Milestone And Video Insight Takeover Offers - Good Or Bad?

The big news in VMS this fall are takeover offers. With the VMS market maturing, there's less and less greenfield and easy analog projects to convert, meaning less growth overall.

Video Insight has a $29 per channel takeover offer, which is a fraction of what most mid to high end VMSes charge for their software.

Now, Milestone is offering free VMS software to OnSSI customers on a support plan and radically reduced prices to any other OnSSI customer.

On the one hand, lower prices is good for customers immediately, as they pay less. On the other hand, less revenue and steep declines in profits makes it harder for VMSes to further development. However, given that Video Insight is a subsidiary of Panasonic and Milestone is a subsidiary of Canon, their cash needs and objectives are likely different.

What do you think?

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Good competition to me is companies that advance product capabilities or find ways to produce / deliver the same product at lower costs.

In the Milestone case, it seems to me that Milestone is choosing to lose money to try to destroy OnSSI, which I think is bad competition. Anyone have a different read on it? Be happy to hear.

In the Video Insight case, it looks like they are going to make it up by selling their own OEMed cameras or their parent's Panasonic cameras. I don't think this is very healthy competition but the other VMS companies need to continue to add valuable functionalities to differentiate themselves from this approach.

Milestone is only choosing to lose money short-term. They expect that these customers will continue to buy Milestone when the time comes, and recoup their investment, and then some.

Its just business, its not personal. Loss leading and back-loading are used everyday by respectable corporations.

You can argue that it is are 'bad' for the end-user, becasue it does not produce any new value and ultimately reduces competition. I would agree. But it can be 'good' for shareholders.

They are doing because it is legal and they believe it will make money. And making money is what 'good' companies do.

Do you think that ONSSI wouldn't do the same to them if they were in the position?

Personalities aside, if you owned stock in company x who makes widgets, and you heard that they were luring company y's customers at a short term loss, but long term gain, would you even bat an eye?

How does Milestone expect to make money on this? I don't think you can just state that as obvious.

Looking at Milestone's financials through the years, their profits have always been minimal and that was when charging full price for their software. Now, they are going to sell at a 60-70% discount and make money on that?

Help me understand how Milestone makes money here. Don't just assume it. Present a clear theory of how that will happen.

Are they going to use their customer base to sell Axis / Canon cameras? Are they going to eventually raise prices if they put OnSSI out of business? What happens in the future that will allow them to generate the offsetting cash to compensate for this loss? I think it needs to be more than selling additional licenses and care packages.

And if this is such an obviously profitable move, why not offer the same deal to Genetec customers?

How does Milestone expect to make money on this? I don't think you can just state that as obvious.

Ok, I will, but first let me say I don't understand your premise. You really want to argue both that Milestone is going to lose money AND that ONSSI is destroyed? Because if ONSSI is not destroyed, then how is it bad for anyone except (possibly) Milestone? End-user gets a better price.

Anyway, this is Software, were not giving away cameras or something, it's a virtual inventory, right? The question becomes how much they canabilize their own sales tommorow by giving it away today.

So the only $ they fully lose are the ONSSI people that were already going to switch to Milestone AND intended to pay full price. Milestone loses that revenue. Is that a lot of revenue?

What do they gain? Well, day 1, they get all the SUP revenue from all the converting customers. Is that a lot of revenue? Well if it's enough to destroy ONSSI, then yes. What are the costs of the Migration to Milestone? Well arent the two lower levels of the CARE actually just passed to the reseller for support? And the higher levels cost significantly more, so they pay their own way.

Then the big bucks start rolling in, new channels other products, upgrades to other versions etc. Then, on top of that, if ONSSI is actually destroyed, then competition is lessened and prices can rise because of the lack of alternatives.

So let's add it up, for new revenue we have:

  1. SUP $
  2. Sales of new channels
  3. Upgrades to higher versions
  4. Sales of other Milestone products
  5. Increased margin if/when ONSSI fails.

For lost revenue we have:

  1. Marketing cost of making the offer
  2. Loss of sale price to those ONSSI owners who WERE already going to buy at full retail before the offer came out.
  3. Cost of support to those in the higher SUP levels.

So yes I believe that new revenue could be more than the lost revenue. Don't you?

