To address the changes in the industry, media companies must invest in solutions that allow them to better integrate their production and distribution workflows, enabling more collaborative production and efficient repurposing of their media assets. Workflow integration with file-based media can translate into significant reductions in labor costs, improved quality and increased flexibility to quickly deploy new revenue-generating services. As a result, media companies are investing in digital content infrastructure that enables them to reliably deploy best-of-breed production and distribution solutions.

Media companies are moving from manual dubbing, labeling and tape delivery processes to deployment of real-time server architectures to ingest digital media and make it immediately available for edit and production.

Distribution is evolving from a tape-based playout model to a file-based media server infrastructure capable of both multi-channel real-time playout as well as file-based content delivery. According to Frost & Sullivan, the market for video servers used for ingest, production and distribution activities is expected to grow from $583 million in 2006 to $1.2 billion in 2010, representing a compound annual growth rate of 20%.

As digital media workflow migrates to a file-based approach, the need for centralized, high-bandwidth digital media file storage increases. According to IDC, the market for capacity-optimized disk storage systems is expected to grow from $2.2 billion in 2006 to $8.6 billion in 2010, representing a compound annual growth rate of 41%.

As more content exists in file format, media companies will need robust content management solutions to address the challenges of indexing and archiving all their digital content files. According to Frost & Sullivan, spending on digital asset management solutions is estimated to be $643 million in 2006, and is expected to grow at a compound annual growth rate of 27% to $1.7 billion in 2010.

Spectrum video servers provide a platform to record, store and play back multiple channels of television content. A Spectrum video server system is comprised of modular components connected by various networking technologies that can be deployed in a wide range of configurations.

Spectrum video servers are comprised of a combination of MediaDirectors, MediaPorts and MediaStores, each providing a specific aspect of the system\'s functionality:

- As the core system processing unit, MediaDirectors provide basic system functionality including file system management, data throughput and bandwidth allocation, data protection and support for external interface protocols;

- MediaGrid active storage systems combine high-capacity storage, high-bandwidth data access and integrated computing power in a central storage system capable of supporting the demanding performance, scalability and reliability requirements of media companies.

- The Company has developed a family of software applications that provide basic content management and system control functionality.

For configuration, monitoring and system maintenance functions, the Company offers comprehensive system management tools that its customers use to manage systems: SystemManager – a management platform for configuring, monitoring, troubleshooting and servicing Spectrum, MediaGrid and ProBrowse systems; and ContentManager – an application that is used to manage the attributes of data stored within MediaGrid.

Gross profit was $36.6 million in the nine months ended September 30, 2006, a $14.5 million, or 66%, increase from $22.1 million for the nine months ended September 30, 2005.

Total operating expenses were $30.8 million in the nine months ended September 30, 2006, an $11 million, or 55%, increase from $19.8 million for the nine months ended September 30, 2005.