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On2 Technologies, Inc. (ONT-AMEX)
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On2
Technologies, Inc. (ONT-AMEX)
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”Any Video, Anywhere’ - With people demanding
video on their PCs, TVs and mobile phones, On2 Technologies provides the solutions to
deliver any video to any device over any network
Services
Business Services
(ONT-AMEX)
On2 Technologies, Inc.
21 Corporate Drive, Suite 103
Clifton Park, NY 12065
Phone: 518-348-0099
Bill Joll
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published -October 12, 2007
Company Profile:
On2 Technologies
(Amex: ONT) is a leading provider of video compression software and solutions. The company
revolutionized digital media delivery with the creation of its advanced full-motion,
full-screen TrueMotion® video compression and streaming technologies. On2 video codecs
are widely used in the Internet, gaming, VoIP, and mobile media markets. On2's software is
used by such leading global companies as Adobe/Macromedia, AOL, Skype, XM Satellite Radio,
Sony, CTTnet, VitalStream, and Tencent. Located in New York City, the company has R&D
offices in Clifton Park, NY, and Cambridge, UK.
CEOCFO: Mr. Joll, you are fairly new in the role of CEO,
what attracted you to On2 Technologies?
Mr. Joll: “On2 is uniquely positioned in the
video industry. We are known to provide the best quality video for any application. We
have been the vanguard in pushing the envelope in this aspect, and we are the video in
many pioneering products and services from well-known brands, as a result. A few that come
to mind are companies like Skype, Adobe (Flash® video), AOL, Sony, and so on. We have
approximately 1.2 billion deployments of On2’s video technologies. Yet we are still a
small company, and given the revolution that is happening in video -- that is video is
moving from the living room now to practically any device and can be consumed anywhere
– the growth prospects before On2 are compelling. Moreover, On2’s position in
the industry is an advantage – we are well known and respected for our technology
prowess and a fifteen-year history of success in this regard. So, when I look at where we
are and where we can take this company, it is perfect for what I was looking for in my
career, the opportunity to take a promising company to the next level.”
CEOCFO: What is the current
vision for the company and how do you get there?
Mr. Joll: “Our vision for On2 Technologies is
formed around the mantra of ‘any video, anywhere’. This is something we have
been doing for some time, but now it is a mainstream industry trend. What this represents
is that we enable any video to be delivered anywhere, meaning to any device, for any
application, over any network. What is happening with video today is that consumers want
to view video on their PC, TV, mobile phones, and portable devices --basically any device.
New and established media companies are launching services to offer download and streaming
services, but also traditional broadcasters are embracing new mediums to reach a wider
spectrum of users. We call this convergence or cross platform applications, but the
reality is that there is a sea change underway in the video industry. We have been
involved in such cross platform video since early days of the company, by applying our
technologies for multiple applications, device and delivery platforms. It is therefore in
our DNA, in a manner of speaking, to bring solutions and innovations to this
transformation that is going on in the industry. We provide everything from core video
compression technology to tools, and system solutions, and are building our company’s
operations around this capability to deliver any video, anywhere – in the most
efficient, easy and affordable way for our customers.”
CEOCFO: What are you actually
providing for people?
Mr. Joll: “At the core, we develop video
compression technologies, and the product is called a codec. Codec stands for compression
and decompression. So, in essence our technology allows video to be compressed to a much
smaller size by the developer of the video, and then decompressed at the user’s end
while playing back video with a higher quality than a non compressed file for a given
bandwidth. Codecs are the engines that power video, as we know it today. What primarily
sets codecs apart from one another is their ability to maintain the quality of the video
as bandwidth decreases. Factors such as complexity, which affects power consumption and
processor requirements, are also key differentiators. Our TrueMotion codecs are regarded
as the best in the world, and these have about 1.2 billion deployments with high-profile
customers such as Adobe, Skype, AOL, and Viewpoint. While we maintain our commitment to
our best-of-breed codecs, with our pending acquisition of Hantro Products located in
Finland, we will add the ability to support leading standards based codecs for our
solutions that are built on codecs. These solutions are a range of software products that
fulfill the ‘any video, anywhere’ promise. We also market our Flix® brand of
encoding and publishing tools, which allow our customers to create and publish videos for
web, mobile devices, and other applications. Suffice it to say, we offer the broadest line
of products that allow practically any video file to be purposed or repurposed for any
desired application. We have these products for consumers, professional users,
enterprises, and service providers, with a varying range of features and capabilities for
different markets. We also provide these for desktops and server side encoding, and across
Windows, Linux and Mac platforms. At a more evolved solution level, we have a complete
end-to-end system for mobile video, called our TrueMobile® solution, that is the most
efficient mobile video system presently available and it is currently in trials by China
Mobile in ten provinces. As part of this solution, we have a player that is deployed
on mobile devices, and going forward we have playback and decoding technologies that are
being implemented in chipsets by major semiconductor houses so that consumer grade devices
like set-top boxes and DVD players will be able to play video in high quality.”
CEOCFO: How do you reach your
customers?
Mr. Joll: “As I mentioned earlier, we have been
established as a leader in video codecs for more than fifteen years, and companies that
are serious about video know us. As we have broadened our solutions for consumers and web
media companies, a lot of our customers find us through word of mouth, including through
various influencers on the web. We also have a growing sales force and channel partners
that conduct business development and sales for us. Today we are also more proactive with
advertising and public relations than we have historically been.”
CEOCFO: Is it proprietary
technology, is it a better way of using the technology; what sets you apart from the
competition?