As for why not offer Genetec customers the same deal, the reason is because any cases besides ONSSI, there is no guarantee that ALL THE CAMERAS will work. This would indeed be a support nightmare.

Plus the whole back-end config can be script migrated in ONE SHOT. With Genetec its manual. And Milestone integrators may not know the ONSSI front-end, but they know the back-end, so conversion is simpler.

"Anyway, this is Software, were not giving away cameras or something, it's a virtual inventory, right?"

No, it's not virtual inventory. They have fairly significant sales and support to contend with, especially doing these migrations. Milestone's complained about that for years, it's why they have had all these issues with forcing people to fly for training and trying to charge everyone for tech support.

"Well, day 1, they get all the SUP revenue from all the converting customers. Is that a lot of revenue?"

Incorrect, for OnSSI users with an existing maintenance agreement, they got nothing more than what was passed back through OnSSI anyway. Zero incremental revenue.

But let's see you are right, that somehow they will make money on this long term, then why shouldn't Milestone offer this program to everyone like Video Insight is doing?

Incorrect, for OnSSI users with an existing maintenance agreement, they got nothing more than what was passed back through OnSSI anyway. Zero incremental revenue.

Zero, eh? So ONSSI was passing 100% of the SUP money directly from the customer to Milestone? AND providing all the support for Occularis on top of that for free? Milestone didn't even let ONSSI mark it up a dime? If so ONSSI gets stronger (initially) with every zero-profit-obligation customer Milestone takes from them.

They have fairly significant sales and support to contend with, especially doing these migrations.

John, I already spelled this out. These are conversions NOT the same as migrating from Genetec. The backend configuration is already done. The camera configuration is not altered. The searching for drivers, installing patched and coming up with work arounds is AVOIDED.

Where has Milestone complained about ONSSI conversions specifically? There are are a walk in the park compared to a ONSSI 4 to ONSSI 5 migration.

In any event, you still have not given a reason for Milestones behavior if not financial.

What are you saying, it's a vendetta?

It's zero incremental revenue because the money anyone has paid to OnSSI for maintenance agreeement already went to OnSSI and whatever cut goes back to Milestone has already been paid. There's no new money.

As for their costs, first there are sales costs. Someone will need to pitch / explain / convince people to switch. This will need to be done for dealers and for many larger customers. Then there is the cost for support for people learning how to use the Milestone Smart Client, etc.

As for the "can be script migrated in ONE SHOT", has this been script migrated? Milestone's not claiming that. Even if they did, how well does it work? What exceptions are there? Are they going to automatically replace every client software on every operator's PC? Also, Milestone is giving away free upgrades from OnSSI's equivalent of Enterprise (the old codebase) to the Milestone's Expert (the new codebase) which cannot be done automatically even for Milestone's own customers.

It's zero incremental revenue because the money anyone has paid to OnSSI for maintenance agreeement already went to OnSSI and whatever cut goes back to Milestone has already been paid.

It's RMR John, SUP's expire and get renewed every month. Milestone acquires that revenue stream. Right?

As for the "can be script migrated in ONE SHOT", has this been script migrated? Even if they did, how well does it work?

Before entertaining this, I think it is only fair that you admit or deny that regardless of how hard it is to do, that it is far easier and less risky than any Genetec or other migration?

You have not acknowledged this key point.

Also, you have not indicated what you believe Milestones motivation, if not financial, would be.

Make a case for a different one, I'll listen.

Expect to see consolidation in the industry, only the strong or nimble (finding cash) will survive. 6-12 months from now we will be discussing companies that are not even in existence now.

An integrator should not put all his eggs in one place. Should make sure they know what is available in the marketplace, otherwise their competition will eat their lunch.

I believe this is healthy.

Mike, good comment!

Let's say this further consolidation comes to pass. Will the market be better then? How so?

Fewer bigger players makes things better or worse for integrators / users?

Update, another Milestone takover offer - Milestone Launches Avigilon Conversion Program

It lowers the value in the marketplace, driving a competitive fight to get back marketshare.

This will eventually have a negative impact on the value of the cctv vms market

Should be a interesting battle for customers, good for you if you sell a lot of milestone,onnsi,video insight products

Some glitchs on all sides to the integration process though .

Lot s of time for the comversion process. IE Programming, set up, installs