Autodesk reported that its Q4 FY 2015 revenue from its Media and Entertainment (M&E) business segment was $43m, an increase of 5% compared to the same period last year, and flat with the previous quarter.
M&E gross margins for the fourth quarter were 79.1% ($34m), down from 81% during the same period a year ago, and up from 74.4% last quarter
Full Year M&E Revenue Declines 13.9 Percent
Media & Entertainment revenue for the full FY 2015 was $167m, down 13.9% versus the full FY 2013.
M&E gross margins for the full year 2015 were 76%, down from 81% in both 2013 and 2012.
Decline in M&E Revenue Continues
As shown below, the latest year-on-year decline in M&E revenue continues the trend that began more than five years ago.
Between fiscal 2008 and fiscal 2015, the company’s M&E business has a CAGR of -6%. During this same time, M&E sales as a percentage of total Autodesk revenue has declined from 12% to 6%.
This is perhaps not surprising, given that company has been talking for some time about the anticipated decline in M&E revenue. Last year, Autodesk CEO Carl Bass said the company expects its M&E revenue to decline over time as Autodesk incorporates greater functionality into its design suites.
Autodesk M&E: A Tale of Two Product Lines
Another reason for the ongoing decline is likely the changing mix of products sold by Autodesk into the M&E sector, including the sale of hardware versus software.
Autodesk breaks out products sold media and entertainment customers into two separate categories:
- Animation (including design visualization): includes products, such as Autodesk Maya, Autodesk 3ds Max, and the Autodesk Entertainment Creation Suites. These products provide tools for digital sculpting, modeling, animation, effects, rendering and compositing, for design visualization, visual effects and games production.
- Creative Finishing: include Autodesk Flame, Autodesk Smoke, Autodesk Lustre, and Autodesk Flare. These products provide editing, finishing and visual effects design and color grading.
In a filing with securities regulators last year, the company said that for the year ended January 31, 2014, revenue from Creative Finishing products declined by 17% due to “a general decrease in M&E industry end-market demand.” In the same filing, the company said that Animation products had declined 7% during the fiscal year ended January 31, 2014.
On last night’s Q4 and full year fiscal 2015 earnings call, the company did not discuss its M&E product in either the prepared remarks or the Q&A session with equity analysts.
Indeed, the company has not discussed M&E on an earnings call since August 2014, when an analyst from JP Morgan asked Autodesk CEO Carl Bass: “How should we think about where the media and entertainment revenue line goes from here, is it something that actually could start to fade away?”
Bass replied: “No. I think, as we always try to distinguish, media and entertainment they are two different parts of the business. There is the creative finishing. Creative finishing has been diminishing, some of it is just nature of the market and some of it has to do with the hardware component in there which we no longer sell. And then there’s the other part which is the software part of the business. The software part of the business is good and healthy and we like all the dynamics in that part of the business. What we see in the other part less happy with it. That’s been going on for the last half dozen years in the creative finishing part.”
Press Release: Autodesk Reports Strong Fourth Quarter Results
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