"MakeMusic Confirms Receipt of Proposal from LaunchEquity Partners, LLC" - Garritan?

[SysExJohn]

Saw this recently in the V.I control forum.

http://www.makemusic.com/Pressroom/Default.aspx?pid=555

How will this affect Garritan, I wonder?

SysExJohn.

[rbowser-]

http://www.fohguild.org/forums/attachments/screenshots/175564d1309496011-animated-gif-thread-nph-shrug.gif

[Silh]

Looks like LaunchEquity is apparently MakeMusic's largest shareholder; looks like they want to buy the whole thing?

[rpearl]

I'm a Sibelius user, and when Sibelius was acquired by Avid, many of us were apprehensive. Recent events have borne out that fear - they are closing the London office, the heart and soul of the operation. I sincerely hope that buyers of Finale have better management sense than Avid. And, that they realize what a notation program really is, what it does, and who its buyers/users are. Good luck guys - hope you don't join down the rat hole...

[rbowser-]

Monday’s biggest gaining and declining stocks
MakeMusic Inc. (US:MMUS) (http://www.marketwatch.com/investing/stock/MMUS?countrycode=US&link=MW_story_quote) rose 13% after LaunchEquity Partners made a proposal to acquire the remaining 72.3% stake in the company it does not already own for $13.5 million. Under the proposal, LaunchEquity would acquire all of MakeMusic’s operating assets, excluding cash, and assume its liabilities. Then MakeMusic, a provider of music technology and software, would adopt a plan of liquidation and distribute the available cash to its existing shareholder.

[caher]

Folks,
This is a most interesting development. Here is the SEC filing:

http://www.sec.gov/Archives/edgar/data/920707/000092189512001507/ex99113da807845mak_071512.htm

It is very interesting reading indeed. It appears to me the Launch Equity folks, who own 28% of the company, are not particularly happy with the way things are being run, with 4 CEOs in 4 years.

They also indicate that the notation products (Finale, PrintMusic, etc) code base is at end of life and needs significant investment. Some of us who use Finale and understand software product life cycles have long suspected that this may be the case. Launch Equity stated that they plan to invest $10M in this. That is very significant for company with a market cap of ~$20M.

A few years ago, I looked into making a fairly substantial (for me, anyway :) ) investment in MM. I wanted to invest in a company doing what I consider to be important work in the world of serious music. Looking into it closely, I chose not to for the reasons that L-E has outlined, in addition to the fact that it seemed to me that a very small number of share traded caused pretty wide swings in the valuation, making it easy for someone to manipulate the stock price. I was also concerned about the cash flow in the company. They were barely in the black then and last year slipped into the red.

On the other hand, if I had bought then and this deal goes through, I would have come out substantially ahead, with an annual rate of return of about 15% for about three years. :) Oh well.

What is not clear at this point is whether L-E considers the Garritan product line a strategic asset or will put it on the block for sale.

Chris

[pokeefe]

It's difficult to know how to interpret a move like this (and doesn't matter whether we know how to interpret it or not:)) but you can bet LaunchEquity isn't doing this because of a love of music or an interest in notation software, sound libraries, etc. I'm sure MakeMusic could use the $10M but it isn't necessarily result in better products (as judged by the current user base) ... not if a different customer base would earn LaunchEquity a better return on their investment. I fear MakeMoney is more important than MakeMusic to LaunchEquity.

Pat

[SysExJohn]

It would seem clear from Avid's effective 'dumping' of Sibelius and the downturn of sales of Finale, as well as stagnation of the SmartMusic product line that either this market has reached saturation or the current worldwide economic climate has had/is having a major impact on sales/subscriptions.

Whether the same is true of the virtual instrument market I don't know. i.e. was Garritan 'acquired' because it was still making money, to boost the ailing Finale product?

We should all remind ourselves that loyalty to customers is only feasible when the company that makes the product is making money. i.e. no sales = no salaries.

However, the fact that the CEO of Avid has awarded himself, no doubt driven by a sycophantic 'remuneration committee', a pay award of 300 percent, I'm not sure over how short a period, followed by the closure of the Sibelius London office, seems excessively cynical to me.

Reminds me of the banking world.

And it's only my 2d. worth.
SysExJohn.

[pokeefe]

... We should all remind ourselves that loyalty to customers is only feasible when the company that makes the product is making money. i.e. no sales = no salaries.

But stockholders should be reminded that loyalty of customers and gaining new customers is feasible only when the company makes a product worth buying. Hopefully LaunchEquity is serious about its added investment in MakeMusic. Avid seems to have missed that point with Sibelius.

