transition SDI to IP and back, but not the switch. That whole router market—a $300-$400 million market—is going to get smaller quickly I think.
TVT: You go way back on this. I remember years ago attending Grass Valley events and you talking about the move to software so this is not really new. This is something that's been going on for 10 to 15 years.
THORSTEINSON: No, but I've got enough historical perspective to tell you it's really happening now. If you take the big guys in the industry, the Evertzes and Beldens and Imagines—we're not at that level— but you take all those guys; huge amounts of their revenue are hardware today and if you consider where their margins are coming from today, the vast majority of it is hardware. Well, that's all going to change and for those of us that have manufacturing operations, fewer products are going to be moving through it. In the playout business, we're already to the point where people don't really want to buy the hardware, they just want to buy the software.
TVT: How important is the NAB Show this year to you guys?
THORSTEINSON: Massive. The most important one ever, I think. I mean, we relaunched ourselves as a company. We changed the name, and we added a few new products, but people have to come to the show and see the new technology and the direction the business is heading and say, "Wow, this is a lot different company than it used to be."
TVT: Is that fair to put the success, the future of the company on one show?
THORSTEINSON: No, but I'd have a full head of hair if it were a fair world. The world's not fair, but frankly it's clear, which is nice. What we need to do is not confusing at this point, which is good. We're getting the same message from every customer. We have helped one company get on-air to 4K quite successfully, and we have a couple of other really compelling deliveries in the pipe, in the short term. We'll go into the show with three to five deployments, and they all want to know, ‘OK, great,’ but HDRs got to be on their roadmap. We're going to be deploying software-only solutions, and there will be an announcement around that, but so will everyone else.
TVT: Image quality has always been a big selling point for Snell. Is that still very important to you? Are you afraid that message may get lost?
THORSTEINSON: That's an interesting point. Our biggest deal on the payoff side—we haven't announced it—but it was a $4-$5 million deal that we got in the last half of the year, highly competitive. We won it because of image quality. But again, it's a software-oriented playout solution. The reason we won is because we were able to take the ICE Morpheus stack and work with the folks with Alchemist and other vendors, and tune their hardware to get a compelling picture on whatever device you have. We won that because of image quality. I don't think the demand for high image quality is going to go away.
TVT: You think it will increase?
THORSTEINSON: I would think so. The problem is the customer wants everything. Customers want high image quality, lower prices and flexibility. They are so demanding, right?
Then again, their world is changing dramatically, but it's a good time to not be huge because we can make changes and reposition ourselves. You look at these big, big companies, and I'm talking about the $100 billion and up; how they change is tough because of the restructuring they have to do. I mean, we have plus or minus 500 people. I've been here 10 months, and the headcount has been flat, but we changed out about 70 people.
TVT: What do you mean by “changed out?”
THORSTEINSON: Well, people left and people came in with different skill sets. My guess is we will have, in two or three years, the same amount of people but half of them are going to be different.
TVT: Is your goal to try to keep the headcount the same or reduce the headcount?
THORSTEINSON: It all depends. My goal is to increase the number of engineers that I have as a percentage of my total headcount. That's been my goal in every company I've ever run. Ideally, one person can do all the finance in the company, and one person can do all the IT, and one really smart person can do all the marketing, and I don't need anything else. Then I have a bunch of people designing product, and they never break, so I don't need a whole lot of support people. That is kind of the ideal business model.
As a matter of fact, we have already combined all of our support, operation; what used to be Quantel and Snell, it's all one now. We've cross-trained all the support people. We’ve combined all the manufacturing and marketing. There's still some product specialists, people that are more specialists and work more products than the switching and routing, and that will always be the same. We're 80 percent of the way down the path of combining the company. The way I usually approach an organization is to figure out what the objectives are and then figure out what people and processes you need in place to meet those objectives. It's tough because there's not a ton of stability. If you look at the job loss in the industry of good people in the last two or three years ... I know you know a lot of them.
There's so many good people no longer employed, which obviously is not a pleasant thing. It's just been a really rough couple of years for the industry.
TVT: How is business now?
THORSTEINSON: Thankfully on the calendar year, our business was up about 15 percent in the second half of the year from the first half of the year. We had a strong fourth quarter. I think we made money. I say that I think because we haven't closed our books yet. We met all of our financial targets. I hear people say that all the time, and sometimes your targets are not that aggressive. They were the targets the board was looking for. We recapitalized the business. We finished the year strongly. We added 20 engineers over the year and got the product roadmap solidified towards IP and 4K and HDR and those kinds of things. All in all, I think it was a pretty good year; a lot of change, obviously, for everybody in the organization. It's tough because this is a legacy business, so I would say embracing change has been a challenge for most.
I think as we move into 2016, the business is definitely better. There are a lot of good opportunities on a global basis. It looks like the market is at least stabilized and maybe getting stronger, but it's more of an incremental step up from my perspective. My expectation is, from a market perspective, 2016 will be a better year.
TVT: How has the reaction been to the name change? Do you find people using SAM or Snell Advanced Media?
THORSTEINSON: I find people using SAM a lot. It doesn't seem to have been a major factor, frankly, from my perspective. I think people are glad it's one coherent brand, but I don't think it's become a big issue.
TVT: SAM is a member of AIMS (Alliance for IP Media Solutions). What is your opinion of AIMS? Why was it needed?
THORSTEINSON: We're not big enough to develop our own proprietary approach to this space. We are ultimately going to develop IP switches that interface with Belden’s routers and they're going to do the same with ours and others. That was the thought behind the consortium.
TVT: Is there a timeline you’re working toward?
THORSTEINSON: You know we’re at the front end to be really honest. We’ve yet to have the first of these meetings. From our perspective, it’s in the early stages. My guess is NAB will be used as an opportunity to really articulate the time frames, and schedules, and interoperability testing, and things like that.