Native Instruments file for insolvency...

[billinder33]

NI filed a return of £250 of debt vs £25 of revenue in 2023.

How in the world are they going to make it out of this? I literally bought Kontakt two weeks ago lol fml.

yeah good question... i just wondering the last days - how the hell can they stack up such a big pile of debt? ... and how did they created it? Or why did they keeping it like that and not working on their finance maybe some years earlier

The short answer is "financial engineering". The longer answer in page 20 of this thread.

[Mike777]

What does "VC" mean?

I wonder how much debt was paying for cloud storage?

Ideal software business plan: make a few of the best sounding plugin instruments/tools at a reasonable price that requires a minimal staff to create and support.

[VitaminD]

CEO response

We are working diligently and responsibly to secure a healthy, financially sustainable future for Native Instruments. As you may have seen, Native Instruments GmbH has entered a restructuring process in Germany, as have 3 of our German non-operating holding companies. In legal terms, we have filed applications to open pre-insolvency proceedings for those companies.

TLDR version:

Don’t worry about the previous VC d-bags who made a mess of things. We’re already out shopping for new VC d-bags to fund the next several years of mess-making.

That's rather succinct.

Who is going to take on the debt? They'd have to think they can out generate the debt load, over time. That's probably not going to happen with high quality "pro-level" coded plugins.

That's probably going to happen by appealing to the masses. The novice budding bedroom beat maker who is willing to throw in a hundred or two hundred dollars into the pot. A lot of them. Those people tend to have tools that can look differently from someone who knows their way around a studio or keyboard.

I think that's partly why Komplete got so bloated over the years. It's the consumer approach to sales. More for Less is seen as better. Even if you have no interest in much of the package, you're getting a bargain because look at how many products are included at a low low price!

[billinder33]

At this point, they need another musical instrument company that is financially stable to buy them ideally.
If another PE company buys them and adds debt to the balance sheet again, it looks bad and might scare off the developers.
Once they lose the developers, it's a downhill run.
This in relationship to Kontakt mainly.

I assume regardless of whether or not NI's IP changes hands, there will be significant debt restructuring as part of the process. Early/majority debt holders will likely be better protected than late/secondary debt holders. I'm sure the PE firm has already gotten their money back so they DGAF either way and are already moving on to their next victim.

[gullfo]

hmmm, so they're saying that non-productive holding/shell companies, indiscriminately buying popular companies using leveraged corporate debt instruments, results in unsustainable debt which cannot be repaid to the shareholders? lol, go figure...

[Funkybot's Evil Twin]

That's rather succinct.

Who is going to take on the debt? They'd have to think they can out generate the debt load, over time. That's probably not going to happen with high quality "pro-level" coded plugins.

That's probably going to happen by appealing to the masses. The novice budding bedroom beat maker who is willing to throw in a hundred or two hundred dollars into the pot. A lot of them. Those people tend to have tools that can look differently from someone who knows their way around a studio or keyboard.

I think that's partly why Komplete got so bloated over the years. It's the consumer approach to sales. More for Less is seen as better. Even if you have no interest in much of the package, you're getting a bargain because look at how many products are included at a low low price!

Yeah, I'm sure NI leadership has been, and will continue to keep looking at their business from the perspective of:

1. We've got this massive installed user base

2. There's this huge tech debt in completely modernizing some of these legacy products (e.g. Reaktor, Kontakt) - that's high risk and expensive - might not yield ROI

3. Hardware is a good business, keeps us in stores and top of mind, and we can tie content to it, but the hardware itself doesn't have the margins software does, so...

4. Let's focus on putting out cheap content - it's low risk and high reward

It's good business on the one hand, but that's also how companies languish. It's entirely possible they got too big IMO.

If I was the owner and it was my investment at stake, would I be like, "you know what would be cool? Making NI hip again. Let's have teams doing total, modern, ground-up rewrites of Kontakt, Reaktor, Guitar Rig. Toss out all the old code, maintain compatibility, modernize for performance and future-proofing? Make killer new products along the way. Spends years doing this; hope it pays off in the end?" Nope. I'd be like, "release more Kontakt libraries, get some Battery packs out, Maschine, Maschine, Maschine! Repackage existing plugins! Make money now, we've got salaries to pay and lights to keep on!"

[Funkybot's Evil Twin]

Ideal software business plan: make a few of the best sounding plugin instruments/tools at a reasonable price that requires a minimal staff to create and support.

That works for small companies. But NI got too big. They've got a massive installed user base. That toothpaste isn't going back in the tube.

[IvyBirds]

Exactly what does anyone expect a CEO to say? "We're going to take everything away from you that you paid for"?

Anyway this just popped up on Farcebook:


Dirk.png


Okay now I have to get to the dentist before my tooth explodes......

That is from the guy who helped create this mess in the first place. That debt NI is carrying includes what he got paid people seem to forget that. PA would not be in this position if the company didn't sell itself to NI, and NI didn't take ln debt to do so

[DCrown]

What does "VC" mean?

I wonder how much debt was paying for cloud storage?

Ideal software business plan: make a few of the best sounding plugin instruments/tools at a reasonable price that requires a minimal staff to create and support.

