CapEx versus OpEx

Dan Rayburn writes in his "Business of Online Video" blog that video hardware vendors are struggling in this environment.

While most of the vendors in the online video industry has fared ok in
these economic times, vendors selling broadcast video based hardware are taking
a beating. While many of these vendors said they saw a big decline in sales in
Q4, the real impact has been taking place nearly all of last year. Combined with
the aggressive-competition driven pricing pressures, companies like Sony,
Panasonic, Avid and Thomson are really feeling the pinch.

Rayburn notes that capital expenditures are difficult to justify.

While the retail price on many video based hardware units has come down, it's
still a big CAPEX expense that many companies simply can't afford with the
smaller budgets. This is not only the case for broadcast video hardware, but
also for webcasting based hardware, video conferencing gear and many other
pieces of hardware in the video ecosystem.

One of the great advantages of a SaaS software solution is that it provides flexibility in the pricing. A buyer can structure the deal to license the software annually and call it an operational expense.

IVT has entry-level price points for its software that allow a media department to begin webcasting across the enterprise for less than $7,000 for an annual subscription.

Of course, a buyer with a strong cash position that would rather make a significant investment upfront in a solution it can amortize over a period of some years, then the provider can structure the deal for a larger upfront commitment and smaller annual maintenance costs.

Another point: software scales, while entry-level "black box" solutions can become obsolete when needs / volumes evolve.