Sonic Foundry's Mediasite Makes Life Easier

by: Jeffrey Walkenhorst, CFA
As we enter 2010, we ask who on Earth needs Sonic Foundry's (NASDAQ:SOFO) Mediasite? Our answer won't be a surprise if you've been following our Mediasite franchise thesis. As Webcasting becomes evermore pervasive, we submit that everyone can benefit from Mediasite -- from schools to corporations to government organizations to hospitals and all of their respective end-users.

Of course, there are a number of Webcast technologies and providers in the market, including Thomson Reuters (NYSE:TRI), Nasdaq OMX's (NASDAQ:NDAQ) unit, PR Newswire's "MultiVu" /VideoNewsWire, ON24, TalkPoint, Veracast, Wall Street Webcasting, and Accordent. However, we suggest that comparing most solutions to Mediasite is akin to comparing apples and oranges. For those interested, here are some events captured with other solutions (registration may be required to view various Webcasts):
  • Limited Brands (LTD) hosted a "2009 Investor Update Meeting" on 10/27/09 -- link here (no registration required). The event was captured using PR Newswire's "MultiVu" /VideoNewsWire platform. PR Newsire is a subsidiary of United Business Media Limited.
  • Yahoo! (YHOO) hosted an Investor Day on Wednesday 10/28/09. Information is available here, including Webcasts captured by Nasdaq OMX's (NASD) unit. We note that the morning after the event, we received the following unfortunate and untruthful message: "The live event you are trying to access has not started yet. Please try again at the announced time of the event" (untruthful as the event occurred the prior day). We presume the delay was related to post-production editing work, primarily manual slide synchronization with audio/video (viewing note: unfortunately, slides pop-up in separate windows = not optimal!) . We're patient investors (and analysts), yet there's no reason any presentation should be delayed for a day (or more) after a live event when Mediasite technology can make presentations available immediately post event (also better for "REG FD" purposes).
  • Vistaprint (VPRT) uses Adobe (NASDAQ:ADBE) ConnectPro to deliver pre-recorded earnings presentations (audio/slides only - F1Q10 link here).
  • Nokia (NYSE:NOK) hosted its annual "Capital Markets Day" on 12/02/09 -- link here. The event was captured by Thomson Reuters.
  • eBay's (NASDAQ:EBAY) CEO John Donahoe presented on 12/07/09 at UBS's Global Media and Communications Conference - link here (audio/slides only). UBS used TalkPoint to capture the event.
  • Charles Schwab & Co. (NYSE:SCHW) posts regular "Market Snapshots" using On24's platform -- latest from early December with Liz Ann Sonders, Chief Investment Strategist, can be found here.
  • Lastly, some companies use Cisco's (NASDAQ:CSCO) WebEx solution. While WebEx may be optimal for group collaboration, we see the solution as suboptimal for lectures, town-hall-type CEO presentations, conference events, or any other one-to-many situation. Needless to say, we dislike the extraneous WebEx pop-up window that says "Playback in progress - Do not close this window, refresh this Web page, click Back or Forward, or click a URL in another window. If you do so, playback will end". Look familiar? Scary, right? As with post-event delays mentioned earlier, such a window and warning message are NOT necessary.

Thus, there is no shortage of competitive Webcasting solutions/providers, some of which look similar to Mediasite. Still, in most cases, Mediasite's strengths are readily apparent:

  • Ability to rapidly capture and publish content - any Mediasite Webcast capture is automatically synchronized (indexed) on the fly and, if desired, ready for on-demand playback immediately following the event. Most other solutions require manual/human post production (i.e. following the event, someone must manually tag/index each slide to the appropriate audio commentary, which takes time).
  • High resolution graphics with low bandwidth consumption.
  • Ability to capture and automatically integrate additional VGA content (beyond solely PowerPoint slides), including Web browsing and ancillary videos/commercials.
  • Superior end-user navigation and overall viewing experience (with new iPod-like playback available - see this link for info, samples).
  • Ability for end users to email presentations.
  • Solid catalog management on back-end
  • Mobile handset playback using Silverlight players (check with Sonic Foundry for information on this topic).
  • Integration with social networks.
Sonic Foundry hosted a Webinar last fall that featured Noble Financial in which the broker-dealer explained why they use Mediasite to capture all of their events:

Judging A Book By Its Cover: What Does Your Webcast Say About Your Event and Your Brand?

One of the slides included a quote from Wells Capital Management:

This is a true statement as Noble Financial is mostly alone among Wall Street users of Mediasite. Further, we've watched hundreds (thousands?) of Webcasts in recent years and concur with the comment from Wells Capital Management: Mediasite is a cut above all other solutions and current practice by Wall Street firms.

To date, such events have not been Mediasite's bread and butter because of legacy relationships and technologies related to the aforementioned providers. For example, aside from close ties with financial services firms, many companies such as Thomson Reuters invested significant financial and human capital through the years to build the company's Webcast solution (StreamingMedia article here on this topic). Finally, there is a cost element, too, as including video adds incremental cost relative to audio/slide only conference presentations (although Mediasite can be used for audio/slide only event capture).

So, to come back to our initial question: who on Earth needs Mediasite? In our view, everyone stands to benefit, including providers such as Thomson Reuters,, Wall Street Webcasting, Veracast, etc. Companies such as Limited Brands, Yahoo!, Vistaprint, eBay, Nokia, and Charles Schwab would also benefit (*as YHOO and EBAY shareholders, we think shareholder value would be enhanced by using Mediasite for corporate communications, internal and external). Importantly, end-users would also benefit through a more efficient and user-friendly delivery mechanism.

The wonderful news is that good things can't go unnoticed forever, which is why Autodesk (NASDAQ:ADSK) relies on Mediasite for its annual Autodesk University and why Nestle used Mediasite for its annual nutrition symposium. We believe more persons are "getting the memo" and legacy relationships may be changing -- recall what Sonic Foundry relayed on the last conference call (text from here):

  • "The events services business is beginning to see a resurgence in terms of interest and activity levels. This involves continued penetration in hotel, conference and exhibition markets. The teleconference sector is beginning to evaluate and utilize Mediasite services and offerings."

Although shares of Sonic Foundry fall into the speculative camp given no history of positive earnings or cash flow generation, we find valuation support in our private market value analysis. Further, we continue to see Mediasite developing into the global standard for rich media capture and Webcasting. As this occurs, Sonic Foundry's recurring revenue and services business component will keep building, much like a traditional software company, and operating leverage should arrive. While forecasting results for any company -- especially in the technology space -- can be perilous, we believe the earnings and cash flow inflection point should occur in fiscal 2010.

Disclosure: long SOFO, YHOO, EBAY.

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