C1 laying off people / sale of P1 this year?

[Paul Spinnler]

Capture One Lays Off Staff Amid a 'Significant' Internal Restructure

It has been a rough year for Capture One.

petapixel.com

I mean glad to see that the market is responding a bit to this SaaS topic in an adequate way and that C1 seemingly is under cost pressure due to their strategic choices in these times. Their whole approach to the topic and the bait-and-switch thing is really not ok.

I didn't recollect all the ways C1 messed up (so the article is a good reminder of the timeline of events surrounding the introduction of the subscription model), but I haven't spent a buck on it since they announced the new changes because I feel it quite uncool that you only ever get the features you right at the time of purchase bought.

Its geared full throttle to move everyone into subscription and the reason for that is that the owner, Axcel, aims to sell this business separately at a high multiple. Software businesses with recurring revenues from subscriptions have proven to squeeze customers better (customer lifetime value or LTV is higher), which is why they are worth more in the financial world. E.g. multiple above 15-20x EBITDA vs. maybe 10-15x EBITDA for just normal licenses ... problem however is that investors due diligence these businesses on the retention metrics and this is, in the consumer photo market of today, where C1 probably struggles. So the higher multiple spiel only pans out if the retention and adoption metrics are good ... which I believe they aren't. Also not sure the additional mobile C1 is a driver for best-selling this ...

Ie its one thing to sell B2B compliance solutions which is are super sticky and resilient sales in a downmarket compared to forcing expensive subscriptions on the average enthusiast + pros who don't want to add monthly expenses given they are struggling already with cost of living and difficult livelhood as a photographer in today's world.

Cutting costs now before doing this is called "dressing up the bride". They are probably getting valuation multiples below or at the same level what they paid for in 2019 given markets changed, so their only hope to make a good return is by increasing customers and selling fast.

Could be that we'll see a sale of the company this year as in private equity the returns decrease each year of an investment if you can't sell it and with markets improving slightly they could now aim to dress up the firms under the P1 umbrella the best way possible way to find a new buyer.

"Dressing up the bride" for a sale means:
1) New product pipeline to show growth tangent for future owner
2) Cut costs where possible to improve profit metrics underlying the valuation

The only thing I hope is that the CEO, who is probably the largest minortiy shareholder at this stage, doesn't again go for private equity as it starves out the photo business.

In any case – I've been waiting for some significant upgrades on the C1 side since the subscription model, but so far no luck, so I am stuck with the old version for my S files and the new one for the P1 files – which is cool, still.

 

[Ray Harrison]

I personally found the article to be more click-bait than substantive, poorly written and speculative in many parts (as usual for me with PetaPixel), and while speculation is easy, the truth is always going to be more complex. My company just did a major internal restructuring with layoffs too . Having run startups and small businesses myself, layoffs and restructuring go with the territory and of course, they're still hiring at C1, which didn't make it into the article. I've been a subscriber for 5 years so no problem at all with that business model as long as I can stop subscribing and still have access to a version to work with my images. There's always been a way to do that with C1, both pre- and post-license-change, it's just that now I can essentially do that for free rather than paying for it.

The recently released masking capabilities are terrific, so pretty happy with what they're doing. While products could always do with improvements and new features, I feel that they missed a lot of opportunities with messaging and how they rolled out the license and other recent changes. The communication of the vision was muddled, the implementation was muddled and really, it still is. That sort of license change needs to be clear, direct and emphatic. "We are a subscription company with an off-ramp license that is cheaper the longer you subscribe". Instead, they still sell something they call "perpetual" (always poorly named) and they still try and offer discounts on it to get the punters in, but it is in no way a good deal. Plus I think it makes subscribers unhappy. So people get grumpy. Then C1 gets bad press in rags like PetaPixel.

Then the approach with C1 Express is another poor rollout, in my opinion. To make people's software stop working instead of simply saying "We're not offering this product any longer and are no longer offering updates. Here's a discount for a subscription, but feel free to use your existing version 'as is' for as long as you'd like". People get grumpy and again get the bad press in rags like PetaPixel.