Ni definetely had too many employees and too bad releases more than the last 5 years. I sold all PA and NI plugins about 5 years ago and what to expect from the trio NI-PA-Izotope?!
The question is who is next? Just keep an eye on companies with 50+ employees and....
I won't tell who is next imo, I would just get the same feedback when I wrote NI won't survive months ago.
Without good quality and innovative products it is hard to survive and AI is a big competitor now, it doesn't necessarily mean you have to include AI in your products, cuz now there are two completely different opinions and views on ai (hate or love), probably in 10 years or sooner, you won't be able to survive without ai.
Imo a lot of hardware products will disappear in future when AI will be used and prefered by the vast majority. I mean you won't even need high end studio monitors, you will completely rely on ai making mixing and mastering according to standard quality. Hardware is a different topic.

[npdc]

What does "VC" mean?

I wonder how much debt was paying for cloud storage?

Ideal software business plan: make a few of the best sounding plugin instruments/tools at a reasonable price that requires a minimal staff to create and support.

Ni definetely had too many employees and too bad releases more than the last 5 years. I sold all PA and NI plugins about 5 years ago and what to expect from the trio NI-PA-Izotope?!
The question is who is next? Just keep an eye on companies with 50+ employees and....
I won't tell who is next imo, I would just get the same feedback when I wrote NI won't survive months ago.
Without good quality and innovative products it is hard to survive and AI is a big competitor now, it doesn't necessarily mean you have to include AI in your products, cuz now there are two completely different opinions and views on ai (hate or love), probably in 10 years or sooner, you won't be able to survive without ai.
Imo a lot of hardware products will disappear in future when AI will be used and prefered by the vast majority. Hardware is a different topic.

Too much AI everywhere. It's also being pushed by force. People didn't even ask for it. I think people will eventually reach a saturation point and will want to return to their roots. I know I want to. Prefer human flaws anytime.

[DCrown]

What does "VC" mean?

I wonder how much debt was paying for cloud storage?

Ideal software business plan: make a few of the best sounding plugin instruments/tools at a reasonable price that requires a minimal staff to create and support.

Ni definetely had too many employees and too bad releases more than the last 5 years. I sold all PA and NI plugins about 5 years ago and what to expect from the trio NI-PA-Izotope?!
The question is who is next? Just keep an eye on companies with 50+ employees and....
I won't tell who is next imo, I would just get the same feedback when I wrote NI won't survive months ago.
Without good quality and innovative products it is hard to survive and AI is a big competitor now, it doesn't necessarily mean you have to include AI in your products, cuz now there are two completely different opinions and views on ai (hate or love), probably in 10 years or sooner, you won't be able to survive without ai.
Imo a lot of hardware products will disappear in future when AI will be used and prefered by the vast majority. Hardware is a different topic.

Too much AI everywhere. It's also being pushed by force. People didn't even ask for it. I think people will eventually reach a saturation point and will want to return to their roots. I know I want to. Prefer human flaws anytime.

Well, if you are 35+ like me, you are probably not happy about ai, not sure as far as next generations are concerned. AI is a big topic now not just as for music production.
Maybe you are right and things will change again, but I remember smart Mr Bill Gates once said the internet won't succeed, he was wrong.
Return to roots? Imagine you are born in 2004, what are your roots? You grew up with the internet, smart phones, social media, 80.000+ new uploads on Spotify every day, started producing music on a daw with virtual instruments. AI just another cool tool to make things more comfortable and easier without any learning curve and ai will probably turn 80.000 uploads every day into 8 Mio uploads every day, easy to make 30 new songs every day thanks to ai.
Imo the internet has more downsides than good sides, I wouldn't care if there was no internet any more tomorrow, but it will never happen.

[EvilDragon]

What does "VC" mean?

Venture capital. But this is not about venture capital. VC is focused on startups, NI is not a startup. What NI is owned by is PE (private equity), which is orders of mangitude a worse thing.

[VitaminD]

2. There's this huge tech debt in completely modernizing some of these legacy products (e.g. Reaktor, Kontakt) - that's high risk and expensive - might not yield ROI


If I was the owner and it was my investment at stake, would I be like, "you know what would be cool? Making NI hip again. Let's have teams doing total, modern, ground-up rewrites of Kontakt, Reaktor, Guitar Rig. Toss out all the old code, maintain compatibility, modernize for performance and future-proofing? Make killer new products along the way. Spends years doing this; hope it pays off in the end?" Nope. I'd be like, "release more Kontakt libraries, get some Battery packs out, Maschine, Maschine, Maschine! Repackage existing plugins! Make money now, we've got salaries to pay and lights to keep on!"

I was going to respond to 2 alone, until I read your ending paragraph (which said the same thing I Was about to suggest).

Right now is THE perfect time to abandon the current Kontakt as a legacy product. Whoever owns NI can develop a new Kontakt (Kontakt X? ) with a modernized GUI, designed for wide screen modern displays and larger controls/fonts.

That way, there is a break point where those reliant on Kontakt as it is today still have their tools and NI can build a better product for the future, without the weight of decades of old design.

[EvilDragon]

That is just not going to happen in a realistic amount of time.

[SLiC]

...good to see development is still ongoing!