Everyone’s saying Cisco has flipped for the Flip, the “point and shoot” video camera that has became a certified success story with confirmation yesterday that Cisco is paying $590 million in stock to acquire San Francisco-based Pure Digital Technologies.
Stacey Higginbotham explains Cisco’s interest:
It’s easy to draw a line between the Flip camcorder and bandwidth consuming video that Cisco hopes to encourage in order to sell more networking gear. However, there are other factors at play. The Pure Digital acquisition brings Cisco deeper into the consumer home, a journey Cisco began with its acquisition of Linksys and its home routers, and continued with its acquisitions of set-top box maker Scientific Atlanta and entertainment networking company KISS in 2005.
If Cisco can integrate or transfer the dead-simple Flip software and camcorder into its Scientific Atlanta boxes, and tie the Flip camcorder to its Linksys router, it can offer PC-free telepresence to consumers. This combines Cisco’s hope of wresting control of the digital home from the PC and putting it in the network with its love of video conferencing.
Telepresence, even more than the 2 million Flip cameras out there shooting short videos, would drive the amount of video content on networks sky high. Cisco estimates that a good HD telepresence experience requires speeds of 24 Mbps and requires quality of service guarantees — both of which Cisco equipment could help ensure. Cisco has already indicated its plans to add $20 billion to its bottom line with a focus on video, and it has launched products around the what it calls the “medianet,” to deliver video from the content provider to the consumer. Driving content in the other direction — from the user back up to a content provider — also makes sense, and the Flip cameras offer Cisco control of the consumer video-producing endpoint.
An advocate of enabling people to be producers, rather than just consumers, I recently worried that The Days of the Internet as Haven for Citizen Production are Numbered. I’m thrilled at the prospect of a Cisco success in moving us to a truly two way network.
Looking at the numbers, Om Malik wonders if Cisco’s paying too much. While Lawrence Aragon says the low amount suggests the VC model is broken:
[F]or big name backers Benchmark Capital and Sequoia Captial [a return of just over 3x their money is] pretty much a dud… This is the clearest sign yet that venture firms don’t expect the IPO market to come back for a long time.
The deal had been rumored last week by Michael Arrington at TechCrunch. Yesterday Arrington looked back at the seven years it took for the company to get it right:
The company isn’t young by startup standards – it took its first round of funding in April 2002 from Mike Moritz at Sequoia Capital with a plan of creating $20 disposable digital cameras that people brought back to the store for processing. The camera’s memory would then be wiped and the device resold.
Those cameras weren’t a commercial success because of the unexpectedly quick shift towards cell phone cameras. The Pure Digital Camera, at $20, just wasn’t appealing to enough people.
Next up was a disposable camcorder, with a similar model. You bought the device for $30, shot video, and returned to a store for processing to a DVD (the cameras were then wiped and resold). But the video cameras got atrocious reviews, and it was time to move on to something else. By this time the company had raised and presumably spent more than $28 million in capital.
Then, the seed of something great. Pure Digital still wanted to build a cheap video camera for the masses, but forget the in store processing and hope of reselling the same camera over and over to multiple people. The first “Pure Digital Point & Shoot” video camcorder was released in March 2006 and immediately had some success. [READ ON]
The Flip today has captured an impressive 20 percent share of the camcorder market. As it happens, I’m ordering a bunch of MinoHDs later today. The Flip is extremely popular with students and faculty alike.
The video above is from long-time Flip-fan Kara Swisher.