And so on. Messaging and communication is important and can make or break a company (to me). Very happy with the product, including recent releases.

 

[Jager]

Sad news, indeed.

But not terribly surprising. High-end image editing software is very much a niche product, catering to a quite small community. That C1 continues to exclude a sizable portion of that market (Hasselblad users) is a strategic decision that continues to reverberate.

I completely understand the attraction to subscription models by software companies. It sustains their revenue stream even as the value proposition for their customers inevitably declines over time (the primary features for any kind of software being delivered in the first few releases, later releases being characterized by an increasingly frantic casting about for something "new and exciting" to toss in). But it sucks for users. I abandoned Adobe a half-dozen years back for just that reason.

In a world where everything has gone subscription, C1 has to ask themselves what makes them better than Adobe. That's an easy thing to answer for a tiny subset of photographers. But it's a much harder ask for the broader professional/high-end amateur market which would bring the numbers necessary to sustain them.

 

[Paul Spinnler]

It’s not all just messagging though. People are not dumb. This is a for profit maximising move and not “to pay people sustainably” nowadays. The owner is private equity - they need to return a 20-25% yearly return on the equity invested. In software the easiest way is to go SaaS and improve market share - at the same time.

Numbers are clear – once a company moves to subscription, successfully, they squeeze out more per customer.

Its a price increase and its sugarcoated with look-through arguments. C1 has gotten more expensive and I don't like that and also don't like monthly payments as I feel I then am forced to keep doing it as I am in an ecosytem.

I think there's no way "messaging" could have changed the view. Its still more expensive and it is monthly payments you are forced into once you move onto their model – or you can't use the software anymore once you stop paying. I have a hard preference for owning my software.

PS is the only software I "rent" and its because to me its not replaceable. On C1 I am stuck on my 22 or so license ...

 

[anyone]

I read the statement just very briefly, but I did not see any mention of the P1 digital back business in there, so I see no reason to speculate further, but maybe that’s just me.

 

[f8orbust]

Hmm, probably don't get your hopes up for an IQ5 anytime soon then

 

[guphotography]

Given the restructuring only takes place at C1, could it be the current owner reigning in the bottom line? So the book looks healthier for a potential spin off.

Once the software becomes the core business, it sure will attract more attension in the market such as Adobe, which it wouldn't be the case if hardware activity is attached to it.

 

[Ray Harrison]

It’s not all just messagging though. People are not dumb. This is a for profit maximising move and not “to pay people sustainably” nowadays. The owner is private equity - they need to return a 20-25% yearly return on the equity invested. In software the easiest way is to go SaaS and improve market share - at the same time.

Numbers are clear – once a company moves to subscription, successfully, they squeeze out more per customer.

Its a price increase and its sugarcoated with look-through arguments. C1 has gotten more expensive and I don't like that and also don't like monthly payments as I feel I then am forced to keep doing it as I am in an ecosytem.

I think there's no way "messaging" could have changed the view. Its still more expensive and it is monthly payments you are forced into once you move onto their model – or you can't use the software anymore once you stop paying. I have a hard preference for owning my software.

PS is the only software I "rent" and its because to me its not replaceable. On C1 I am stuck on my 22 or so license ...

Obviously, if you subscribe to C1, paying by the year is the far better deal and I wouldn't think anyone would pay by the month. My own price hasn't changed much, if at all, in years, though I expect it to at some point. For me, my raw converter is important, so the cost isn't really a factor in the grand scheme of things and even now, you can choose to "own" a "perpetual" license with C1, as opposed to Adobe, for example. I could walk away with one of these "perpetual" licenses today for free, so not too bad.

 

[spassig]

In Germany, PhaseOne/ CaptureOne recently moved everything to Calumet.
Hasselblad did this a long time ago.

