A self-described “technologist” at heart, Louis Hernandez Jr. knows an emerging trend when he sees one and likes to ride the wave as long as possible. Trained by his father, a computer science teacher, with his formal undergraduate and MBA in finance, he became a technology entrepreneur in the mid-1990s where he founded, worked for, invested in and owned tech companies serving a myriad of markets. This includes content management, e-commerce, sports and media, financial services, cybersecurity and digital payments. All have been successful in one way or another, having created over $3Billion US dollars in value and recognized through numerous awards and recognition. His “For A Bright Future” foundation, provides scholarships and sets up Media Labs across the country.
In the media production space, Hernandez was chairman/CEO of Avid from 2013 to 2018, overseeing the company’s transition to becoming one of the first broadcast-focused companies to transition to cloud-based architecture, often credited with having “saved Avid”. He next moved on to start his own private equity firm, Black Dragon Capital, investing in several smaller companies before buying the Grass Valley business for hundreds of millions from Belden in July 2020. Grass Valley is now surging with its market leading innovations around the Grass Valley Media Universe, as he describes, reimagining the future of media workflows. He now serves as Executive Chair and CEO of Grass Valley, as well as Managing Director of Black Dragon Capital.
Through it all, Hernandez says he’s been driven by a passion to advance technology initiatives that specifically enable the active collaboration and connection between individuals, teams, and businesses. He’s also keen about building out a “digital ecosystem I've been dreaming about since my first company in media.”
The Broadcast Bridge: You’ve built a track record of running different companies in technology, but mainly in the Media & Entertainment (M&E) space. So how do you see the future of the M&A space? Do you see growth potential? Do you see consolidation? What's your view of what's happening? What's going to happen?
Hernandez: I think for media entertainment overall, it's an incredibly fun and important time because media is part of the social fabric of how humans exist, sharing experiences through stories. But as you know, the operations and the economics are being severely disrupted. So, this really important social thing we have that we all participate in is going through a pretty big metamorphosis. And that's what's fun from the technology perspective, because technology often is used to solve and bridge these transitions.
We all know content is exploding, consumption is going up, but the yield per asset has dropped and the economic models are being torn apart. Not as bad as the written word, because I was there in the 90s when that happened. Or even music, which has recovered but in a totally different model. So I think basically the consumption of rich, highly edited media is going to keep growing. But the aggregated view ad model is forever changing.
So, how do you take a slow or low growing, highly profitable business and transition that into much higher growth, less profitable, unknown territory successfully? I think people understand where we're going to land, but getting there can be complicated and tricky. And I think media organizations are looking for good partners like Grass Valley to help navigate an increasingly complicated landscape. Even for the most experienced leaders in our industry, it’s a complicated time; I have to tell you. I've been in the industry for decades, and I've never been asked the type of collaborative, strategic questions that I'm being asked now from the most senior executives. They recognize we need to work together to find the right path.
The Broadcast Bridge: When Black Dragon Capital bought Grass Valley, it was a surprise to a lot of people. What attracted you to acquire Grass Valley initially? While you knew many of the people that worked there, you weren't that familiar with the company, I'm assuming.
Hernandez: I'm an entrepreneur. So is Black Dragon Capital. When you're an entrepreneur, you're a believer in the possible. It's a fun, lonely, sacrificial place where you have to keep pursuing this thing you believe in. So I bought Grass Valley because they're number 1 or 2 in every category, with a very broad product base and an incredible brand. I’ve learned that I had to own 100% so nobody can stop me from finishing the strategy and vision I had.
I couldn't believe they had this promising architecture called the Agile Media Processing Platform (AMPP) that they had spent enormous money on, had been in 16 POCs running for a couple of years in some places and they hadn't really had a commercial mindset to it. And I thought, I think I'm going to finally be able to build this digital ecosystem I've been dreaming about—and with a substantial platform that's branded. And that's what got me excited about Grass Valley. We set out to embrace what people love about us: advanced technology, both hardware and software innovation, and brand heritage around great service.
I knew we needed to change, make everything less expensive, more agile, more flexible, create new revenue streams for our clients. And this is what we've been investing in. It's been a lot of work, incredible work by the team, and a lot of change. I mean, it's been pretty dramatic the last 12 months. But it's really caught fire and it's fun for the people who went through that period to see it's working.
