New Zealand’s competition regulatory agency, the Commerce Commission, has denied clearance for AlphaTheta’s proposed acquisition of Serato.
AlphaTheta, Pioneer DJ’s parent company, announced last year an over $50 million buyout of the New Zealand-owned and headquartered music software firm. The proposed merger — if passed — would bring under the same umbrella Serato and Rekordbox DJ, which together account for 90% of market share in the DJ software business.
The move was met with significant pushback from US audio equipment manufacturer InMusic (parent company of Akai, Denon DJ, Moog Music), who cited fears of a monopoly situation, arguing that the buyout will “eliminate competition” and “hurt the DJ community”.
On the decision to decline, NZCC chairman Dr John Small said that the Commission was not satisfied that the merger would not have the effect of “substantially lessening competition” in the markets for DJ software and DJ hardware.
“While other DJ software providers would remain in the market, we did not consider these rivals, or the possibility of a new DJ software provider entering the market in the near term, would be sufficient to replace the level of competition that would be lost with the merger. We therefore could not exclude a real chance that the merger would result in a substantial lessening of competition for DJ software, resulting in price rises to consumers and/or a lower quality software offering.”
As Serato’s DJ software is currently integrated with many brands of DJ hardware, the agency is concerned the merger would make it harder for DJ hardware rivals to compete with Pioneer DJ.
“The evidence before us indicated that the merger could give ATC [AlphaTheta Corporation] the means to either eliminate or worsen DJ hardware rivals’ ability to integrate their products with Serato,” said Dr Small.
“We were also concerned the merger would provide ATC with access to its DJ hardware rivals’ commercially sensitive information, including information about unreleased products shared in the integration process, which could provide ATC with a competitive advantage and lessen the incentive on both ATC and its rivals to innovate.”
In a joint statement, AlphaTheta and Serato said they “disagree with and are disappointed by the ruling of the New Zealand Commerce Commission against the acquisition.”
The proposed agreement is one that would have capitalised on both parties’ “complementary expertise” and “accelerated” their combined ability to deliver incredible products to DJs and Producers around the world, said the companies.
“Regardless of the disappointing outcome of the judgement, we remain excited about the future,” said Yoshinori Kataoka, president and CEO of AlphaTheta. “Through this process we have built on our 15 year relationship with Serato, leading to the commencement of a number of exciting new projects for DJs and Producers.”
Serato CEO Young Ly added, “While it’s not the decision we wanted, the Serato business has never been in a better place, and neither has our relationship with ATC. Through the process we have not taken our eye away from what we do best and our pipeline of future innovation is incredibly healthy, including a number of projects with AlphaTheta and other industry partners.”