Pat

[caher]

A very quick scan of MM's latest annual report shows that the excecutive compensation levels are no where near the levels of the Avid CEO. Lookes like a CEO salary of ~$300K with a small bonus as these things go and worthless stock options.

Most interesting was the combined purchase price for Garritan & Recordare: $2.5M. I suspect someing on the order of a 80/20 split in Garritans favor.

It is clear that MM is pretty frugal in the way it runs the company but it is subject to conditions that are far outside it's control. "Interesting" times ahead.

[Raymond62]

Yes, interesting. Wait and see.

Raymond

[passagio]

Avid itself is in trouble, so unloading Sibelius was probably aimed at self-preservation. just a few weeks ago, I was working at another firm in the same building as their US headquarters , when word reached us that a 20% layoff of the parent company was under way. So it's not just Sibelius.

I just finished reading an interview in Wired magazine in which Marc Andreesen (he who invented the browser, thus making the internet possible) was broadly suggesting the days of the $600 killer app are over - and cloud sourced processing, storage and subscriptions are the next wave. I think this is one factor involved in the LE buyout (one hopes they'll take it private, so they can get off the quarterly report hamster wheel and get some space to change the business model). Another factor is the cutbacks in secondary and higher education, which has to be a monster consideration for notation software. Schools, universities and conservatories are where students are taught the intricacies of durable music composition, and have the time to begin creating their own. Absent such an experience, we face not just the loss of notation software, but a draining of the deep end of the talent pool as well.

[maiki]

I am not sure how anyone can expect anything positive from a buyout by LE, corporatists who have no concern for music, music education, or musicians.

The announcement says something about LE's plans are to "liquidate the assets". Doesn't that mean to close the company?

I don't know what a company would gain by buying a company only to shut it down, but it looks like that is their goal. They probably only bought those shares to get a large say to sell to themselves.

They do not own a majority of shares though, so all other shareholders should vote against the plan.

I wasn't comfortable with Garritan being bought out by MakeMusic, and now this is far worse.

We should all be writing to the heads of MakeMusic and encourage them not to make that sale.

There is an online petition to AVID protesting the closure of Sibelius, should we have such a petition about Finale, Garritan, etc.?

It would be quite unfortunate if there is no further development of Finale, Sibelius, etc. And for us--the Garritan libraries! (And even if one of the notation programs shuts down--that affects the other--as without competition--no reason to grow and improve.)

I recently became aware of another troubling fact of the music industry. I'm not sure how many are aware of this yet. Are people here aware that most of the major online music retailers have been bought up by one company--Guitar Center? When you buy something from Musician's Friend, Music 123, Woodwind and the Brasswind, etc., you are really buying from Guitar Center. (They still pretend they are separate companies, but they are not.) (I think there are more than the three I mention, but those are the ones I recall for sure at the moment.) GC also owns Harmony Central now. (So I doubt I could write about this at HC!) And guess who owns Guitar Center now---? Bain Capital! Yes, that Bain Capital with their mitts ;-) into everything, closing down companies all over the place, etc. What ever happened to antitrust in this country? Competition is essential for capitalism to work well for the consumer. Why was it allowed for one company to monopolize the industry? (Have you noticed in the last few years, when you search online for the best price for a piece of music hardware, all the online retailers list the exact same price? Sound like price fixing? Not hard to do, when one company monopolizes the industry.)

I was unhappy too with the buyout of Steinberg and Cakewalk-12 tone by the Japanese mega corporations Yamaha and Roland, respectively. But at least those are music hardware corporations. (Well, Yamaha is many other things as well, but the musical instrument part of it is important.) I would not be unhappy at this point if Yamaha and Roland were to buy out Sibelius and MakeMusic, at least a better result than being liquidated by corporate gluttons who care nothing about music.

[fastlane]

The announcement says something about LE's plans are to "liquidate the assets". Doesn't that mean to close the company?


I think they just want to buy out the other shareholders.

Once upon a time there was a company called Opcode who came out with a great sequencer for the Mac called Vision that later became Studio Vision Pro which had audio recording capabilities. Studio Vision Pro was the best DAW on the market for working in a song format. It's only real competition was Digital Performer which was probably better suited for classical structure.

About 1999 things looked pretty bleak at Apple and Apple software developers were in survival mode. Opcode was bought buy a larger company and then shortly it was shut down with no explanation. The interesting part of the story is that the company that bought Opcode and killed it wasn't a Bain Capital but Gibson Guitars.