00 Understanding Vidyo-Licensed for Distribution

7/28/2019 00 Understanding Vidyo-Licensed for Distribution

1/6 Wainhouse Research 2010 Page 1 Doc #WR101206-0293-RNThe distribution of this document is based on an unlimited, global distribution license provided to Vidyo, Inc.

VidyoTrack: VideoconferencingSegment: VendorsRelease Date: December 2010

Analysts: Ira Weinstein, Andrew Davis

Company Background

Founded in late 2005, Vidyo (formerly known as Layered Media) is a privately-held, venture-backeddesigner, developer, and provider of videoconferencing products. Although a relative newcomer to the

space, Vidyo is staffed by a number of videoconferencing industry veterans and some top video

engineers.

Vidyo was the first company to leverage scalable video coding (SVC) for videoconferencing

applications.1 A part of the H.264 family of standards and profiles, H.264 SVC supports the division of

video streams into multiple additive layers of video resolution, video quality, and video frame rate. The

key benefit offered by SVC is the ability to deliver video, and specifically videoconferencing, over best

effort IP networks. Such video calls require both error resiliency (to compensate for the lack of QoS

over the Internet and other non-QoS networks) and rate adaptation (to compensate for constantly

changing bandwidth capacity). Scalable video coding-based applications were first proposed by theresearch community for systems intended for one-way delivery of video over packet-switched networks.

Today, however, SVC has become a hot topic within the two-way videoconferencing space.

Although best known for its use of scalable video coding, a less understood but perhaps more

important Vidyo innovation relates to the companys multipoint videoconferencing architecture and the

way that architecture leverages the advantages of SVC. Generally, but not always, multipoint

videoconferencing involves the use of expensive, centrally deployed multipoint control units (a.k.a.

MCUs or video bridges). In order to host multipoint video calls, the MCUs decode each incoming video

signal, mix the signals together as required, and then re-encode the signals to provide the appropriate

streams to each participating endpoint. While functional and well accepted by the industry, thisarchitecture is very expensive (MCUs range in price from $1k for SD to $5 8k for HD per video port /

connection) and introduces significant latency (starting at ~ 30 ms for non-transcoded, non-rate-

matched, switched video calls through to 300 ms for transcoded, rate-matched, continuous presence

sessions depending upon the video bridge and video resolution in use).

Vidyos solution, on the other hand, does not require a centralized MCU for multipoint calls. Instead,

the signals are encoded by each endpoint, and the encoded streams (actually SVC layers) are then

sent to a centralized server called a VidyoRouter which routes the appropriate streams to each

endpoint. The benefits of this architecture include:

Scalability (a single VidyoRouter can support up to 100 HD streams) Low latency (since the unit is performing IP packet switching and NOT video encoding /

decoding, latency is typically less than 10 ms)

Low cost (via the use of standard Intel-based servers)

The ability to avoid the signal quality degradation due to the secondary decode / encode

associated with centralized MCUs

1Other vendors that currently leverage SVC for videoconferencing include GIPS (acquired by Google in May

2010), Magor (using SVC techniques, but not H.264 SVC), and Radvision.

Company SummaryCorporate Structure PrivateFounded 2005HQ Location Hackensack, NJEmployees ~ 1302009 Revenue Not Disclosed



Vidyo was granted six patents for this architecture and related coding technology since October 2009

and has other patents pending.

Until early 2007, Vidyo operated in pseudo-stealth mode focusing on software development and

securing financing. Vidyos initial business model involved the licensing of its SVC-based architecture

and development toolkits to vendors in various market segments (e.g. videoconferencing, streaming,

Internet portals, etc.) to enable the delivery of high quality, low latency video over a broad range of

networks including the Internet. Although the company maintained this business model throughout2006 and 2007, success in closing business appears to have been limited. We are aware of only two

companies that licensed Vidyos technology during this early period; ShoreTel and Cisco. ShoreTel

was the first to offer a Vidyo-based product, and Cisco never productized Vidyos SVC technology.

In late 2007, the company shifted gears and released a line of enterprise videoconferencing products

and an annual licensing price model designed to decrease start-up costs for customer organizations

seeking to deploy videoconferencing. The Vidyo product line then included the following:

VidyoDesktop a software-based solution running Vidyos SVC algorithms that is available for

Windows and Macintosh computers and supports encoding and decoding of HD-quality video at 30 fps.

Requires the VidyoPortal and the VidyoRouter to operate.

VidyoRoom a videoconferencing appliance based on Intel Architecture running Vidyos SVC

algorithms that supports HD quality video at up to 60 frames per second. Optional camera and

speakerphone are also available. Requires the VidyoPortal and the VidyoRouter to operate.

VidyoRouter- a 1 rack unit appliance that routes audio and video streams between the endpoints.

The VidyoRouter identifies and automatically adjusts to bandwidth, resolution requirements, and device

capability constraints. The VidyoRouter, which is the heart of Vidyos architecture, enables multipoint

capabilities in the Vidyo world, but is also required for point-to-point calls. The VidyoRouter also

supports firewall traversal within the Vidyo environment.