Why?
What was the reason?
CO should also open their software for other systems, e.g. Hasselblad

Jochen

 

[Paul Spinnler]

Hmm, probably don't get your hopes up for an IQ5 anytime soon then

Has nothing to do with it. The bottle neck with P1 was always the availability of new tech from Sony.

As soon as they get first dibs on a full-frame 3.45 micron chip, say, ie equivalent to 200 megapixels, they can re-do the IQ and 50 megapixels more alongside a SoC refresh are enough for an IQ5. The investment by Axcel in that scenario is totally warranted as they'll sell a lot of them with all the backlog in the market and IQ4 owners having had time to save. I'd immediately upgrade my IQ4.

Remember: M11 and CFV100c are re-hashing 2018 tech which P1 first had access to and on top in a unique sensor size. They might now have same access to the next gen, meaning it'll trickle down to other formats in a few years then and if you want to be on top its the P1 price.

The best value from an investor perspective is if you break out each business to a sensible unit with its own profitable P&L and growth to crystallize the underlying sum-of-the-parts discount in a conglomerate structure. Ie becasue C1 is now part of sth bigger with not so dynamic business units it is lowered in value as its being pulled down by not being visible.

That's pretty much standard PE playbook and cutting costs means they're dressing up the bride for the sale, ideally this year because PE holding periods are typically 5 years.

It would make sense to sell the business concurrently with the launch of the IQ5, for example ... Axcel bought P1 when they launched the XT ...

 

[Paul Spinnler]

In Germany, PhaseOne/ CaptureOne recently moved everything to Calumet.
Hasselblad did this a long time ago.

Why?
What was the reason?
CO should also open their software for other systems, e.g. Hasselblad

Jochen

Change of distribution model – all onto the dealers. Saves costs. Dealers have margin, that's it.

CO is open – Hasselblad is the blocker; they don't want to give away HNCS to C1 which is owne by P1 – it would nullify the need for Phocus.

 

[guphotography]

Change of distribution model – all onto the dealers. Saves costs. Dealers have margin, that's it.

CO is open – Hasselblad is the blocker; they don't want to give away HNCS to C1 which is owne by P1 – it would nullify the need for Phocus.

In turn, Phase one may benefit from people continue shooting with phase back instead of Hasselblad.

 

[Geoff]

WIth little access to the deeper facts and financials, this may be off the wall... but there is just a feeling that P1 is slowly taking themselves out of the game. There is less interest in big heavy cameras, or backs that are super expensive for only some improvements, or the XT, which seems to be a camera for a few. Don't get me wrong - am a big fan, and love their software and backs, and hope they'll pull themselves up, but overall, the situation looks more like a negative spiral. And it's a shame: C1 is super, and P1 has made super backs. But unless they've got some hi-end solid industrial customers keeping them happy and afloat, their consumer model doesn't seem very healthy.

 

[Paul Spinnler]

WIth little access to the deeper facts and financials, this may be off the wall... but there is just a feeling that P1 is slowly taking themselves out of the game. There is less interest in big heavy cameras, or backs that are super expensive for only some improvements, or the XT, which seems to be a camera for a few. Don't get me wrong - am a big fan, and love their software and backs, and hope they'll pull themselves up, but overall, the situation looks more like a negative spiral. And it's a shame: C1 is super, and P1 has made super backs. But unless they've got some hi-end solid industrial customers keeping them happy and afloat, their consumer model doesn't seem very healthy.

I think you don’t have a full or true market picture in this forum. There are many people who still buy XCs and one shouldn’t make the mistake to extrapolate from here or oneself, especially with regard to Asia.

China is a huge market - they sell many XCs there, apparently. Also the really rich and fully involved working pros with P1 setups aren’t on this forum.

I think they are also releasing a lot right now. Just the tilt XT lenses, the new 90 HR tilt soon, the large XT, potentially IQ5 next year, etc.

This is an enthusiast forum primarily where a minty Alpa 35 XL at a bargain price of 2k sits for weeks all the while P1 is selling 13k lenses globally atm to a wider audience.

