Part of a 1998 year-end letter from the Chairman of Ampex Corp.: ampex.com
Turning to our strategy for Internet video-based business expansion, I would like to restate the point that Ampex is an electronic imaging company. We have learned how to take electronic images and audio, process, manipulate, compress and store them, and to make them look and sound better. I wrote last year of our belief that the Internet has the potential to become the key video delivery medium, eventually eclipsing television, DVD or VCRs, but that the timing of this occurrence is uncertain. Since my letter of last year there has been a key market development that makes the time for Internet video, if not now, then very soon indeed.
This development is the dramatic growth in streaming video software. Ampex and other video companies have used streaming in video applications for many years. The technique has now been adapted for the Internet, which began its life as a text-based network. The addition of a graphical layer to the Internet created the world wide web and gave the technology much wider appeal. The arrival of streaming video could well be the next advance that dramatically broadens Internet usage. The required software is available from various suppliers and the versions offered by two companies in particular, Real Networks and Microsoft, are available to millions of PC users now, and more downloads are occurring everyday.
Many individuals and companies believe that the key to success in Internet video is the availability of high speed (broadband) Internet access because, until then, the network cannot deliver acceptable video. We think that streaming software is the real revolution because it delivers video today whereas broadband delivery is primarily an evolution that will make the video look better over time.
Internet video is not television; the images are not that good. We believe that Internet video will evolve as a distinct medium, incorporating elements of television, the telephone and the printed
word, but different from all of them. This medium will require specialized production values and techniques to maximize its impact. We believe that in this environment, video will be only a part of an experience that includes text, audio and the interactivity of the Internet, but makes them more compelling and effective.
Proper targeting of Internet video markets will be important, as will economies of scale in certain areas. Our strategy is to target relatively small groups of highly interested consumers, to assemble a
large number of such groups and to reach them through web narrowcasting. In this way we can justify an organization to produce, brand and market our collective content on a major scale. Finally, and importantly, we foresee an opportunity to use Ampex Data Systems' and MicroNet's image storage expertise to archive all of our material, thereby building a content library that will have long-term value, much as television, film and information libraries do today.
The period of time to establish an early lead in this area may be short, so we accelerated our start-up plans with three strategic investments between September 1998 and February of this year. The first, Reiter Associates, Inc. is a small, highly talented organization that provides various services including e-commerce support to businesses operating on the world wide web. Our strategic interest in Reiter stems from the possibility that e-commerce will be the most important source of profit on the Internet, and that it could be useful to have in-house expertise in this field. Our initial investment represented 20% of Reiter's stock with an option to acquire a majority. We will be exercising this option after the end of the first quarter and Reiter will become a majority-owned subsidiary of Ampex at that point.
Our second and third strategic investments are targeted more directly at delivering video over the Internet. TV onthe WEB, Inc., in which we invested in January 1999, provides special interest web video "channels" for sponsors that are primarily business-to-business oriented. It is a full service operation that can provide services ranging from production and web distribution to live webcasts and advertising sales.
Alternative Entertainment Network, Inc., in which we invested in February 1999, is among the more successful on-demand streaming video web sites. It produces and aggregates content that is generally entertainment oriented and consumer focused. AENTV.com was recently listed by the influential magazine, Broadcasting & Cable, as one of the "10 Great" streaming video web sites in the country. In both of these cases we have acquired a 20% interest with the option to acquire a
majority so that they may become, as with Reiter, majority-owned subsidiaries of Ampex in the future.
In addition to these strategic investments and acquisitions, we have begun construction of our own Internet video production and distribution center in the Los Angeles area to be followed closely by a similar operation in New York City. These facilities will give Ampex a base for its own set of "channels" yet to be named. These new channels will be complementary to those of AENTV and TV onthe WEB which will develop as independent brands. We have recently hired experienced professionals, based in New York, to head the marketing, programming and advertising sales functions for our own channels and to coordinate with AENTV, TV onthe WEB and other potential affiliates.
While the Internet is an ideal vehicle for delivering content to the whole nation or across the globe, the availability of content tends to be concentrated regionally; for example, entertainment in Los Angeles or fashion in New York. Accordingly, the efficient gathering of Internet video content requires us to be in the places where the interesting content is. With operations or affiliates in the New York, Los Angeles and Washington, D.C. areas, Ampex is already present in three of the world's key media and content centers and we will be adding more of them in this country and overseas.
Unfortunately, a letter such as this does not lend itself to a detailed discussion of such a complex topic, but we will be making announcements as our plans unfold. [deleted]
Yours sincerely,
Edward J. Bramson
I think this guy knows what he's talking about. No, I don't have any shares of Ampex, but I'm looking at it. |
