Hang the DJ? ComCom delays $116m Serato call for a fifth time
Serato chief executive Young Ly. The firm was founded the 1990s by Auckland University mates Steve West and AJ Bertenshaw (now AJ Wilderland), who remain its largest shareholders. Photo / Dean Purcell
It’s the gig without end.
It was July last year when Japan’s ATC (owner of the Pioneer DJ brand) signed a deal to buy Auckland-based DJ software maker Serato for about US$70 million ($116m).
After gaining Overseas Investment Office approval on September 7, ATC took a run at its second and final regulatory hurdle as it applied for Commerce Commission clearance on October 10 – a process that typically takes about two months.
The regulator set December 22 as the decision date. But it came and went after the US and NZ-based InMusic (owner of Rane, Denon DJ and a host of other DJ hardware brands that use Serato’s software and compete with Pioneer) mounted an energetic attack on the deal.
InMusic’s US-based owner Jack O’Donnell travelled to NZ to lobby against the ATC-Serato deal.
Earlier this week, after four delays, a ComCom spokeswoman told the Herald: “We’re continuing to target 8 May and hope to communicate something publicly then.”
In the end, the regulator released only a one-liner on May 8, saying the decision date had been extended until June 27.
A spokeswoman said the commission had decided it needed more information.
London calling
No further explanation was forthcoming but the extension came on the heels of the UK’s regulator completing a “Phase One Investigation” that highlighted several potential party-killers.
Serato makes software for living-room DJs and dominates the market for the pro software used by multiple makers of DJ hardware, such as the decks used to play tracks at nightclubs, events and concerts.
Then-PM Jacinda Ardern visits InMusic’s Auckland office in 2020. The US firm, which counts Akai Pro, Denon DJ, Marantz, Numark and Rane among its stable of DJ hardware brands, set up a development hub in New Zealand in 2018 after buying Kiwi firm SoundSwitch. Photo / Getty Images
If the deal goes ahead, it “could see DJs paying more to keep partygoers entertained”, the UK’s Competition and Markets Authority (CMA) found.
CMA executive director Joel Bamford said:
DJs and entertainers depended on having access to the best equipment and software to put on a good show.
The deal could substantially reduce competition in DJ software, resulting in increased prices, less innovation and less choice.
The authority was concerned it could negatively affect the hardware markets by allowing the combined business to leverage Serato’s leading software to harm its hardware competitors, ultimately affecting DJs and consumers.
The CMA has asked ATC to address its concerns.
Leaning towards ‘no’
The Serato deal was already looking in need of a remix.
In a February 8 statement of issues, the Commerce Commission said it was “not currently of the view” that the deal met its benchmark for approval. The regulator assesses whether any deal would substantially lessen market competition.
A ComCom red light would effectively kill the deal. ATC’s Overseas Investment Office approval is conditional on ComCom approval.
Serato was founded in the 1990s by Auckland University mates Steve West and AJ Bertenshaw (now AJ Wilderland), who remain its largest shareholders although they stepped back from its day-to-day running years ago (West is now one of the prime movers behind EV charging network ChargeNet).
Read a backgrounder on the Serato deal, and the firm’s financials, here.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