VidyoLine a perpetual software license for a single logical connection from a VidyoDesktop client to

a VidyoRouter. In many ways a VidyoLine is analogous to a port on a traditional MCU. During a point-

to-point call between two VidyoDesktop clients, two VidyoLines would be used. VidyoLines are used

only by VidyoDesktop clients and only while those clients are participating in a call. In addition,

VidyoLines are not associated with a particular VidyoRouter; a model that allows an enterprise to buy

VidyoLines and share those licenses across its entire organization and across multiple VidyoRouters.

Vidyo has elected to support connections between room systems and the VidyoRouter without

consuming VidyoLine licenses. This is the case for both VidyoRoom systems and non-Vidyo room

systems. Note that non-Vidyo room systems also require the use of a VidyoGateway.

VidyoPortal a 1 rack unit appliance that provides web-based management for point-to-point and

multipoint communication, and controls and manages licensed streams.

VidyoGateway a 1 rack unit appliance that enables connectivity between Vidyo endpoints and legacy

videoconferencing systems using legacy protocols (SIP, H.323, G.711, G.722, H.263, H.264 AVC,

H.239, etc.).



Other Vidyo offerings include a 1 rack unit appliance called VidyoOne (contains a complete

VidyoConferencing system including VidyoPortal, VidyoRouter, 10 VidyoLine licenses, and 100

VidyoDesktop downloads). The company also offers an update to the VidyoOne package to add

another 10 VidyoLines and 100 VidyoDesktop downloads. In addition, Vidyo offers the VidyoVoice

service to enable voice-only participants to join Vidyo conferences.

Although a detailed price discussion is beyond the scope of this document, WRs analysis indicates that

in many situations, and especially those involving a relatively large number of globally distributeddesktop users, Vidyos offering may be an order of magnitude less expensive than competing solutions.

This model of charging a one-time license fee on a per live connection from VidyoDesktop to

VidyoRouter basis makes this offering especially cost effective for large enterprises with low initial

utilization.

During the 20082009 timeframe, Vidyo closed deals with dozens of videoconferencing VARs and

small service providers that enabled these Vidyo partners to launch hosted videoconferencing services.

These Vidyo-powered service offerings provide business class, Internet-based, videoconferencing for a

monthly fee. Competition in this space is fierce and includes both free (e.g. Skype, which leverages

On2s VPx codec and Google, which leverages Vidyo technology but acquired GiPS in mid 2010) and

paid offerings.

Vidyo continues to disrupt the videoconferencing industry with groundbreaking products, capabilities,

and innovative business models. Recent examples include:

April 2010 a demonstration of a 1080p-capable, all-in-one, executive desktop

videoconferencing system including a touch-screen user interface and Vidyo software for

$1,000. This compares quite well, in terms of both performance and price, to executive systems

from industry leaders Cisco / Tandberg and Polycom.

May 2010 release of the VidyoTechnology software development kit (SDK) enablingdevelopers to build multipoint videoconferencing applications into Android and Mobil-based

smart phones and tablets.

June 2010 a new, revolutionary business model offering FREE multipoint videoconferencing

for VidyoRoom systems, effectively reducing the cost per MCU port for VidyoRoom systems in

the Vidyo environment to $0. Under this model, customers still need to purchase licenses for

VidyoDesktop systems, but calls between VidyoRoom systems and VidyoGateway calls to

legacy room systems (e.g. Cisco / Tandberg, Polycom, LifeSize, etc ) do not consume

VidyoLine licenses.

June 2010 support for decoding / receive of 1440p (2560 x 1440p) video resolution at up to 60

fps during Vidyo multipoint conferences, thereby enabling a quad-split view with each quadrant

(or site / person) at 720p resolution.

November 2010 release of a personal telepresence plug-in that allows users to launch a

Vidyo conference within an Adobe Connect session.



In addition, the company has established several key partnerships including:

March 2009 an arrangement under which Vidyos technology will power the single-codec and

multi-codec videoconferencing solutions from Teliris.

June 2010 an agreement with HP under which Vidyos solutions will be white labeled by HP

(and sold with the HP logo) and added to the HP Halo product portfolio. In November 2010, HP

officially announced its Vidyo-based product line. This partnership with HP may be the most

important event in Vidyos short corporate history. November 2010 an agreement under which audio and web conferencing service provider

Arkadin will distribute Vidyos desktop and room-based videoconferencing solutions. It is not

clear whether Arkadin will host a Vidyo-based service for its customers as well as distribute

hardware and software, but Arkadins business model to date has been exclusively one of

selling services and not products or software solutions.

November 2010 the appointment of Imago, the leading European videoconferencing

distributor, as the sole distributor of Vidyos entire line of VidyoConferencing products within the

UK.

