TWST: We'd like to begin with a brief historical sketch of the company and a picture of the things you are doing at the present time.
Dr. Simler: Scopus is a public company traded on NASDAQ. It went public just three years ago. Scopus is in the business of developing, producing and marketing digital video for broadcast-type applications. It sells professional solutions for content contribution and distribution and video delivery to the home, including reception, video processing, distribution, and video networking equipment to cable operators, satellite operators, broadcasters and IPTV. The company is very active in pretty much all of these areas. In the last few years it's been growing rapidly, I would say in excess of 20% per year in all of its markets and has definitely been one of the key players in the market, with market share somewhere between 5% and 10%.
Today, much of what is really driving our business is what's happening out there with digital video, which you are seeing more and more of everywhere, in the emerging markets and, of course, in major markets such as the US. Currently, the US market is very much about digital video. Half of all cable subscribers and 100% of satellite subscribers have moved to digital. Verizon and AT&T are starting all their new subscribers with digital.
But if you go out to the rest of the world, specifically in Latin America or Asia, that digitization process is only beginning now. It will continue for the foreseeable future and these markets will be very, very active ones for us.
TWST: What have been the principal drivers for the success of your company?
Dr. Simler: There are several things. I think that in general, our success factors differ in the different theaters. In our more traditional markets, which have been markets outside of the US, to start the process of digitizing video you need to build a system in which you take the analog signal and compress it, then distribute it and then receive it. This continues until you reach your subscribers' homes. We offer systems that can do all of the above. So we come as the experts to customers who know nothing about this process. We come with a system in which everything is made by us and we are the resident experts. We help the operators and broadcasters get where they need to go and serve as a one-stop shop; this level of end-to-end service and expertise is very, very important to our customers. The ability to have one number to call was very important.
TWST: What are the chief items on your agenda as you look out over the next two to three years?
Dr. Simler: I think the first item on the agenda at this point is looking at what's happening in the market. Okay, let's call it a challenge and figure out how this will affect our business. I can tell you that it's not clear how it will affect the business, because everybody I talk to has the same question, nobody has the answers. How deep is this recession or whatever you call it going to be, how long will it last, which segments will be affected, etc.? So as we do our budget for 2009, we're trying to think whether we are going to see any growth in 2009, or is it going to be flat, is it going to decline. So that is, I think, the first order of business I'm looking at. But let's put this aside for a second.
The other challenge that we must meet as we look forward, of course, is determining where the video business is going. I mentioned before the mobile aspect of it. Mobile, of course, includes video to your handheld, but also mobility in the sense that you'll be able to watch whatever video you want to watch not just in your living room or the bedroom or the garage, but at large. In order to meet demand for this kind of service, which will happen in about three years, maybe five, the networks will need to have support for certain formats and our customers will need a diversity of processing to prepare content for consumption in different types of end devices. Your experience watching HD on a 57-inch screen is very different from watching it on a small handheld screen or on a PDA or, say, on a laptop. So the method of how it is delivered and the things you would be able to do with it publicly are different. So therefore it will need to be prepared differently and thought of differently. And, by the way, how do we enable our customers to make money while doing all that? Some of the answers are with personal advertising and other kind of methods that increase ARPU.
TWST: With all this, it would seem that joint ventures, alliances, partnerships and things like that will be important.
Dr. Simler: You're absolutely right. We're now talking about the global issue here. We're talking about the kind of infrastructure that will require multiple players to work together. We do collaborate today with a lot of other vendors in our space. For instance, when you send video, you don't send it in the clear, you basically encrypt the video so that people won't be able to just put a satellite dish on their roof and pull it off the sky and see the content for free. So that entails us working with companies like NDS or Nagra or Irdeto or Conax or whoever it is on encryption. That's one example. And, of course, you also need decryption on the receiving side.
In addition, there are companies that specialize in content with metadata, that actually enter content or information about the transmitted content. So the processing of that content — that particular metadata — with our devices is very, very important. Another example is doing splicing for ad insertion. Digital ad insertion also means that we need to collaborate with companies like SeaChange or SEACOR who make video ad servers. Digital advertising has soared and we have a device that inserts ads in the middle of the program, so we need to work in tandem with these guys. So these are just examples.
Now for going to video for, say, the mobile device, there are different formats. There is a format that's made by Adobe, there's a format made by RealNetworks or Microsoft. When we start looking at all that, we need to collaborate with these guys as well. I could go on and on with the amount of collaboration that's needed. Thank goodness, a lot of it is standards-based, which is obviously very, very important for this industry's growth. But in addition, it's also a very good model for us, it's been our growth strategy to have one or two good partners with which we work to make sure that our road map matches that of our customers and that we are able to offer a tight package to our customers.
TWST: What would you reasonably expect things to look like at Scopus in four or five years?
Dr. Simler: As we look at the analysts who cover us, they expect us to finish the year at around $75 million in sales. We are looking forward not for five years, but actually to just two years from now, in 2010, when we plan to break $100 million in terms of revenue. So if I look five years down the road, I would love to see us be in the $150 million range, maybe even more, a million-dollar company that is very active. At that point, we'll be working on emerging application of video to what I call the "four anys": any content, anytime, anywhere and on any device. And the idea is that I'd like to see us be part of leading this particular development. Maybe we'll call it a revolution without being too dramatic. What that means is that we are looking at things as far as what I'd like to see us do, and will be there with some of the innovations that will help propel that transition.