Native Instruments Insolvency and Updates

[fossile]

the “New Owner” is legally obligated to honor existing licenses, but you are responsible for proving you own the products.

unless they sell off the IP versus the operating company(s)… for example, if the reason NI is going under is poor operations, then one could wonder if a smart acquisition would be to buy the ops, vs just the IP and re-brand it… or another common one – buy the ops and IP, then resell the IP and dump the ops… thus avoiding potential legal issues for NI if doing it directly… and NI then simply becomes just another innocent instrument provider vs the entire infrastructure…

 

[LinkedMusicians]

@fossile It appears that NI was well managed on a day-to-day operations level. It’s the acquisitions and massive debt vs. earnings that led to their insolvency. Their acquisition spree occurred during the post-COVID home-studio boom, so they paid top dollar for everything. When interest rates rose, all of their earnings went to paying down the debt (again, according to CDM’s report, their debt was roughly 10x their annual earnings).

So, it’s basically a given that there will be an asset deal — an intellectual capital transfer — where the buyer doesn’t inherit the debt obligations. No sane business person/company would take on the level of debt NI has accumulated. Those assets include NI’s user database and activation servers. Here’s where current NI customers should take note — the new buyer has a strong motivation to keep the activation servers running — they need to do that to maintain the value of what they purchased. So, it’s very likely that NI customers’ existing licenses will transfer to the buyer of the new company (let’s say Kontakt for this example).

For us long-time NI customers, when Francisco Partners first bought NI—they moved everyone over to the “Soundwide” ecosystem, and our serial numbers us there. Hopefully, that is what will happen in this case.

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1

[LinkedMusicians]

Now, I realize that I will lose some folks on this, but while one might think this is similar to what occurred with Gibson’s sale of intellectual property to BandLab, it’s actually quite different.

BandLab bought all of the intellectual property (IP), including the source code for SONAR, brand trademarks, and patents not the customer database or obligations. Gibson retained the legal liabilities and any remaining corporate debt of the original Cakewalk subsidiary. Of course, BandLab also hired core Sonar developers like Noel. Again, BandLab didn’t buy and takeover the Cakewalk customer database. We had to opt-in to BandLab’s database. With NI, the insolvency administrator is trying to scrub the debt from the parts of the company for sale and sell the various parts of NI, including customer databases as part of the core assets to ensure continuity.

When BandLab bought Cakewalk’s assets, they didn’t buy the obligations between Gibson and the users. That’s why those lifetime deals or any customer agreements didn’t have to be honored by BandLab. In effect, BandLab was saying to customers, “We didn’t make that deal with you, so we don’t have to honor it. That was with Gibson, not us.” Instead, BandLab attempted to buy the goodwill of the customer base by giving away product (what was once, and is now again, called Sonar) for free for a limited time.

From my understanding, the company that buys from NI has the option of doing what BandLab did and telling customers, “you’re not my problem.” The new buyer, for example, is unlikely to give your Komplete 15 license 10 years of free support — you bought that from a company with different owners, and legally, they’re not obligated to do that. However, not honoring existing NI licenses, while legally their right, would be brand suicide. So, I think it’s most likely that buyers will be honoring existing licenses to some extent, but likely limiting or ending support of older products. They may very likely do things like revise or terminate things like NI’s generous license transfer policy.

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2

[LinkedMusicians]

If the chatter around the NI M&A discussion is correct, the companies presently in talks with NI/NI’s insolvency administrator are Fender, Focusrite, Yamaha/Steinberg, InMusic, and Adobe — there’s also some social media discussion that deadmau5 and NI’s original founders (Haver and Galic) might be attempting to raise money to buy part of NI.

I have another blog post in the works that weighs the pros and cons of each of the above companies buying Kontakt (I’m just focusing on Kontakt due to my time constraints and my knowledge being the deepest with that product and its ecosystem). I would love to hear from our members, if they could pick the company that think would be best for the future of Kontakt, which one of those it would be.

My pick — by far — is Fender. It has proven that it knows what to do with an acquired software company with PreSonus. Focusrite would be a question mark. They haven’t been great when it comes to managing software. They’ve discontinued a lot of the software they’ve introduced. They definitely operate like a hardware company that doesn’t prioritize or even treat their software lines as equally important.

My concern with Yamaha is that HALion is already the second largest sampler in the industry and buying their competitor would create less competition in the marketplace, which would have negative impacts on innovation and pricing. InMusic would be a nightmare based on their terrible track record with software. Innovation would almost certainly stop as InMusic has a well-known history of not investing even in the maintenance of the software brands they’ve acquired (Air Music Tech and BFD top the list, but there are others). Adobe would be the the worst case scenario of all, as they would almost certainly turn Kontakt and any NI products into subscription-only, leaving current Kontakt perpetual license owners in a very bad position.