December 2010 an agreement under which KDDI, a leading global carrier in Japan, will

deliver a videoconferencing service based on Vidyos products and technology. WR expects to

see other Vidyo announcements re: carrier partnerships in the next few months.

Over time, Vidyo has continued to raise capital. In early April 2010, Vidyo announced an additional $25

million of financing, bringing the total amount of capital raised by the company since inception to $63

million.

WR Analysis and OpinionVidyo has yet to reach its true potential within the videoconferencing space. The companys standards-

based scalable video coding (SVC) technology works quite well, and its no-MCU multipoint

architecture offers both performance and cost benefits.

Although WR has yet to perform a full evaluation on the Vidyo product line, WR s personal experience

is that the solution provides an exceptional video experience. Enterprise user feedback, however, is

that the Vidyo user interface is less than ideal. This is, of course, purely subjective. The only real and

documented weakness in the product story is the somewhat limited scalability of the VidyoGateway.

This, however, is a minor nit that is easily resolved by deploying multiple gateway units at a cost of just

under $6,000 per unit (supports up to 12 SD connections or 3 HD connections); a price that compares

favorably with the cost of a traditional MCU or gateway port.

In addition to a strong product line, Vidyo offers a unique and compelling business model. However, its

business model is so unique, at least in the videoconferencing realm, that many VC managers have

trouble grasping its nuances. Actually, Vidyos business model is closer to an IP PBX or telephony

business model involving, a) initial product and software purchases, b) annual (optional) maintenance

fees on both hardware and software, and c) perpetual licenses for each concurrent connection (a.k.a.

VidyoLine). According to Vidyo, this model works extremely well for its primary sales target IT

managers.



As described above, Vidyo does not require a VidyoLine for VidyoRoom or legacy video system

connections. This makes the VidyoRouter / VidyoGateway combination a very cost effective video

bridge for legacy H.323 or SIP video systems. For example, one could build a 12 port Vidyo-powered

SD video bridge for just $12k (1 VidyoRouter for $6k, and 1 VidyoGateway for $6k). The table below

highlights this use case and the ability to increase port capacity via the use of additional

VidyoGateways. Note that WR has never tested this configuration.

# of VidyoRouters(US $6k each) # of VidyoGateways(US $6k each) Total Cost(in US $) # ofSD Ports Cost (in US$)per SD Port # of HDPorts Cost (in US$)per HD Port

1 1 $12k 12 $1k 3 $4k

1 2 $18k 24 $750 6 $3k

1 3 $24k 36 $667 9 $2.7k

Five years after inception and three years after exiting from stealth operating mode, Vidyo has

generated significant brand awareness. In fact, at this time WR receives more phone calls and

inquiries about Vidyo than about any other vendor. Considering the companys relatively small size,

this is an impressive feat. Brand awareness aside, Vidyo had had great difficulty conveying to the

marketplace the power of its novel architecture; a key item that distinguishes Vidyos SVC-based

offering from SVC offerings being touted by Vidyo competitors.

Vidyos partnering efforts have yielded some success. Despite the fact that its early relationship with

Cisco bore no fruit, its licensing partnership with Teliris has, according to Vidyo, generated solid

revenue. In addition, the companys OEM relationships with Hitachi, Google, and a handful of smaller

companies have also helped Vidyos bottom line. Vidyos recent HP partnership, however, is likely to

be the game-changer. Assuming HP moves forward on its announced go-to-market strategy, Vidyo

technology will be running on a wide range of HP computers and servers in the near future. Vidyos

technology combined with HPs market position could take Vidyo into the mainstream.

As stated above, Vidyo is NOT the only vendor leveraging SVC within the videoconferencing space.For example, Radvision released SVC support for its desktop client and SCOPIA MCUs in 2009. In

addition, Polycom announced its intention to support SVC in Q1 2011 and make its H.264 SVC

technology available FREE to UCIF members. Although these and other announcements may make

Vidyo appear to be just one of many SVC vendors, the fact is that Vidyos architecture is unique and

offers significant benefits in both point-to-point and multipoint calls. WR expects this to remain a key

Vidyo differentiator for quite some time, assuming the company can articulate its message.

WR believes that Vidyos long term success (assuming it stays independent and is not acquired, which

we believe is unlikely) will depend upon its ability to:

1) Tighten its messaging re: its product line (clarify whether it is a software company, hardware

company, or both) and its business model

2) Promote the power of the MCU-less multipoint architecture at every opportunity this is the

companys true differentiator

3) Demonstrate that its overall platform performance, and specifically its audio performance, is

acceptable to enterprise users

4) Enhance its user interface



Based on its technology and business model, Vidyo should be much further along in terms of market

penetration than it is today. But traction appears to be accelerating, and the HP relationship has the

potential to accelerate the company even faster, particularly if HP decides to get serious about visual

communications. With its novel architecture and ability to host high quality visual collaboration sessions

over variable quality networks and endpoints, Vidyo today remains a diamond in the rough.

00 Understanding Vidyo-Licensed for Distribution

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