SMALL CAP IDEAS: Blackbird sees the contracts flying in

While the past five months have seen the unfolding of an international health emergency with a very human dimension, when Blackbird boss Ian McDonough looks back on lockdown, he may remember this unprecedented period for different reasons.

For around the end of March is when the tectonic plates started shifting in favour of the company he heads, whose cloud-based editing technology could eventually threaten the dominance of the two leaders in the field – Adobe and Avid.

This period of isolation has proved a remarkable leveller for the challenger, which was built for the sort of remote use that has been forced upon the broadcasting profession along with the population at large.

The clampdown has led to a revolution in work habits. It has chased production staff out of multi-million pounds editing suites and onto kitchen tables and into spare bedrooms. So being able to work remotely yet collaboratively is imperative.

McDonough assesses recent events less with relish or satisfaction, and more with a sense of mild sense of disbelief.

‘Since March, the conversation has been around remote production; something we are amazing at,’ the Blackbird chief executive told Proactive.

The company’s technology, unlike the competition, was specifically designed to work natively in the cloud.

It has a codec (a compression-decompression) algorithm developed by director of R&D, Stephen Streater, that creates a system able to operate at very low bandwidth without ‘blocking or blurring’, making online video editing ‘extremely agile’.

The company’s JavaScript toolset, meanwhile, delivers a ‘fully-stacked’ editing suite that’s available instantly on web browser with no need for download, plug-ins, configuration or installation.

While other systems, such as Adobe’s Premiere, exist in the cloud they weren’t originally built for it.

And there are frustrations to using these rival systems, particularly around transferring files, that infuriate the professionals grappling with these legacy products from home.

A welter of recent contracts for Blackbird, from businesses such as Sky News Arabia, the US National Hockey League and Riot Games, the maker of League of Legends, suggests there is plenty of demand.

Under McDonough the firm has reset the commercial strategy with a focus on OEMs – original equipment manufacturers – where Blackbird is ‘part of an end-to-end solution.’

Simply put, it means the digital editing suite is one of a set of products sold by a third party to broadcasters. This ‘channel approach’ broadens significantly the firm’s sales reach in an effective and cost-efficient manner.

‘We can scale much more easily and we don’t usually have to meet the end customer,’ said the Blackbird chief.

‘We are doing deals that are replicable and simpler generally. It’s a much more scalable proposition.’

The next stage of the company’s evolution is for the Blackbird technology to fly the nest, as it were, by making it ‘native’ within the cloud environments run by giants such as Amazon, Microsoft and Google.

This then makes it easier for customers to scale up and scale down the platform’s editing capabilities.

‘There’s still a little of work to be done to get us completely native in the public clouds,’ said McDonough.

‘But, once we’ve done it, customers of these public clouds can turn Blackbird on like a tap, and we’re much more scalable up and down.’

Current estimates suggest Blackbird has a small slice of a market worth over $1billion a year; but it is one that is growing strongly driven by the proliferation of video content on the web and TV.

A great example is football. Thirty-odd years ago the rights holder to top-flight games, the BBC at that time, might edit down six to eight games for the Match of Day programme late on Saturday. Job done, everyone down to the pub for last orders.

Today those games, spread over four days (Friday to Monday), will be sliced and diced by broadcasters around the world, cut down for marketing on social and topped and tailed by individual clubs for their dedicated channels, Twitter feeds and showreels.

This tends to make redundant highly specified, capital-intensive kit. Ease-of-use and portability are more important in this digital age where you can expand capacity instantly.

‘The editing market is literally mushrooming,’ said McDonough, referring to the voracious demand around sports, news and entertainment.

Turning to the financials, which will be updated with the release of the company’s interims on September 7, the Blackbird chief executive says cash burn has been ‘brought down significantly.’

The prelims in April revealed the company had funds of just under £8million at the end of last year – which was deemed by the market to be more than enough to get the business to break-even.

Investment is expected to flow into sales and marketing as the commercial push continues and into research and development to make the Blackbird platform ‘interoperable’ with as many systems as possible.

At some point, Blackbird may look to take the technology at the heart of its system – the codec mentioned earlier – into adjacent areas.

That might mean licensing the IP out to other tech companies that offer video solutions – the current fad for video conferencing is a case in point.

But that’s for another day. In the meantime, McDonough and the team are focused on building on the additional momentum the coronavirus (COVID-19) pandemic has provided, with more significant contracts of the type signed with international sports group IMG and TownNews.

‘I sense we are at an inflexion point,’ said the Blackbird chief executive.

‘Companies are wanting to do larger and more wholesale changes to their workflows to reduce their technological footprints, and costs. We can help with that.’