PROVIDENCE -- Sitting in Mathematical Technologies Inc.'s dining
room turned conference room, William Foulkes watched the squiggly lines
jumping on the computer screen disappear with a wave of the mouse.
It's a pretty good view for Foulkes, chief executive officer of MTI, who
spent the end of last year watching something much less magical --
disappearing revenue.
MTI's software cleans up movies. It removes dirt, lines, scratches,
flicker -- all the debris that mark up the film that people see in movie
theaters.
Last year, the company's software ran only on expensive high-powered
computers. But with the soft economy and increasing competition, MTI's
founders -- two Brown University professors -- were worried about the
company's long-term health with such an expensive product. They decided
to take a huge risk and completely reengineer MTI's core software to
make it less expensive and more versatile.
But once the 15-person company started focusing on product development,
instead of growing its sales, revenue started to drop.
"We had a very rocky 2002," said Foulkes, during a interview this
spring. Foulkes joined MTI in August 2002 to help the company complete
the transition. "But, we made a decision and we needed to focus on that
and hope the decision was the right one."
Despite the stress on the company, the choice to revamp its core product
-- even in the midst of an economic downturn -- may have saved MTI's
life, according to William Jackson, recently retired president of the
Brown University Research Foundation, which manages the commercial
aspects of new technology developed at Brown University. He is also a
member of the board of the state's Samuel Slater Center for Interactive
Technologies, which in February invested $100,000 in MTI
"If you don't bring down the price, you're going to lose the market. I
would say MTI had no choice," said Jackson. "If MTI wanted to be a
contender in the long term, they had to innovate. The only way to
continue to grow was to distribute the product widely."
This isn't the first time MTI has reinvented itself. It was started as a
consulting company by Stuart Geman and Donald McClure -- two Brown
University professors -- who later transformed it to make software that
can automate machines.
In 1995, Geman and McClure applied their technology to the film market.
They created software that allows movie houses to clean up the film
shown in theaters so it can be converted into other formats such as DVD
and videotapes.
Prior to this type of software, editors and designers had to look at
each frame of film by hand. They would have to repaint colors that were
scratched off and physically remove the dirt, according to Foulkes.
With MTI's software, a computer can do it all. The software analyzes the
frames of film before and after the problem, matching the images and
patterns to fix the mistake. The editor sees the frame of film on the
computer screen, circles the problem with the mouse, and the scratches
or dirt disappear.
"[The software] is guessing, making assumptions about what something
should look like," said Foulkes. Some of the largest movie houses in
Hollywood started to use the product to clean up film before it was used
to mass produce DVDs, said Foulkes.
The first film MTI's digital restoration software was used on was The
Ten Commandments, starring Charleton Heston. Last year the company's
software was used to fix a 30-second-long scratch on the movie Tuck
Everlasting, before it was sent to theaters, according to Foulkes.
But the drawback to MTI's software was that it was expensive and could
be used only on high-end Silicon Graphics computers. With the price of
those as high as $90,000, only large studios could afford MTI's product,
which limited the company's customers and left it open to competitors
with less expensive products, said Thorne Sparkman, director of the
Slater interactive technology center.
"[If] you try to get the total solution down to $70,000 or $80,000, at
that point maybe a huge library could use it, or people that take old TV
shows and reduce them to DVDs can use it," said Sparkman. "As the price
comes down the potential audience of people that can afford it
increases. . . . And part of it is driven by competition. . . . There
are more and more people coming into that marketplace."
Driven to increase its customer base and capture people who are
transferring old movies and television shows onto DVDs, MTI decided to
revamp its software again. But it was a serious gamble. To stop looking
for new customers in a poor economy where companies were not buying new
technology in order to revamp software wasn't a safe decision, experts
said.
"I think it requires more courage . . . to invest in yourself when the
markets are down -- that's when companies might want to pull back a
little bit," said Paul Mulligan, an associate professor of management at
Babson College in Wellesley, Mass. "Part of what is commendable is that
fact that they did this early -- they did it as preventive medicine."
Sparkman agreed.
"The greater risk is not doing it. The price of these solutions goes
down over time, and someone else comes into the market," he said.
Last year, large companies -- compared with the less-than-$10
million-a-year MTI -- were already starting to enter the market, Foulkes
said.
The founders also brought in Foulkes, a former executive with Context
Media, an interactive firm in Providence. It was a decision, said
Foulkes, to bring in someone with business experience who could really
carry out the transformation.
"They are not business people, they are full-time professors," said
Foulkes. "They knew they had made a few decisions they needed help
executing."
Partially fueled with continued revenue from its machine-automation
software, the company spent about 14 months reengineering in the
company's headquarters, a gray Victorian house on Angell Street. MTI
launched the new software at a trade show this spring. Since then, the
company has signed its first United Kingdom and German customers and is
working with an arm of the U.S. government to analyze decades of video
-- branching out of the entertaiment business for the first time.
It also sealed a deal with CBS. The studio has agreed to use MTI's
software to completely restore the I Love Lucy television series. The
company has signed partnership deals with major film markets, and
Foulkes said he sees more markets for MTI in the business world with
training and publicity videos.
But the company's not done -- it plans to increase the speed of its core
product and launch a whole new software line by the end of the year, he
said.
"The great challenge for a company like ours is continuing to innovate,"
said Foulkes. "We're 15 people in a Victorian in Providence, and we're
competing with some of the largest companies in the world."