The Broadcast Bridge: You often use the word “partnership” when it comes to your strategy of building long-term relationships with customers. Explain what this means to you?
Hernandez: As a technologist who has started companies as well, I’ve come to understand that although I always wished that a customer would select my product or service because I had better technology, unfortunately, that's only part of the equation. When you are participating in high growth industries in transition, the stakes are high for everyone. I find that clients begin to think more about who the best partner is as compared to the best technology. They often put their faith and trust in a few who can invest in the long term, who share their vision and understand their pain. Only a truly partner mindset, with the money to invest for the long term, and look beyond the latest quarter, can win the hearts and minds of the industry.
When you're a disruptor, you're allowed to take more risk. When I started a company in 2011 that I just sold last year [Payveris, a provider of cloud-based bill payment technology], everyone understood that I was a newer company. Customers wanted the cutting edge and they're willing to take some risks.
When you're Grass Valley, customers expect that when we launch a cloud native application, it's been heavily tested and proven through multiple POCs before I come and try and bring it to market. Because that's what they expect from the Grass Valley brand.
At the core of the Grass Valley client base are the largest, most sophisticated media companies in the world. They don't intend to lose during a disruptive time. And they need partners who will help them win, which means the technology we offer has to be proven and trusted and also advanced. And there's some balance between the three. And that's what I mean about a partner, somebody who can deliver the things that really matter to them at a time that's complex.
The Broadcast Bridge: Grass Valley recently put out a press release talking about your “three-year business transformation since you bought Grass Valley that now includes a transition to growth mode." Isn’t the goal to always be in “growth mode”?
Hernandez: Of course, everybody wants to grow and expand, but CBS, ESPN, Disney and Paramount and others, they've all gone through some pretty significant adjustments in the last two to three years. The global market is going through a major adjustment that it has never seen before. People are changing their business and operational models because they have to. So Grass Valley had to change, too.
We had to adjust what the business was, and where we should invest. And it's not that we didn't keep growing, but it's a different set of energy when you're simplifying the org structure, reducing the SKUs, investing hundreds of millions of dollars in an operating system like AMPP, and trying to figure out how to share it with the world. Most of that is now behind us. We're seeing the results. We're ready to start leaning in. And that's one of the benefits of being a private company. We don't have to report to anybody except the industry that we’ve been a part of for decades.
The Broadcast Bridge: Does growth also mean new company acquisitions in the Broadcast and Production space?
Hernandez: We always look for inorganic growth when it makes sense, however I really believe Grass Valley is an organic play. I mean, AMPP has opened up the world so much. We launched almost a hundred new native apps just in the last two years. We have more than 50 patent grants or applications on AMPP alone, and almost 80 alliance partners in just the last year. AMPP has created a halo effect for our other products and I believe we have at least a 2 to 3 year lead on the market. It’s a powerful platform that we can build off of, hardened by years of testing and $100s of millions of dollars. We've got a lot of big ideas. We haven't really got into cyber security or revenue generating areas yet in a big way, which we intend to do.
On the revenue side, I think we can help our clients with dynamic ad placement, product placement and a lot of other things. So I think [Grass Valley] is going to be an organic play for at least, you know, ten years.
The Broadcast Bridge: You mentioned the cloud and the disruption that the cloud is causing. Coming from a dedicated hardware heritage, some people would say that Grass Valley was disrupted more than most as far as vendors having to reshape their product lines. Do you agree with that?
Hernandez: You know my history. I've done this before. Everybody told me at Avid, “you're never going to get the professional audio business to switch to a cloud subscription model.” That's now probably their best performing revenue stream.
When I bought Grass Valley, many people told me “you're going to ruin the business. It's never going to work.” Well, guess what? Talking to customers, I had a good feeling it was going to work, because it’s addressing some of their most powerful needs, and it worked extremely well. The best thing about AMPP and the related suite is that all the IP in the hardware and software exploits the operating system, making everything lower cost, and more agile. And best of all, it can be deployed on premise, hybrid or pure cloud. Most of our clients exploit all alternatives. Remember, these are large sophisticated organizations who need to create great content at dramatically lower costs. It’s a powerful combination.
Louis Hernandez Jr. - Executive Chair and CEO of Grass Valley.
The Broadcast Bridge: You mentioned that you’ve always wanted to create a digital environment or complete studio control in the cloud. Can you explain what you meant by this and is it practical today?
