Serato sale declined by CommCom

This month's issue of Metro magazine has an in-depth look at the history behind NZ DJ software company Serato, and looks at its proposed sale for $115m NZ announced in July last year, written by Chris Schulz.

That sale was cleared by the Overseas Investment Office, but has been held up by the review from the Commerce Commission, which has delayed announcing the outcomes a total of SIX times. They finally announced the outcome yesterday (18 July), declining clearance for the deal.

Metro: "On 17 April, the Commerce Commission will release its decision on whether Serato’s sale to AlphaTheta can proceed. A lot is riding on that decision. The process has, Ly admits, been unsettling for staff. Some have needed reassurance. “It caught us slightly off guard,” he repeats.

"What’s at stake? Read through the submissions and you’ll find heated arguments for both sides. Some say the company’s sale will create a global monopoly that locks out other competitors and stymie innovation. “It will definitely limit choices for the consumer and give [AlphaTheta] an unfair monopoly on both DJ hardware and software,” one unnamed DJ submitted. Local retail store Rockshop also spoke out, claiming “innovation will be lost, end users will have less choice and prices will increase”.

"That’s an argument also made by the biggest name in the fight against the sale. Morgan Donoghue was Serato’s marketing director, then chief operating officer, from 2011 to 2017. He left to manage InMusic NZ, a stable of imported DJ hardware brands. In its submission, InMusic states the sale would “substantially lessen competition” and “should not be cleared”. Donoghue didn’t respond to a Metro request for comment, but told the New Zealand Herald a month after the sale was announced: “We know the Serato guys, we’ve worked closely with them for years, we have a great relationship with them. We’re just worried that Pioneer buying them out would change everything.”

The Commerce Commission's press release said "AlphaTheta and Serato are both active in the DJ segment of the music industry. AlphaTheta supplies DJ hardware under the Pioneer DJ brand and DJ software under the rekordbox brand, and Serato supplies DJ software. Serato’s DJ software is currently integrated with many brands of DJ hardware, including Pioneer DJ.

The merger proposed bringing together two of the most popular DJ software brands and would have also combined ownership of the most popular DJ software brand (Serato) with the most popular DJ hardware brand (Pioneer DJ).

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.

“The evidence gathered by the Commission indicated that Serato and rekordbox compete closely in the DJ software market. 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,” Dr Small said.

BusinessDesk reports that Serato stated its too early to say whether they will appeal the decision.