I’d love to get everyone’s thoughts. Again, this is a big deal to me because (1) most of the sample libraries I own are Kontakt formatted sample libraries (and I’ve spent a lot of money on Kontakt sample libraries) and (2) I have made a good deal of friends who are sample developers who I know are in a tough spot right now.

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[Brian]

Good argument for Fender.  I would love to see them take in NI hardware and software, but not the other companies (Izo, etc) that were grossly over-paid for.  I suspect the seller of P.A. (to NI) is going to get it back for pennies on the dollar 🙂

Edit-  Adding a bit re: In Music.  While I have been burned by them more than once, I think their HeadRush Guitar pedals (at least the Flex Prime I recently bought) is amazing, and unbeatable for $500.  I still would HATE to see them get NI, but not all of their companies are dumpster fires.

1

[LinkedMusicians]

On Brian said

Good argument for Fender.  I would love to see them take in NI hardware and software, but not the other companies (Izo, etc) that were grossly over-paid for.  I suspect the seller of P.A. (to NI) is going to get it back for pennies on the dollar 🙂

I think the price any of these parts of NI will sell for is dependent on the competition for them. If there are indeed many companies discussing — and possibly — making offers, that, of course, lessens the likelihood that this will be a fire sale. That’s why the administrator’s first order of business is scrubbing the debt from the business, because it appears these are otherwise profitable sub-brands. If PA has been profitable and the debt is scrubbed, and there is competitive bidding, it could sell for a decent price.

The parties in these equations that is guaranteed to get a small fraction of what they put in are creditors.  So, they know that, and they’re just  trying to get as much as they can, knowing it will only be a small fraction of what they’re owed. But they don’t want a fire sale and there’s no need for a fire sale if there are numerous interested parties.

A fire sale would happen if these parts of NI had poor sales and were long neglected technologies, but that’s not the case. So, when you remove the debt, you have very attractive brands and business units. If the reports are true and the debt was at something like $240 million (that’s from memory — I wrote of it earlier) and the company was earning $25 million annual revenue, there’s no way those creditors are going to see anything close to what they loaned the company and no buyer would take on a company with that debt to earnings ratio. We can’t stress enough that the problem with NI wasn’t that their products aren’t competitive, the problem is all of those acquisitions made, buying companies when their prices were very high, and being saddled with massive debt due to that, especially when the market changed and interest rates increased. So, again, separate all of that debt from the picture, and you likely have an attractive business or businesses.

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[fossile]

thanks, for me, 40+ years of working with giant evil corporations seeking world domination (aka wall street etc) when i say “operations” – i mean as the corporate executive whole, not the folks on the front lines creating the products and maintaining them. 🙂 irresponsible compounding of debt is (in my speak) an “operating issue”.

anyways, i am hoping my few thousand dollar investment in NI and Kontakt platform instruments will be preserved… but i’m somewhat cynical that the same type of people running NI into the ground in the first place, will be able to discern the proper path forward…

[LinkedMusicians]

On fossile said

thanks, for me, 40+ years of working with giant evil corporations seeking world domination (aka wall street etc) when i say “operations” – i mean as the corporate executive whole, not the folks on the front lines creating the products and maintaining them. 🙂 irresponsible compounding of debt is (in my speak) an “operating issue”.

anyways, i am hoping my few thousand dollar investment in NI and Kontakt platform instruments will be preserved… but i’m somewhat cynical that the same type of people running NI into the ground in the first place, will be able to discern the proper path forward…

I think you and I are in agreement that it is the actions of top-level management responsible for acquisitions, like the CEO and CFO, and strategy people that are responsible for NI ending up in insolvency. I wouldn’t fault the NI development, marketing, brand, support, HR, or sales staffs. They aren’t involved in all the acquisitions and resulting debt that led to NI’s downfall. Of course, I’d love to see, for example, Fender, buy at least Kontakt, and hire the team that has worked on it. While all of the debt they were under hindered progress, I think that team has done a good job and I have heard mostly good things from developers who work with them and still continue to have meetings with them through all of this.

@fossile, what company would you most like to see end up with Kontakt?

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[LinkedMusicians]

We’re coming up on a milestone; we’re four days away from the 90-day mark. That’s especially important, as in Germany, the government guarantees employee wages for 90 days during an insolvency. After that, companies must fund their employees themselves or lay them off.

This is an uneasy time in the industry. I’m hearing that numerous companies are laying off employees. I have heard that one company in talks with NI is not moving forward, but I don’t know how trustworthy that is. But we’re at a point where an announcement is likely going to be made very soon.

