NOVEMBER 29, 2022

CapEx vs. OpEx in the Production Evolution

Image of cloud video editing software as part of production evolution

The move from CapEx- to OpEx-focused business strategies has gathered momentum rapidly—and with good reason. The “on demand” economy streamlines the supply-demand process, providing consumers what they need exactly when they need it. People expect immediacy, including from the media. Clients are pushing for faster turnaround times, and technology is improving to make that happen.

Here, at Avid, we think about cost, efficiency, and how we can provide support. Consistently reaching out to you, our customer community, for feedback and to hear about your experiences gives us the information we need to know what to innovate so that you can advance and grow. Your success is our success.

This article is part of a series of three articles examining the evolution of production and the economic and operational benefits of moving content creation to the cloud. The articles are based on a whitepaper we published, Avid | Edit on Demand - The New Evolution of Production, and explore trends driving companies to the cloud, why remote post-production workflows make operational and economic sense, and changes impacting the industry overall.

Investing in CapEx vs. OpEx

Post-production companies have traditionally relied on and invested heavily in CapEx, including pricey on-premises servers, workstations, studios, and more. OpEx was considered day-to-day-only expenses, like salaries and electricity. But this new era of remote work, cloud reliance, and the SaaS tech boom have completely changed the playing field and led to OpEx driving business, while CapEx takes a back seat.

The reason is simple. Investing in OpEx gives companies more flexibility, scalability, and often more savings. Even though the move toward more OpEx had begun prior to the pandemic, the forced global experimentation of cloud-based SaaS and DaaS technology during the pandemic has led to widescale adoption of OpEx as a sustainable investment model. Investing in new buildings or other physical assets when much of the workforce is remote doesn’t pay off. With studies revealing that companies that offer remote work options produce happier, more productive employees, the long-distance work-life balance model is likely to remain.

Businesses that rely on a CapEx-forward model face more challenges as technology advances. Post-production houses invest in data centers and often overprovisioned hardware that depreciates over time as new technology renders it obsolete. Even in a virtual space, regularly unused capacity can drain profits. Studios must bring on dedicated information technology (IT) employees, which, in a tight labor market, is a challenge to hire and retain. Resources that may not be fully educated in niche industry needs can be expensive as they oversee production infrastructure maintenance. Additionally, streaming and cloud connectivity is becoming increasingly important, and securely connecting an on-premises data center to the cloud requires significant expertise and manpower.

Alternatively, OpEx enables companies to access greater scalability, efficiency, and adaptability—traits that proved crucial during the pandemic and will only become more important and relevant with digital acceleration. Adopting a good OpEx and cloud-based business model means not having to scramble to retain IT staff to update physical server rooms and technology. Remove the go-between entirely and get tech support directly from the team that made the product. Focus on being a production studio and not a technology company, improving flexibility and work-life balance, which means happier, more productive staff.

What happened when this post firm made the move

For this post-production company, moving from an on-premises model to video editing in the cloud changed everything. Chris Rash at Sawhorse Productions and Luminosity Entertainment was supervising a tier one low-budget collaborative feature across both companies and looking for a remote solution that would fit within the budget, with all editors located in the Los Angeles area. He considered renting an edit studio, but with a limited budget, contacted local Avid representatives, who suggested the team consider Avid | Edit On Demand, which was just over half the price of a physical edit location.

The team was able to avoid the LA commute while still utilizing the full collaborative capabilities of Avid editing solutions. DITs encoded and uploaded footage directly to the Avid | Edit On Demand cloud service, and the editors were able to work from there and share with the director live.

“Our editors worked seamlessly; they really didn’t need any set-up at all,” Rash says. “It was such a smooth transition for them... It’s a little more than half of what it would’ve cost us to rent a physical space for the same amount of time.”

Benefits of an on-demand approach

The positive outcome Rash and his team had with Avid | Edit On Demand is one that is being experienced by many others.

“During a remote preview, I switched from our on-premises data to the Avid | Edit On Demand system, and the director didn’t even notice anything had changed,” says Mitsuo Nishio, editor, Imagica Entertainment Media Services, Inc.

Avid | Edit On Demand allows you to quickly take on new projects, cloud expertise is not required, you can collaborate remotely with distributed teams, share and store media securely, source talent from a broader pool, and have a more sustainable operation. Software as a Service (SaaS) enables you to fluidly adapt to your clients’ needs, scale services up or down as needed, and leave issues like capacity optimization and technology troubleshooting to providers, cutting IT and data storage costs significantly.


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Where Is the Production Evolution Headed?

Changing trends are impacting the post-production industry, causing challenges and opportunities. See how Avid | Edit On Demand is providing solutions.
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The Cloud’s Role in the Production Evolution

Staying current on post-production trends, including cloud based video production, is key to success. Get details on what’s driving the industry.
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