Mr. Joll: “We became the de facto standard when
Adobe (formerly Macromedia) chose our technology for Flash video, the Adobe® Flash®
Player 8. We provide higher quality, better licensing terms, and we use less bandwidth, so
that is what sets us apart. Now what is happening in the industry is the standards based
technologies have established themselves in certain markets, such as video-on-demand. And
while we continue to aggressively market our proprietary technology and help introduce new
service paradigms, such as what we have done with Skype, with the the pending Hantro
acquisition we will support customers for standards based technologies to the extent that
we provide value to the industry and derive synergies with our existing products and
technologies. Therefore, we have a combination of proprietary technologies ideally suited
for the Internet and mobile applications, and the standards based technologies that are
used by some in the broadcasting industry. With the pending acquisition of Hantro, we are
further expanding our presence in the standards and device space.”
CEOCFO: Are acquisitions part
of your strategies going forward?
Mr. Joll: “The industry is moving fast and there
are many diverse elements converging. These elements are what I alluded to earlier,
essentially different technologies and applications that need to work together for a
complete consumer solution. Acquisitions are a logical way for us to create synergies and
stay ahead of the curve and grow. Both as a growth strategy and competitive strategy, we
look at where acquisitions make sense.”
CEOCFO: Is it time for the
industry to consolidate?
Mr. Joll: “In a sense, while video has been
around for a long time, this is a new industry. Just gauging by the venture capital
investments, number of startups and the innovations in service paradigms and business
models, this is the start of a new industry. I am referring to our customers and potential
customers who are media companies and service providers. Consolidation is a natural
progression. In some ways, it has started when you look at Google’s acquisition of
You Tube, and Comcast’s acquisition of the Platform. That said, I consider the
industry to still be in a nascent stage with more companies entering the market than
leaving through acquisition, consolidation or otherwise.”
CEOCFO: What is the financial
picture like for On2 today?
Mr. Joll: “Positive. We are experiencing
double-digit revenue growth. Our cash reserves have been growing. We are optimistic going
forward because the market opportunity is certainly there, and we are positioned even
better.”
CEOCFO: You mentioned using
distributors in various places; in what parts of the world are you looking to do that and
what is the growth strategy internationally?
Mr. Joll: “Internationally there are markets that
are either very aggressive, such as Korea and Japan, and those where the opportunities are
untapped, such as India and China. We put an agent in Taiwan, an agent in India; we have
distributors and resellers in Korea and Japan. Japan and Korea are the leaders in terms of
video service deployments. India is a growth opportunity because there is tremendous
demand and the infrastructure is inadequate. We address the issue of quality in
bandwidth-constrained environments, and that is a market that needs our technologies. We
are exploring what we do in South America and we already have a good presence in Europe.
With the pending acquisition of Hantro, they also have an international sales force which
will further extend our reach into international markets.”
CEOCFO: Is your management team
in place?
Mr. Joll: “We have added and defined management
roles over the last year that are more in line with our business. We are growing fast in a
fast moving industry, and we are constantly adapting to make sure we are firing on all
pistons. With the pending acquisition of Hantro, we will have a bigger team and broader
scope for the management team.”
CEOCFO: Please tell us a bit
about Flix Publisher.
Mr. Joll: “I am glad you ask, because Flix
Publisher is one of those amazing, innovative products that meets the needs of the time.
Flix Publisher allows anyone to become a video producer and publisher without any prior
knowledge of video publishing and without any infrastructure or capital costs. It is
provided by service provider as a web page to a user, where the user can drag and drop a
video file that, say, they shot with their camcorder. Instantly, the file is transcoded
right on the user’s desktop in accordance with the parameters that the service
provider has predefined, and uploaded to the service provider and published instantly. It
fits perfectly with how the user generated content sites and social networking sites run
their services, but without all the capital costs and operational complexities, they have
today. The same holds true for live video with Flix Publisher Live.”
CEOCFO: Why should investors be
interested and what might they miss about On2?
Mr. Joll: “We are poised at the cusp of
tremendous growth in the video industry. In terms of our strategy, we’re aiming at
the largest addressable market; cameras, cell phones, PDAs, connected over broadband, 2.5
and 3G, Wi-Fi, WiMax. We are focused on getting our technology into the vast array of such
devices. If you look at the mobile set, a billion hand phones are shipped every year. By
2010, 70% of those are going to be video enabled and we as a company are well positioned
to address that market.”
CEOCFO: What do you see as the
challenges in accomplishing your goals and how are you ready?
Mr. Joll: “Challenges are inherent when
opportunities abound in an industry such as this. The challenges in the industry itself
are that there are new service and business paradigms being tested. Some will prevail;
some will fall by the wayside. It is too early to tell. The fortunes of some of our
customers will also rise and wane accordingly. There is also resurgence in format wars if
you have been following the developments by some of the major companies. This
development has certainly been fueled to some extent by the success of Adobe’s
VP6-based Flash video. It is easy for us to remain proprietary with our TrueMotion video
as we have done in the past, but we also have to recognize many of our customers need to
support multiple formats. In some cases, such as mobile video, the market is still in a
very early stage even though technologies are ready. It takes patience and persistence to
stay the course, because these are huge investments and commitments our customers are
making, and we need to understand that. As we move up the value chain in terms of
providing either embedded solutions or system solutions, we are also going to find bigger
companies also in the running. We are approaching such opportunities so that we don’t
rule out strategically partnering with others.”
CEOCFO: What should people
take away from this interview?
Mr. Joll: “We are at the heart of the
video revolution. We are the company poised to deliver any video anywhere. Our presence in
the market is larger than our size would indicate through our relationships with marquis
customers like Adobe, AOL and so forth. We are connected with the Who’s Who of
players in the industry to make the emerging world of video a reality.”
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