Bringing Webcasting to classrooms

Rimas Buinevicius
Chairman and Chief Executive Officer of Sonic Foundry. Buinevicius joined Sonic Foundry in 1994 and helped take the company public in 1998.
Age: 45
Hometown: Chicago, Ill., but has lived in Wisconsin for 23 years.
Family: Married with a 7-year-old son.
Education: Received a bachelor's degree in electrical engineering from the Illinois Institute of Technology, Chicago; a master's degree in electrical engineering from UW-Madison; and a M.B.A. degree from the University of Chicago.
Experience: He spent the majority of his professional career in various research and engineering development roles in the biomedical, defense and industrial control industries before joining Sonic Foundry.

Sonic Foundry, Inc.
Founded in Madison in 1991 as a multimedia software company specializing in audio software, Sonic Foundry (NASDAQ: SOFO) went public in 1998. In 2003 the company reinvented its product line and business model, selling off its proprietary personal computer software to Sony. It now specializes in Webcasting technology for educational and business institutions in the U.S. and internationally. Its chief product is called Mediasite. It allows presenters to automatically bring together a variety of media -- including video, images, Microsoft PowerPoint presentations, links and graphics -- into an online Webcast and interact with remote viewers.
Address: 222 W. Washington Ave., Madison
Web sites: www.sonicfoundry.com, www.mediasite.com
Employees: 94
Sales: $16.5 million in 2007, projected $17 to $18 million in 2008.

Q: Who uses Sonic Foundry's products?

A: Sixty-five percent of our market is higher education, including well-known universities around the country. Approximately 25 percent is corporate. Then the remaining balance is government, K-12 schools and a smattering of health institutions and uncategorized international work.

We're really dealing with a transformation in university education. Forty-two to 45 percent of higher education students are now adult learners. They're looking for flexibility -- taking classes online, getting retrained, all this -- so you have a huge, unpenetrated infrastructure in terms of universities that are doing things the old-fashioned way. We're seeing now that, both in the U.S. and worldwide, education is changing. The market is really being driven by the consumer, who turns out to be the student, who is saying, "I want to go to the university where I have the ultimate flexibility."

Q: What is "rich media" and how does Sonic Foundry employ it?

A: Rich media is really the assemblage of audio, video and graphics into one common interface. It can incorporate links to third-party content, third-party message threads and Q&A polling. A lot of interactivity that is centered around the content that you're focussing on.

In our world, it also tends to focus on knowledge experts creating something or purveying their knowledge. It might be a lecture, it might be a briefing at a conference, an exhibition, what have you. It's often anchored on their presentation trail.

Commonly people think it's PowerPoint, but it can go beyond that. In the medical community it could be medical imaging. Someone might show a beating heart or cancerous cells or things like this. The imaging piece comes in with the actual talking head of the knowledge expert and so you have those elements assembled and delivered over the web.

We tend to deliver very high resolution graphics and a very efficient protocol. We're at the high end of the market.

The 'eureka' moment we had with the company was realizing that presenters not only use PowerPoint to anchor their presentations they go beyond that. They go to digitizers, white boards, document cameras, medical devices, and they use these devices to try to create ad-hoc presentations.

Mediasite is a much more elaborate type of device and service. In some cases, the rooms where Mediasite is installed are half-million dollar rooms that are automated with cameras in the back that turn on automatically and capture presenters as they approach a podium, and they know that a class is happening at 9 a.m., and everything lights up and happens. It becomes Hollywood time, only in a teaching environment or hotel.

It's almost like Cliff's Notes. It used to be -- well, it still is in the majority of cases -- that a professor would sit there and lecture with a white board or chalk board and you'd sit there and scribble everything in your notebook. When you think about that it's really a silly process, because why should I do that if I can capture everything, digitize it, and change the whole dynamic of the classroom?

Q: How has the market for digital media changed since you took this post, and how is the company moving to change with it?

A: It's changed a lot, but in a lot of ways it hasn't changed at all. The most difficult and challenging aspect of it is we saw all of this coming back in the mid-1990s -- streaming audio and video, transactions, micro-markets, it's all an offshoot of multimedia -- the problem is that markets don't develop as fast as entrepreneurs need them. It used to be having training on a CD was the norm, there was no Internet, there was no streaming. We lived through the advent of music, mp3's, things like this, and developing technology around that and video streaming and such. We're now starting to see maybe the next generation of mass proliferation of media, both from a low-end and a high-end perspective.

We end up delivering technology that has a lot longer life these days than we did in the consumer software days. Today when we deliver technology, it tends to have a three- to five-year lifespan. When we were doing consumer software, video editing, audio editing and such, it was a year before an upgrade was necessary. Standards were changing, consumer demands are typically much faster paced than enterprise demands. Enterprise wants stability, wants incremental change, they don't want a lot of constant changing. Whereas consumers tend to want to tweak software, they want to always be up to date. That poses it's own engineering challenges.

Those are the two extremes of where we've played. We've been in shareware, freeware, $50 software. Now we're selling in some cases half-million dollar infrastructure systems to manage what is essentially the same thing -- media delivery and all that -- but in this particular case it's delivering it for a specific vertical market that has more of an economic purpose. That's different.

In terms of where we were going as a company, we envisioned this world where media would be used as a form of communication in the future. We didn't know how it would transpire fully, but we knew that if we could figure out a way to get there that would be a much more lucrative market for us, especially as a niche player and a smaller company. It would be a unique playing field for us. Whereas when we were in the consumer space it was more about Hollywood, music, broadcast, the more traditional media venues. Differentiating yourself in that market is a lot tougher than it's been carving out this new space in the distance education, learning, training markets.

Q: Sonic Foundry has had a lot of bad financial news in recent years. Do you see that turning around in the near future?

A: Well, we certainly hope so. We look at the technology sector and in a lot of cases we move in a broad group. Micro-caps are certainly out of favor right now. We have survived these big upward and downward spikes in terms of shareholders and investor sentiment. We're at a low right now. It's not a good time unless you're in alternative energy stocks right now.

From our perspective, we have to keep focused on the business. That's really what the core is. For the last five years, we've essentially been a public start-up company again, because we started in 2003 with a new market opportunity. We know where the market is going. We know this is going to be a great market in the future. Our job is basically to position ourselves to be a market leader. So, starting from zero five years ago, we now own 40 percent of this niche of a niche market.

Our objective now is to continue maintaining that focus, building that market, riding this trend that we see. The biggest issue has always been can you maintain a differentiated, competative advantage with your product, and can you have enough runway to be there when the inflection point happens. It's partly a waiting game and it's partly a positioning game.

We have to be way more adept at identifying market opportunity and chanelling our resources there and just focussing on our costs and making sure that we do things right. So that's the bet. If we're right, then it's going to be a huge winner. If we're not right on the timing, if it takes too long, if the market gets blind-sided by some new technology, then it's not the right bet.

Q: Is Sonic Foundry in a more comfortable place since the shift in direction?

A: I think so. It's an almost completely untapped market, but it's a difficult market. It's seasonal. It tends to be budget-constrained. It sometimes has government oversight. However, we figure there's only about one percent penetration in the market doing what we're doing: classroom capture, lecture capture. The number of classrooms worldwide that have our sort of technology probably number about 5,000 out of 500,000 rooms that could be captured. And that's just education, it doesn't include corporate and government markets. So there are many market opportunities and the trends in overall acceptance and usage of electronic forms of learning look great in terms of how the market should continue to grow in this area. More people are becoming comfortable with it, they accept it, in some cases they expect it. This is a remarkable change from even a couple years ago.