Reply To: NOT A DEAL: Spitfire Has Been Acquired by Splice

[peter]

On GoncaloL said

Damn! Not sounding good at all

Im worried about all my investments on spitfire.

i was really on board about what they were doing and this will certainly change their business model

just a great reminder of what we are really buying when we invest on sample libraries

What are your concerns? That Splice will abandon the high-end libraries that Spitfire has been working on? That Splice won’t continue to develop or maintain Spitfire’s player? Did you watch the video with Paul Thomson and Splice’s CEO Kakul Srivastava that I embedded in the blog post? While I understand the distrust that many have for larger companies doing acquisitions, I think Splice’s CEO was very likely shooting straight in that video.

She sees Labs as appealing to the Splice customer base and the higher-end Spitfire product portfolio and customer base as expanding Splice’s reach to serious amateur, semi-pro, and pro composers. Acquisitions are all about growth for the acquiring company. She obviously is excited by the prospect of being able to expand what she can sell to the current user base, but she also wants to expand the reach of the business to higher-end customers (a smaller market with much higher profit margins).

I think that there’s an assumption that most folks have that not changing business strategy is safe. It’s not. Reality is, the danger is quite the opposite. Inertia is risky. Markets change. Companies that don’t adapt don’t survive. There’s a ton of change going on right now in the industry and that environment creates enormous uncertainty for companies in this industry. It’s been no secret that Spitfire’s co-founders have been looking to sell their company for some time. I don’t want to get into the controversy, but it clearly had A LOT to do with Henson’s quick and very quiet departure from the company. Christian and Paul didn’t want the controversy around him and any repercussions to harm their efforts to sell the company for as much money as possible, because it certainly could have harmed the company’s value very quickly.

FTR, my background is the tech industry and includes serving as a strategy director to the CEO or a Fortune 200 in addition to leading digital marketing at the Fortune 500 level. During my strategy days, I advised the CEO on potential acquisitions, which included some well-known companies (one was Intuit). The most well-known blogger that I mentored was technologist Padmasree Warrior, once one of the most followed business leaders in social media. My sense is that Splice’s CEO was shooting straight in the video. I think their strategy with this acquisition is clear and it makes a lot of sense. While I don’t know anyone from Splice or Spitfire — although I know people who do — I suspect that this will result in lower pricing for many of Spitfire’s libraries, and there being a two-teired approach, with products like Labs aimed at the Splice market and the higher end Spitfire libraries building on that for the composer market.

Now, there’s another discussion of whether purchases of non-transferable licensed sample libraries from Spitfire are truly an investment. I’d call them an expense. But they lose 100 percent of their value when we die. I suppose in some kind of psychological sense we can call them an investment, but technically, they’re an expense and they don’t have the kind of durability or longevity of physical instruments. But that’s another conversation! Is there uncertainty with this acquisition? Of course.  But there’s uncertainty if Spitfire never sold their business. That’s just the nature of business, it’s dynamic, not static. And right now is a very dynamic period in this field. I believe — and it’s reflected in the words of Splice’s CEO — that this acquisition will make many of Spitfire’s libraries more accessible (cheaper). Splice is looking to grow this market. If you listened to what Paul said, Splice is NOT going to make everything subscription-only, they’re committed to continuing with perpetual license products too. Once again, I think that Splice is likely to continue with subscriptions for Labs, growing that audience, and will likely see what’s possible with some of the mid and higher-end Spitfire sample libraries. My guess is that they’ll attempt to offer some of them on a subscription basis while still offering perpetual licensing. Eastwest, Cinesamples, and others, have proven that there is an appetite for both the subscription model and the perpetual license model. But these are the same options that Spitfire was pursuing prior to the acquisition, only now they have much greater reach and resources.

Here’s the video:

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