Reply To: Native Instruments GmbH is in preliminary insolvency

[LinkedMusicians]

Like many of our members, Kontakt is an integral part of my creative toolkit.

For those struggling to understand what this means, this is similar to a US chapter 11 bankruptcy. It allows a company to restructure its debt. NI is not fully insolvent. It would not be surprising if NI sells off parts of its business during this process. Mergers and acquisitions can always be fraught with risk and NI has done a fair amount and not successfully integrated them.

As a former Fortune 500 business strategist, whose duties included assessing potential acquisitions, I looked at acquiring companies as large as — (and including) companies like Intuit — and am well aware of how acquiring companies at a brisk pace as NI was doing can quickly put a company in a bad situation. Consider how quickly economic environments can change things or the impact of a poor integration. All of these were factors for NI’s acquisitions. Even more, the consolidation of iZotope, Plugin Alliance, and Brainworx did not appear well-managed and obviously wasn’t a success. Add to that Francisco Partners — which has a majority stake in NI — pushed for short-term profits, as Francisco Partners itself was struggling and had a series of layoffs and leadership changes.

If you’re thinking to yourself — wait, I thought the industry had been experiencing growth in recent years? You’re right. It has. The digital side of the music industry has been growing (while physical instrument exports have been declining).  But NI’s internal operational problems and reactions to shifts in the market and following acquisitions appear to have led to the current situation.

Most of all, my heart goes out to their employees. I’m sure this news will also give many independent Kontakt developers pause. I’ve always given the advice that diversification is extremely important. This news should underscore the importance of diversification (in this case, it’s as simple as having sample libraries in multiple platforms). Kontakt will almost certainly survive this.  I would expect that the brands / products that likely will be sold off will come from iZotope, Plugin Alliance, and Brainworx.

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