This is more the place where people are happy to buy an 8k back or might have to sell a lens or two to pony up 8k for the new back.

So it’s a smaller subset of P1's market, in all likelihood.

P1’s insta lives again … they foreshadow new products in the latest post ... I think it will be fine ... and actually I think the are sampling new chips from Sony at this stage.

 

[Geoff]

Let’s hope your positive view holds true. They do make lovely products and have been a benchmark for this industry.

 

[PapaJoe]

WIth little access to the deeper facts and financials, this may be off the wall... but there is just a feeling that P1 is slowly taking themselves out of the game. There is less interest in big heavy cameras, or backs that are super expensive for only some improvements, or the XT, which seems to be a camera for a few. Don't get me wrong - am a big fan, and love their software and backs, and hope they'll pull themselves up, but overall, the situation looks more like a negative spiral. And it's a shame: C1 is super, and P1 has made super backs. But unless they've got some hi-end solid industrial customers keeping them happy and afloat, their consumer model doesn't seem very healthy.

Geoff, I agree. A few years ago, I had an exchange of views with Doug Peterson on this forum about the possibility of Capture One adopting a subscription model. I felt it was inevitable and the only way to show predictable long term revenue growth. The perpetual model was "lumpy" and didn't give the private equity owners sufficient confidence in revenue projections. Adobe had already adopted a subscription model for its Creative Cloud and it was, and continues to be, wildly successful. Although there was marching through the streets with torches and pitchforks, Adobe persevered and rewarded its investors with higher equity value and dividends. And it rewarded its subscribers with a continuous flow of new features and improvements. Since then, major and minor software companies, including Microsoft, have adopted subscription models for software and that has become the industry standard for B2B and B2C.

If I recall correctly, the C1 "division" accounts for the vast majority of Phase One's revenue. So the private equity owners have to get that right sized and sustainably profitable first. The current reduction of staff is likely aimed at just that. Private equity isn't known for its patience, so this may be the first of several steps to "dress up the bride".

I'm not confident about the hardware side of P1’s business. It's a niche within a niche within a rapidly changing ecosystem. The customer base is small and the noncommercial customer base is shrinking. Digital back competition is encroaching from Hasselblad. And Fuji and Hasselblad medium format cameras have taken some of the allure from P1 capture solutions.

I can't predict the outcome, but the comment about a "negative spiral" caught my attention.

Joe

 

[BillyBagel]

Change of distribution model – all onto the dealers. Saves costs. Dealers have margin, that's it.

CO is open – Hasselblad is the blocker; they don't want to give away HNCS to C1 which is owne by P1 – it would nullify the need for Phocus.

It wouldn't be blocked if DJI purchased Capture One, lol. That would be a wild turn of events...

 

[anyone]

Monopolies are seldom good for the consumer. Just saying...

But C1 for Hasselblad would be fantastic

 

[hcubell]

CO is open – Hasselblad is the blocker; they don't want to give away HNCS to C1 which is owne by P1 – it would nullify the need for Phocus.

This is completely inconsistent with my understanding of the issue between C1 and Hasselblad....MONEY. You know what they say, it's always about the money. Fuji is reported to have paid a very substantial amount of money to Phase to get C1 opened up to the GFX cameras. I assume Hasselblad has not been willing to pay the price of admission. Neither of your explanations as to what the hang up is makes any sense. First, Hasselblad was reported to have worked very closely with Adobe on the Camera Standard profile for LR/ACR to try to make the color and tonal conversions of Hasselblad files in LR/ACR as close as possible to Phocus. I have processed thousands of files from X series cameras through both Phocus and LR and I firmly believe that Hasselblad and Adobe have achieved that goal. So, I guess they were not terribly worried about sharing the HNCS with Adobe. Second, Hasselblad does not make a dime on the use of Phocus. It's free to anyone who owns or owned a Hasselblad camera. It's a cost center, not a profit center, and I am sure that Hasselblad would love to terminate the Phocus software program if it were not reluctant to place the very survival of the company as a camera manufacturer in the hands of an unrelated third party software company on whom it was completely dependent for raw conversions.

