Welcome to the third edition of Open Insight, the newsletter where I communicate directly with Net Insight’s stakeholders. We’re undoubtedly in an intensive phase at the moment – although the last newsletter was only published about a month ago, a great deal has happened since then. We’ve presented the results for the third quarter, finalized the new management team, launched a new version of cloud solution Nimbra Edge and won important new business.
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Quarterly result and new leadership
The pandemic continues to affect the market and our business, and this was reflected in the results for the third quarter: sales were down by some 15%. Although we don’t know how long the pandemic induced market downturn will affect us, we are confident it will come to an end. This means that we’re continuing to future-proof our business. As mentioned previously, we’ve established a long-term strategy focusing on our core operations with the aim of achieving long-term profitable growth before expanding into new areas. We’re starting to see the results of our accelerated product development in the form of several new launches. We’ll continue to work on increasing internal efficiency, improving cash flow and focusing on sales.
I’m delighted with the appointment of Christer Bohm as Vice President Product Management with responsibility for product planning, and the aim of increasing the overall competitiveness of the Nimbra and Aperi products. Christer has extensive experience in this field and is one of Net Insight’s founders. His appointment means that I have now finalized the management team that will build the Net Insight of tomorrow.
One of the most important trends in our industry is the gradual transition to cloud-based production and distribution. A new report from the industry association IABM states that 45 percent of those surveyed in the broadcast and media industry, already use cloud services in some form. By shifting workflows to a cloud-based environment, customers can benefit from significant efficiency and flexibility gains. A flexible cloud environment facilitates the transition to remote and distributed production, ensures cost-efficient distribution (including for more niche-oriented content aimed at smaller audiences), and improves flexibility when choosing distribution solutions. With Nimbra Edge, customers benefit from the advantages of a cloud environment as it’s built on open standards and supports all major transport protocols, such as RIST, SRT and Zixi. Nimbra Edge allows our customers to choose between private or public cloud solutions, or hybrids of both, and the technology can be optimized according to their own specific needs. Embedded synchronization, a function that’s included in all our products, facilitates shifting production towards more efficient remote and distributed solutions.
The new version of Nimbra Edge offers attractive functionality. Authentication protocols mean that content owners and service providers can easily and securely publish content aimed at end-users in a cloud environment. We believe this is attractive to companies that want to reach specific customer groups with targeted content, which requires flexibility and cost-efficient solutions. For example, it makes it easy to publish previews and other attention-grabbing content on social media to attract customers to live broadcasts.
The pay-per-stream pricing model is one of Nimbra Edge’s competitive advantages, which allows customers to calculate costs in advance and improve cost control. In addition, the pricing model is advantageous for high resolution streaming (HD, 4K) and enables handling of multiple streams with different resolutions without incurring additional costs.
Another key advantage of Nimbra Edge is its compatibility and capacity for integration with existing Nimbra and Aperi platforms. There are currently an estimated 16,000 Nimbra units installed on the market, which means that Nimbra Edge is part of a large existing ecosystem.
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Both Nimbra Edge and Aperi have recently won an award, read more here
The Switch expands
There are several recent examples where service providers have chosen Nimbra to expand media network capacity. In the last issue of Open Insight, I outlined the deal with Tata Communications, and we also won a similar deal during the summer in our Nordic domestic market.
Further, we’re delighted that The Switch, a leading North American operator and a long-term customer, has chosen our Nimbra solution to expand its media network in the US. Nimbra 1060 and Nimbra 680 will allow The Switch to build a new 100Gbit network to media and sports hubs, offering increased capacity and more services. This is the first of three upgrades, according to The Switch, and we’re excited we will be delivering solutions throughout this journey. There is a clearly increased need for capacity as TV companies, sports leagues and businesses are competing to provide customers with more and better content, which is evidenced by this network expansion.
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Market trends and our transition
Clear market trends include the transition from hardware to software, from products to solutions and from CAPEX to OPEX. Customers are operating in an expanding market that requires investment. However, the market is also in transition and can be difficult to gauge, with customers demanding more flexibility and improved cost control.
We aim to offer more solutions and less products, and pursue more flexible payment models. This means that we’re increasingly moving towards selling software-based solutions rather than physical units, where payment takes the form of repeat revenue streams and the customer pays for services received.
The customers’ barrier to purchase is lower for solutions with repeat payments as opposed to a single, up-front hardware cost. For us, repeat revenue streams generate more stable and predictable income compared to traditional sales. This provides us with increased security and facilitates investments in future products and services.
The transition toward repeat revenue streams will happen gradually as we have many pre-existing long-term contracts. To support our customers, we’re working on a new pricing model that we’ll be introducing in the first quarter of next year. Changes of this kind should be handled carefully, and we’re implementing them gradually and primarily for new transactions and customers. This is a long road, but one that I’m convinced is the right one for our customers, the company and our owners.
2020 has been a challenging year for everyone; for entire sectors, individual businesses and staff, and particularly for the families affected by the pandemic. However, the end is in sight and, to borrow a phrase from the US President-elect, we have the opportunity to “Build Back Better”. At Net Insight, we wish you a happy holiday season and a better 2021.