Reply To: EastWest Grammy Sale – Up to 80% Off!

[LinkedMusicians]

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With the recent news of Native Instruments (NI) entering preliminary insolvency in Germany, I’ve become increasingly cautious about developers with high fixed assets. Personally, I think we should be careful about investing heavily in EastWest and VSL right now.

My reasoning is based on what looks like a desperate push for cash flow to offset their massive studio overhead:

The Studio Liability: Maintaining legendary spaces like EastWest Studios and Synchron Stage is a huge financial burden. In a post-NI insolvency market, these high burn rates are a major red flag.
EastWest’s Price Spiral: Their constant “all-time low” sales suggest a prioritize on immediate cash flow over long-term brand value.
VSL’s Aggressive Update Fees: I’m particularly concerned about VSL’s recent monetization strategy. They seem to be repeatedly charging existing users significant fees—often well over €100—for “updates” to their legacy products and entry-level libraries (such as the Smart and Big Bang series). It feels like they are squeezing their loyal install base, including those on “affordable” tiers, for substantial cash repeatedly, possibly to fund the maintenance of the Synchron Stage.

If a platform giant like NI is failing, can these high-overhead developers survive without constantly squeezing their customers? I’d love to hear your thoughts.

You raise some very good and strategic points.

There have been major disruptions in the industry, largely due to a massive drop in the pricing of pro-level sample libraries and effects plugins, which has dramatically lowered margins for developers (whereas hardware makers have seen a drop in demand). Combined with the fact that even the companies we consider major players in the sample developer space are small so we don’t even know whether they’re in the black or in the red, and it makes it very difficult to navigate these times. Because of that, unlike large public companies, we don’t know the financial conditions of these companies; consequently, we’re flying blind to a large extent when making large purchases from developers.

One might see the safest strategy is to go with the larger players with parent companies with deeper pockets (e.g., Spitfire). However, I still don’t think that’s enough to ensure stability, as parent companies may lack patience when an acquired company begins performing poorly, whereas a founder may be a lot more likely to stay committed and maintain a long-term perspective.

I think the massive drop in the pricing of sample libraries is major disruption for the industry and it certainly can cause shakeups in the industry. Sample and effects plugin developers have seen their margins shrink dramatically in recent years. As even the larger players, like NI, are not large businesses (they’re literally a small business by US standards), it’s pretty difficult to know what kind of financial shape these companies are in. I don’t think there is any clear answer for how to navigate these times. But seeing any company go into bankruptcy/insolvency proceedings does give one pause and consider what happens if a product we depend on — or the activation we depend on — stops working. Now, I don’t think that’s going to happen with NI/Kontakt — and if there is an activation issue, it won’t be permanent — because Kontakt is so popular and has such a large ecosystem that it’s a very valuable asset. But I can absolutely see that more niche product lines from NI will likely be casualties.

As far as the state of EastWest, I have no idea. I know that since I posted about NI, a popular developer emailed me to thank me for the posts. Developers are, rightfully, concerned, but most are unlikely to want to publicly comment because they have concerns and they know that their customer base has concerns too. Kontakt developers know to tread carefully at this time.

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