The Foundry Tinder v1.3v1

GenArts CEO Katherine Hays received a call one day from Bill Collis of the Foundry - a call which led to GenArts buying all of the Tinder plug-ins. The move all but cements GenArts position as the dominant plugin company for high applications such as Nuke and Autodesk systems. But why did the Foundry want to drop its profitable plug-ins and how will GenArts get a return on all its recent acquisitions? Mike Seymour speaks to both companies to get the detai

Effective immediately, GenArts will assume all development, sales, marketing and support of all Tinder and Tinderbox products. This will allow both GenArts and The Foundry to each focus on what they do best. GenArts hopes this will facilitate customers to standardize on the tools from GenArts that are essential to everyday compositing pipelines.

There was no doubt when we asked Bill Collis if the Tinder Sparks were profitable, his single word answer came without hesitation, "Yes!" So why would the Foundry off-load its entire Tinder line, (while retaining Furnace, Keylight and Ocula)? GenArts recently purchased Wondertouch, adding to their previous purchases of SpeedSix Rapters and Monsters. GenArts already has 27,000 customers from Disney to the Mill, from Lucasfilm to Framestore... so where is the growth for GenArts?

In late 2008 we posed this question, "GenArts is a pivotal player in the image processing plug-in market, but are they happy to stay on the sidelines as a plug-in supplier?" The answer 14 months later is that rather than enter the mainstream application market - they are seeking to dominate the plug-in market.

The details of the deal are not published but as the Tinder Plug-ins are profitable they would have to be purchased at a multiple to the discounted cashflow they would generate, so for example if they generate a million dollars a year then the price would be some multiple of that discounted for inflation and allowing for the cost of getting that money from GenArts investors. This can be something approaching 5 to 10 times price to earnings. This means we will be well into this decade before the Tinder Sparks pay for themselves - assuming no new costs and that they continue to sell at present levels. For GenArts to make any money - and for their investors to see a profit, Hays must have a plan. Only three options seem viable:

* broaden the market to areas the Foundry never engaged such as the nearly 1.5 million legal FCP users

* increase the price (and risk selling less),

* find some way of making more of the technology (out guru the Foundry's Gurus)

We put this to Katherine Hays. "Firstly, we dont intend to increase the price of Tinder, ...to your other two points, we see the opportunity to do both, we intend to expand our development team to invest in further innovating around Tinder, the Tinder technology and the Tinder Brand,... and part of that may in fact include reaching out to a broader audience." Tinder already has a 90% plus market share of the Autodesk Spark market but the overall plug-in market is dominated by AE, FCP and other areas GenArts is yet to dominate.

One concern for users may be GenArts itself owning so much of the plug-in market. We asked Hays if all this expansion had resulted in unsupportable levels of debt? "We are a private company - so we do not disclose our financials but we are a profitable company and we have a positive cashflow, so that does help fund all sorts of growth, " she replied.