Pinnacle Systems was emulating the early days of Silicon Valley pioneer, Ampex.
It had experienced tremendous growth, then nearly closed, after which it created an outstanding new product. Finally it had become overly reliant on one customer. Sales of its Alladin technology to Avid accounted for more than 40% of sales.
Company co-founder Ajay Chopra recalls:
Of course Pinnacle was very successful due to the Alladin deal with Avid but it was something problematical. A significant percentage of our revenue was coming from one client. How do you expand your portfolio without starting to compete in the professional market against your OEM partners? You have this great core technology at the heart of your company, where else can you sell it?
VP of New Business Development, Bill Loesch had an idea. Research available to the market from Sony, estimated that 60% of America’s 25 million camcorder households owned personal computers.
Loesch wanted Pinnacle to create an editing product for under $500, as CEO Mark Sanders recalls:
Bill nagged and nagged and nagged me about it. To which I would reply that ‘the consumer market is too different, we don’t have the distribution channels, we don’t have volume manufacturing or knowledge of that market, it would be a big stretch. Bill just smiled and told me ‘We can do it’. He convinced me.
Pinnacle founder Ajay Chopra recalls:
We looked at the low-end consumer market since our OEM customers such as Avid and Media 100s weren’t in this market. It seemed obvious that there was a real opportunity there.
I saw things very differently to Mark but one of his strengths is not to dismiss ideas he doesn’t agree with. I remember saying to him, “tape based editing is dead, its history, we should make something new”, and he got so mad and yelled at me “What the hell are you talking about? Tape editing isn’t dead!” In the end we were both right, tape based editing was going to be around for a while but the writing was definitely on the wall.
Sanders gave Loesch the green light to create a Consumer Products division with its first product to be a non-professional video-editing package, code named Alibaba.
Over at Digital GraphiX Inc, Ivan Maltz was keen for a change. Bill Loesch recalls:
We had looked at buying the Deko group and of course Ivan Maltz was the lead engineer there so we got to know each other. We exchanged ideas with Ivan and Keith Thomson and persuaded them to leave the east coast and Deko to come to Pinnacle. It was the right time for them and for us.
Over several discussions Bill showed us the business plan for Alibaba, I think I still have it in a box somewhere at home! It was a very exciting idea and on the strength of it we left New Jersey for California to help start a new group. I was always been on the edge of video and editing and always around it from my days at Dubner and then Grass Valley with the ImMIX guys but now I was going to be very much part of it.
We got to Pinnacle, and we had a clean sheet of paper!
We looked around at what was available and there weren’t many consumer products. There was MGI’s VideoWave and a few others and although I had no background in editing and didn’t know what an AVI file was, I knew about video and I knew graphics and I knew how to make applications.
Bill Loesch recalls:
As soon as they arrived we started writing a consumer non-linear editor. I think it’s fair to say that Mark (Sanders) hedged his bets here. He figured that if the consumer play failed, Keith and Ivan were two top-notch professional video engineers who could fit into our professional organization.
Ivan Maltz worked on the systems software, and Keith Thomson the user interface. Maltz continues:
We actually set ourselves the goal of getting an ‘Editor’s Choice’ review with PC Magazine but that was going to be difficult because at the time they didn’t even have a video editing category!
Loesch is candid in his assessment.
There were a lot of people on the board who thought Mark Sanders was crazy.