High Tech: Making The Cut

Tewksbury, Mass., used to be known for its carnation industry. Now it nurtures something far more fragile--the images of Julia Roberts, Russell Crowe and just about every other TV and film actor. Located half an hour north of Boston, Tewksbury is home to Avid Technology, whose 1,700-plus employees are resisting the attempts of Japanese giants Sony Corp. and Matsushita Electric Industrial (the parent company of Panasonic) to penetrate the fast-growing market for digital video-editing software.

Founded in 1987, Avid makes tools that allow editors of movies and TV shows to manipulate the images, voices and surroundings of the stars. Avid has won 45% of a professional computer-based editing and special-effects global market, worth $1 billion last year and expected to double by 2005. Its closest competitor, Discreet Logic, a division of Autodesk based in Montreal, has 30% of the market. Sony and Matsushita have managed to win only 15%, even though they dominate electronics hardware.

How does little Avid, with a market cap of $415 million, stay ahead of $75 billion Sony and $40 billion Matsushita? For starters, the company carved out its niche early by mastering the difficult art of making its product easy to use. "Avid is the most intuitive editing environment on the market," says Gene Munster, an analyst at U.S. Bancorp Piper Jaffray. Tim Squyres, film editor for Crouching Tiger, Hidden Dragon, says, "Avid's software has gone through many revisions of being designed to accommodate editors."

Movies used to be edited by physically cutting and pasting together individual frames of film. Avid's Media Composer software, launched in 1989, offered a revolutionary alternative: film could be translated into digital information and edited on a computer screen. Media Composer, now in its 10th version, belongs to a host of Avid software that controls everything from sound to 3-D effects. But the company's original appeal is the same. Its programs incorporate elements like a rotating paddle--which mimics a device used in traditional film editing--and language such as "the bin," where scenes that have been cut are deposited.

To demonstrate, Avid effects specialist Kent Petersen clicks on a video clip of two actors walking against a blue backdrop. Petersen points his cursor to a scene of a grassy field, drags it over the icon of the clip, and suddenly the actors are strolling through the field. Something's missing, though. Petersen pulls down an editing menu and clicks, and shadows appear behind the actors.

At Avid's headquarters, a trophy case displays an Oscar, an Emmy and a Grammy awarded to the company's software. One wall celebrates the company's 108 patents. Posters of such movies as Crouching Tiger and Titanic line the halls, and the conference rooms bear names like The Matrix. Each title used Avid systems. Says company president David Krall: "You're able to trick the mind into seeing things that it believes are real. It's the highest art form."