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[LinkedMusicians]

It’s officially 91 days since Native Instruments entered insolvency. That’s a very significant milestone, because the German government guarantees employee salaries for 90 days, so today is the first day that NI employees no longer have that protection. Due to the enormous debt that NI is under, with a reported debt-to-earnings ratio around 12x to 13x, the situation is especially uncertain. It’s very likely that there will soon be an announcement soon regarding sales of intellectual property, product lines, layoffs, and/or acquired businesses, possibly this week.

Given how significant Native Instruments is to making music in the 21st century, it has a significant impact on the up to 2 million monthly active users as well as developers and contractors in the NI ecosystem. I thought it would be valuable to take my business experience, digital experience, and knowledge of this industry to build a hub specifically dedicated to the Native Instruments insolvency. That is what I did. If you go on YouTube or the big legacy forums, they’re overflowing with very bad information from people trying to sound authoritative on these issues that, in fact, don’t even understand the fundamentals. Consequently, today I’ve released the Native Instruments Insolvency Hub, a central place where music creators and developers can go to dive as deep as you’d like to find the latest information regarding Native Instruments. Specifically, it encompasses:

• A real-time feed from Native Instruments where the CEO issues official statements.
• Official Court Announcements: We index the Amtsgericht Berlin-Charlottenburg (Case No: 3612 IN 602/26) and filings from the administrator, Prof. Dr. Torsten Martini, to give you the exact legal status of the restructuring and future filings that may be forthcoming.
• M&A & Industry Intelligence: Track active negotiations and potential acquisition news from vetted financial and music tech journals like CDM (Create Digital Music), Sound on Sound, and Music Tech.
• Developer Continuity: Monitor statements from partners like Plugin Alliance and iZotope to understand which business units are operating outside the insolvency debt.
• Professional Community Intel: Real-time thread from the Native Instruments subreddit, allowing you to see how fellow composers and indie developers are managing their Kontakt-based libraries and license security.

You can always find the NI Insolvency Hub in the navigation menu under RESEARCH GEAR, FORUMS & BRANDS.

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3

[Kirean]

So some worrying updates as of late is that you can’t download installers (including for older versions) anymore from Native Instruments via the account. Things seem to work through via Native Access now only.

Then on VI Control there was mention that iZotope had removed NI logo from RX12.

I truly am hopeful that my gut wrenching feeling about how things are gonna go turns out to be wrong.

1

[LinkedMusicians]

On Kirean said

So some worrying updates as of late is that you can’t download installers (including for older versions) anymore from Native Instruments via the account. Things seem to work through via Native Access now only.

Then on VI Control there was mention that iZotope had removed NI logo from RX12.

I truly am hopeful that my gut wrenching feeling about how things are gonna go turns out to be wrong.

Your post caused me to do something I haven’t done in a very long time, look at VI-Control, specifically at the thread on NI’s insolvency (I do look at their RSS feeds regularly, but don’t actually visit the site). It is packed full of misinformation on the NI insolvency — some of it liked by NI competitor, Mike Greene (a few months after his 40+ page attack on his competitor 8Dio using two contractors, one paid contractor for Greene himself making attacks on his and his friend Andrew Aversa’s competitor 8Dio based on false stories they manufactured who is now promoting Greene’s new NI/SoundPaint/Cinesamples competitor venture on KVR). Our membership actually includes at least one senior manager from NI. I would allow LM to be a source of misinformation about any company, plus, unlike VI-Control, LinkedMusicians isn’t owned by a Native Instruments competitor who can benefit from negative information about NI that can harm the brand and negatively impact the sale of the company and its assets.

If iZotope really removed the NI logo, it’s nothing I would be concerned about. NI and iZotope are extremely likely to be separate in the near future. If someone in the UI team accidentally released a version of the GUI with the NI logo removed, because they have a version of the GUI without the NI logo in anticipation of the two companies splitting up, that’s no reason to be concerned. It also doesn’t tell us anything at all. That is expected, just as it is expected that Brainworks and Plugin Alliance will  also very likely be separated from NI. So let’s address just some of the wild speculation and rumors that Greene is allowing to flourish at the NI-competitor owned VI-Control forum:

