InMusic – the maker of Denon DJ, Numark and Rane DJ hardware – is fighting to block the buyout of DJ software company Serato by Alpha Theta, the company that owns Pioneer DJ.
Admitting that the takeover represents an existential threat to the DJ side of its business, inMusic has this week revealed that it is exploring taking legal action to stop the $100 million purchase.
The company has also taken out a full-page advert in the New Zealand press today to further publicise its position.
inMusic told us: “Due to the fact that we have to work directly with Serato months and even years ahead of product releases, we naturally have concerns about our intellectual property and ideas leaking directly into the hands of the competition.
“The proposed acquisition would give Pioneer DJ almost monopolistic dominance driving up prices and driving down innovation.”
Fighting this takeover may prove to be a difficult task for InMusic. Serato is based in New Zealand, but due to the global nature of the DJ market, we’ve learned that inMusic is exploring legal action in several territories.
And despite inMusic recently issuing a “business as usual” message to reassure its users that they have nothing to worry about, the real position the company finds itself in has always been both obvious and rather more dramatic.
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Tellingly, inMusic’s owner Jack O’Donnell admitted to the New Zealand Post that he “didn’t really see any options” for inMusic if the acquisition did proceed.
He also told the newspaper: “I am quite confident what’s happening here and it’s an outrage as far as I’m concerned.
“In any market when you eliminate competition, it has an effect on consumers. It’s going to raise prices, eliminate innovation and limit choice. So it’s a big thing for a small industry.”
He went on to claim that it would take InMusic three to five years to develop its own software from scratch and even then it would be ‘chasing a tail’, as once DJs were used to using one type of software they’d have little incentive to learn something else.
Our thoughts
We said from the start this takeover was monopolistic and that it may threaten the very existence of Serato, and of course by extension, the DJ operations of the only other really major player, inMusic.
The DJ industry is in a weird position in that many brands have relied on Serato software over the years, not only the inMusic brands but other big names like Roland and Pioneer DJ itself. But this fact has always put Serato in a strange position, something revealed by O’Donnell in the article:
“For years, Serato had indicated [to us] that they were worried about the dominance of Pioneer and fighting their dominance.
“We felt like we had a great partner that was continually saying, ‘let’s give you features, let’s make sure you compete’, so we felt we had a partnership.”
But in truth the fact that Serato doesn’t make hardware meant it would always be vulnerable to takeover by a big hardware company. The obvious company to do so would have been inMusic itself, an option we have to assume they will have explored. Yet it appears for whatever reason Alpha Theta will be the company to finally buy Serato.
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As Alpha Theta already has an established DJ software platform for its own Pioneer DJ hardware, Rekordbox, the purchase of Serato can only really be seen as a play to effectively control the majority of the DJ market, and to give the company a hold over all of Serato’s partners. So InMusic does appear to have a case here.
What will happen now?
Despite O’Donnell’s view that the takeover wouldn’t leave any options for his company, all would not be lost for inMusic and its users if the takeover did go ahead.
To start with, existing inMusic (and other brand) Serato gear owners would likely continue to be supported for the next three to five years minimum – the lifespan of their gear.
But of course, inMusic has also worked hard in recent years to develop a standalone platform, Engine DJ, which powers equipment it sells under the Denon DJ and Numark brands, and which does not rely on Serato at all.
For long-term survival, we think inMusic must now buckle down and make Engine DJ a “full stack” DJ platform, capable of working in all the ways Pioneer DJ’s Rekordbox currently works, both “standalone” and “laptop”. Relying on third-party software was always a precarious position to be in. After all, even if inMusic does manage to block the takeover – something which Serato’s owners are happy to go ahead with – where will that leave the relationship between Serato and inMusic going forward?
Phil Morse
