On July 2nd, when Avid announced that it was selling off multiple audio and video product lines, it was easy to miss the big picture. More Avid layoffs accompanied the news, and many people focused on the negative as Pro Tools users fretted about the future of their long-familiar DAW and I/O hardware provider.
But there’s two sides to every story, and the positive angle was that the respected M-Audio product line, along with the less-visible AIR Software Group, had a welcoming new home: Rhode Island-based inMusic, a company with expertise in the space via its ownership of Akai Professional, Alesis, and Numark, as well as other music production, performance and DJ brands.
It’s been an interesting journey for M-Audio, the company which was founded in the late 1990’s by a California Institute of Technology graduate named Tim Ryan. Originally dubbed Midi Soft and then Midiman, Ryan and his colleagues quickly grew their baby into a competitive manufacturer of audio interfaces and MIDI keyboards. Avid, suitably impressed, bought Midiman (which had been doing business under the M-Audio name since 2000) for a cool $174 million in 2004.
But even with a number of successful recording and DJ products (KeyStudio, Fast Track, Torq) and high-profile users (Black Eyed Peas, Skillrex, The Crystal Method), at some point M-Audio no longer fit in with Avid’s plans. M-Audio changed hands earlier this month, with a new HQ just down the road from Avid’s Burlington, MA base of operations.
What drives mergers and acquisitions (M&A) in the audio sector? In an industry where the users have had to deal with what seems like a nonstop downgrading of their music’s value, it’s interesting – and not a little bit validating — to know that the builders of audio tools still are seen as valuable.
We interviewed inMusic’s Director of Marketing, David Frederick, about the market forces that led to his company’s new acquisition.
How would you characterize the inMusic group of brands — what is the common thread of the products that you supply to the marketplace?
I would characterize them as diverse and synergistic. All of our brands blend leading technology, innovation, functional usability and creative inspiration across all market segments and price points. Combining that with our drive and passion to deliver world-class products, we strongly believe inMusic is uniquely positioned to deliver the most innovative and creative tools available to musicians, composers, producers and DJ’s all over the world.
The common thread we supply to the market is a family of premium brands that reach across a broad market segment. In many cases, our products leverage common intellectual property which helps democratize creativity and functionality across all our product and brand lines. The biggest thread is our passion and focus on delivering products that meet and exceed the needs of our customers. This thread drives everything we do at inMusic.
When did inMusic become interested in acquiring M-Audio, and why? How did you see it complementing the brands you already had such as Akai, Alesis and Numark?
inMusic is always on the lookout for unique and complementary opportunities that help us deliver world-class products.
Our interests and Avid’s aligned in regards to our acquisition. We were interested in M-Audio and the AIR Software Group because they not only offered unique, market-leading products, but they fit our model of growth and product strategy. Further, both M-Audio and AIR Software Group have unique and extremely valuable technologies and intellectual properties, which inMusic will be able to leverage for the benefit of its other brands and their customers.
In the pro audio/consumer audio space, what are the primary considerations that a company thinks about when deciding about an acquisition? What are the benefits, and conversely what are the liabilities that you have to weigh?
Of course this question is different for different companies. For inMusic we look at a variety of tactical, strategic and growth considerations. For us, it’s all about delivering world-class, innovative products for our customers.
Things like IP, technology enablement, synergistic or complementary offerings, cross utilization of IP, market share and position, human capital, growth opportunity and sustainable competitive advantage all factor into the calculations of an acquisition like M-Audio and AIR Software Group.
In all acquisitions there are assets and liabilities. These must always be weighed against the overall tactical and strategic objectives. It also goes without saying that one company’s liabilities are another’s assets.
Along those lines, M&A on this level is relatively rare in the pro audio/consumer audio space. Why would a product line like M-Audio no longer be essential to one company — Avid — but still worth investing in for another, inMusic?
I can’t speak to Avid’s thinking outside of what they have discussed in their press release and announcement call. In regards to inMusic, making investments in quality, innovative and dynamic brands is what we do. Again, it’s all about innovating, delivering and offering the best products in the world.
How many M-Audio employees will remain with inMusic? How will you decide who carries over?
As a private company we do not disclose our financial information or the terms our acquisitions. However, having said that, we are retaining key personnel from M-Audio and AIR Software Group that will help support, develop and further innovate and extend offerings both at M-Audio and AIR Software Group and our existing brands.
What is your view on the long-term prospects of the pro audio/consumer audio sector that M-Audio, and inMusic’s other brands, occupy?
My view is that the pro audio/consumer audio sector is always rather volatile and evolving. Those companies that can adapt and leverage the shifting sands seem to do well. Those that can’t, well, they seem to drift.
It’s a tough market sector. You have many factors that influence its behavior. In one regard, the democratization and enablement of creative technology has empowered a new generation of customers to engage in the creative process. In another, the market seems to be bifurcating into discrete pro and consumer segments with the “prosumer” segment dissolving away or at minimum having its lines blurred between the tradition triad market segment: consumer, prosumer, pro. This creates opportunity for some and disaster for others.
For us, we are laser-focused on delivering world-class products for all our customers across all market segments. That focus enables us to be responsive versus reactive in our approach to how we serve the market. This model has clearly served us well.
We are truly excited about the long-term prospects of our industry. inMusic is growing by leaps and bounds. We are leading and engaging in our respective market segments. We are developing innovative and exciting products, and we just acquired a fantastic brand, product line and amazing technology.
For us, both our near term and long-term future is bright. For our customers, dealers and partners, our family of brands delivers quality, innovation, value and in-demand products.
— David Weiss