 

[Paul Spinnler]

This is completely inconsistent with my understanding of the issue between C1 and Hasselblad....MONEY. You know what they say, it's always about the money. Fuji is reported to have paid a very substantial amount of money to Phase to get C1 opened up to the GFX cameras. I assume Hasselblad has not been willing to pay the price of admission. Neither of your explanations as to what the hang up is makes any sense. First, Hasselblad was reported to have worked very closely with Adobe on the Camera Standard profile for LR/ACR to try to make the color and tonal conversions of Hasselblad files in LR/ACR as close as possible to Phocus. I have processed thousands of files from X series cameras through both Phocus and LR and I firmly believe that Hasselblad and Adobe have achieved that goal. So, I guess they were not terribly worried about sharing the HNCS with Adobe. Second, Hasselblad does not make a dime on the use of Phocus. It's free to anyone who owns or owned a Hasselblad camera. It's a cost center, not a profit center, and I am sure that Hasselblad would love to terminate the Phocus software program if it were not reluctant to place the very survival of the company as a camera manufacturer in the hands of an unrelated third party software company on whom it was completely dependent for raw conversions.

Howard – no digs at Leica?

HNCS is about differentiation which means MONEY. It would make no sense to keep Phocus if both C1 and LR could exactly do the same (to your survival theory below).

There's more to HNCS than a simple profile of course – its actually a colour temperature dependent interpolated film inspired LUT (between two "illuminants", cold and warm) within Phocus over a camera unit specific, factory calibrated gain file which normalizes the different sensors to a common starting base for the LUT. Then, based on the colour temperature, its applied within Phocus for further processing. Torger, the guy behind Lumariver, untangled this years ago over at LuLa.

So naturally this means implementing it in C1 costs development time and who pays for it is subject to negotiation and individual company strategic objectives; then on top you share a secret sauce, especially the reading of Hasselblad calibration data + LUT interpolation and LUT data, with a software company which is owned by a competing back and camera manufacturer – ie not really something you do if differentiation is important.

In addition, P1 is a fierce competitor of DJI in the aerial drone space which probably also doesn't support sharing more detailed info on key product differentiators.

Lastly, one has no clue what contracts are in place between Adobe and Hasselblad as Adobe could have implemented it for "free" and stipulated that Hasselblad may not strive for interoperability with C1, which is its main competitor.

You forget maybe here that Adobe is also in strong competition with C1, in effect, it is its no.1 problem, so to say. Inversely, Hasselblad is not in real competition with Lightroom (unlike C1 which has been growing a lot in recent years and actively went after the LR crowd) and therefore its more like two forming an alliance against a common threat between these two.

To summarize: Hasselblad and Adobe are strong competitors of P1 on a software and hardware level while Hassy and Adobe not really and despite this, according to your analysis, the reality is that actually Hasselblad would like to kill off Phocus, but doesn't do it because it is afraid to not survive if it were to give its raw conversion away?

Sorry – makes 0 sense.

Sony, Leica, Canon are walking on very dangerous territory here, eh, by placing their "very survival" in the "hands of unrelated third party software" companies ... ok, alright, sure.

There are reasons why Hasselblad is incompatible with C1 and it is in all likelihood a combination of agreements with Adobe and based on strategic objectives to keep some differentiation ring-fenced.

It may change in the future, but without sitting at the neogitation table or knowing what the contract between C1 and Adobe stipulates as of now you can only look at the sensible facts and these are that Adobe and C1 are competitors as is Hasselblad vs. P1 – Adobe and Hassy are not really competing.

This is strategy and competition stuff. Hasselblad camera compatibiltiy is a very strong bargaining chip between LR and C1 with Adobe in-between trying to fend off market share gains from C1.

The proof is right here in the forum – some P1 people say that the new back is a no-go because of the incompatibility with C1 and some are saying they will move to LR just because of the back, depending on preferences.

Enough said.