Hernandez: Well, right now AMPP is running in some incredible organizations’ backend operations within a 100% cloud native infrastructure. So the reality is, it can be done today. Packet sizes and cost are things we have to understand better. That's why what we've done is allow the customer to deploy an on-premise version where you can burst into capacity as needed. You can launch it cloud native on prem or hybrid or in the cloud. The savings can be dramatic, and best of all, it’s increasingly proven at scale.
So what we're going to do is figure out together with its industry, what is the best way to tiptoe to the tulips, to get to where we want to end up. They're all using it differently, right, but they all are enjoying the benefits of a cloud native architecture, even if they run it on prem in a box because they can pop up a channel as needed, reduce costs, purchase to the lowest level, and burst into volume.
The Broadcast Bridge: Would you agree in a perfect world, that doing it all in the cloud is the way to go? And is that the future, would you say? If it's cheaper, more agile, high quality and safe?
Hernandez: It has got to be cheaper. It's got to create as good or better quality content, got to be safe and more agile so that you have the flexibility to operate to your lowest cost unit economics. That's what we're working so hard to do.
But at the end of the day the Cloud is a tool that should be used as appropriate based on the specific customer use case. Our philosophy is do the processing as close to the content as possible. So if all your sources and content are on prem, it doesn’t make a lot of sense to move it all to the cloud and potentially then back down again.
The advantage of the AMPP architecture is that because it is an edge compute architecture customers can put the processing where it makes the most sense while enjoying all of the benefits the cloud brings in terms of enhanced security and reliability.
The Broadcast Bridge: When talking to customers about the cloud and how they want to get involved, what are the pitfalls you tell them about you?
Hernandez: It's pretty straightforward. Total cost of ownership, control and security. That's why when we sell, we listen. They want a cloud native architecture because it offers them the most advanced flexibility and tools to use. But how you deploy it? Do you want us to host it? Do you want it in AWS or Google cloud, or do you want to put it on prem and only burst into the cloud? That's when we really need to sit down strategically with our customers. That's what I meant earlier about partnerships. We're being forced to engage at a level that I've not done in this industry before.
The Broadcast Bridge: In all of your years seeing new technologies come and go, what's the one advancement that you see coming along now that's maybe impressed you the most or seems most valuable to you. I’m referring to currently emerging things like Artificial Intelligence and fully automated operations.
Hernandez: I've been going to the CES since I was a kid, so I love it all. I have to say robotics, green tech, media tech, it still gets me excited when I see it applied in a new and interesting way. Nicholas Negroponte from the MIT Media Lab wrote a book called “Being Digital” in 1995. I started my first company in media around that time.
It blows my mind that many of the things are happening now, he wrote about when I was a kid in my 20s. He used to use this phrase called “mass customization,” which was where every view of a media file will be tailored to the profile of the user. We now actually have the technology, packet sizes, compression technology and artificial intelligence to know who that person is and to predict what they want to see and even what they'll buy.
So what's fascinating to me is to see the technology catching up to these concepts. Where ChatGPT and AI-driven profile views, matching a profile purchase of a shirt and what your preferences are, and knowing that what you like to watch and consume together can feed what we create for the viewer to make their life better.
It's really fun to improve the viewership, the creation and the monetization of media. It's a fun time to be here. And I think for the rest of my life we're going to keep this industry moving forward to continually digitize in ways that we won’t expect. The stories are going to get better. The questions about governance and what's real and authentic is going to get more interesting and more controversial. And the cost of creating a file is going to go down and the revenue model is going to change.
The Broadcast Bridge: What do you say to the technical director working on a Grass Valley video production switcher who's worrying about AI taking their job?
Hernandez: I've written about this in some of my books [“Saving the American Dream,” “Too Small to Fail,” and “The Storyteller’s Dilemma.”]. If you know the storyteller’s dilemma, since the written word, before the written word, there were cave drawings and sounds to help us communicate when to fight, when to eat, when to celebrate, which all got converted to languages. And our world is filled with innovation and that means as humans, we have to keep evolving and changing. It's just part of life. Nevertheless, AI is never going to replace the creatives operating in tier 1 events, AI is just a tool and you are likely to see it being used to augment the creative work of operators in tier 1 events not replace them. But in the continued need to do more with less there are going to be types of events that are simply not cost effective to operate a full crew on and so I think that’s where you are going to see the most impact.
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