• A user claiming that you can’t download old installers that have long been replaced by Native Access. That’s within the realm of normal operations. Native Access continues to work flawlessly for me as of Wednesday morning. I haven’t found any widespread reports of issues with Native Access or authorizations. If there were problems with Native Access or authorizations, I would be concerned, but that isn’t being reported anywhere that I’ve seen, and my personal experience is that everything works flawlessly.
• The person that reported that the NI logo has been removed from the recently released iZotope RX 12. It is extremely likely that iZotope, Brainworks, and Plugin Alliance will be split up from NI. Yes, it’s possible that a company would buy all three, or that creditors could decide to keep the some parts of the company that couldn’t be sold for a desired price together, but it’s far more likely that NI and the companies it recently acquired will be split up. Consequently, it would be in no way surprising if iZotope, Plugin Alliance, and Brainworks soon begin to remove NI branding. I would find this to actually be a good sign that they are hopeful to find an owner. If they made no changes, I would be more concerned that they have no hope of being acquired (while it could mean that creditors decided to keep the entire organization together, I find that highly improbable).
• One of the speculative posts on VI-Control attempts to make something out of Francisco Partners no longer listing NI on their site. Even a first-year business student can tell you it is normal for a private equity company to remove a company that is in insolvency from its list. FP actually tried to sell NI to Bridgepoint and Bain Capital in late 2025, but the deal fell through. Francisco Partner’s site is basically a marketing tool to attract investment in FP. Francisco Partners removing Native Instruments from their website doesn’t mean NI is gone—it means Francisco Partners is gone. It’s a clear admission that they have lost their investment and no longer control the company. For users, this is actually a milestone: the ‘Private Equity era’ of NI is officially over, and the company is now fully in the hands of the court-appointed administrator and the creditors as they look for a new buyer. It would be far more surprising if they didn’t do that. The fact that the VIC poster is trying to read something more into it is, very candidly, only a reflection of their lack of understanding business fundamentals.

It’s very likely that NI will making an update announcement very soon. It may be that they are further along in negotiations with potential buyers or may be finalizing a deal; it could be that they’re closing down parts of the business or all of the business (highly doubtful); or it could be layoffs. But it’s very likely that we will hear an update very soon. From the public statements the solvency administrator and NI CEO have made, we know that they’re looking to sell the various parts of the company, not shut them down. Technically, it’s a bit of a gray area, but realistically, Francisco Partners really isn’t in the driver’s seat. While it’s not legally accurate to say, for all practical purposes, NI is now owned by creditors and they decide its future, and it seems clear that they want to split up and sell the company. I have seen nothing reported that makes me think there is any reason for panic. Everything to date has been very routine considering the circumstances.

As I’ve shared, the overwhelming majority of the sample libraries I own are Kontakt libraries. I use iZotope plugins extensively. I master everything I’ve ever shared in iZotope Ozone and use their software like Nectar, RX, etc. in most projects. So, basically, my following all of this is of great personal interest to me, but considering my background in marketing and business strategy (with the latter being more relevant in this situation), I thought it would be useful to NI customers, NI ecosystem developers, and NI employees if I shared my knowledge and experience.

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[nishyp]

Looks like InMusic is acquiring NI, iZotope & PA

https://cdm.link/inmusic-will-acquire-native-instruments/

https://www.inmusicbrands.com/press/inmusic-native/

[Frank]

An announcement from Nick Williams, CEO of Native Instruments – Native Instruments Blog

https://blog.native-instruments.com/an-announcement-from-nick-williams/

[LinkedMusicians]

That statement and other articles appeared on the Native Instruments Insolvency Hub in real time and lets you search the legal filings in real time also (the related PowerSEARCH). I want you guys to check it out. It’s not pretty but it took me a bit to come up with and put together and I plan on creating more stuff like that in the future. So I’d love to get everyone’s thoughts. This site will still be worked on after we move the forum to the subreddit.

I’m working on a blog post breaking down the positives and negatives. Since I’m showing my real name, my background includes serving as global strategy director at a Fortune 500, advising the CEO and C-level, specializing in digital strategy and assessing technology company mergers and acquisitions, so assessing this is completely in my wheelhouse. Give me 30 minutes or less and I’ll update this thread with a link.

UPDATE:
I published the blog post which gives a breakdown of what this acquisition may mean based on inMusic’s past acquisitions of software companies and the CEO’s past moves with software acquisitions. For those who think — yay! Everything is going to be the same, that’s absolutely not a safe assumption. It’s highly likely that there may be consolidations, job eliminations, products or brands that aren’t performing could be sold off or retired, and layoffs where there are inMusic sees duplications from its own staff (e.g., accounting, marketing, etc. ).

https://linkedmusicians.com/native-instruments-beyond-insolvency-what-it-may-mean-for-music-producers/

 

• This reply was modified 2 hours, 51 minutes ago by LinkedMusicians.

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[LinkedMusicians]

Related thought, developers who decided to create an alternative sampler banking on Kontakt going under surely chose unwisely. The reason it was as close to a sure thing as it could be that Kontakt would survive was (1) the product is the crown jewel of NI, (2) NI’s debt wasn’t a problem of the product lines, it was due to the wild acquisitions and buying them for way too much money when prices were at their peak, and (3) because the administrator have basically removed the debt from the company to make it appealing to acquire — that last piece gave it a near guarantee of selling.

This is going to give developers a sense of confidence that Kontakt will continue for a long time. I just hope inMusic will invest in it like NI was doing before all of this or better. NI seems to have a great team behind it, it is my hope that keep them doing what they were doing — if anything, invest more so they can bring more innovations to market.

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