Sibelius Users: A Pressure Group

Interesting activity going on here at sibeliususers.org.  From their description:

Please join us in convincing Avid that it is in everyone’s best interests for them to sell Sibelius.  This will still ease its cash crisis, but will ensure Sibelius lives on in safe hands.

A few salient points for further discussion:

  • Sibelius likely is not making enough money to support the larger staff that it has enjoyed since being acquired by Avid.  Doing a little back-of-the-napkin math based on the acquisition press release from 2006, Sibelius had 180,000 users back then.  Let’s divide that number by 5 years, (36,000 users per year) times the average price of a copy of Sibelius (let’s say around $100 since there are a lot of upgrades and Ed discounts in there).  This gives you about $360,000,000.
  • BUT WAIT – Sibelius was acquired by Avid in 2006 for only $22M.  So obviously the user base number was either a) inflated; b) a guess; or c) accounted for everyone who pirated the software as well as paying users.
  • By 2012, I would assume the paying user :: pirate ratio has probably gotten worse.
  • However, I doubt that’s the only problem.  In the time between the acquisition and the sell-off, I can anecdotally say that Sibelius is being used less by creators of content than arrangers, and other scribes and copyists types in the music world.  DAW-style apps have become the de-facto creative standard, while notation has become a necessity for those who need it (hint: composers no longer “need” it).  I admit this is a blatant opinion, and not something I’ve researched.

A few more points regarding Avid’s earnings:

  • Right before the sell off, Avid reported revenue of $152.1 million, with a net loss of $15.6 million.  They originally paid $22M for Sibelius, and not only can they not make this money back, but they are losing nearly the same amount just based on operating.
  • Avid is one of the only publicly traded media software/hardware-only companies.  The only other one I can think of is Adobe.  Everyone else is either a giant (e.g. Apple, Sony, etc.) or a private single-focus company (e.g. Ableton, Propellerhead, Aja).  This puts an inordinate amount of pressure on the company to remain profitable for its shareholders’ interest.
  • The main focus of their sell-off seems to be to strategically shed businesses they aren’t totally sure about.  For instance – the Education market (one of the original targets that made Avid want to acquire Sibelius in the first place) is changing very rapidly.  No longer is it mandatory to buy something like Sibelius to teach music in a lab.  In fact, some would argue that notation software is unnecessary altogether in a K-12 educational environment.

These lead me to a conjecture: If Sibelius was spun off back into an independent company, it could no longer stand on its own.  A company cannot simply retreat to pre-crisis levels and maintain modernity.  Since 2006, Sibelius (while apparently not generating much profit) had grown into a multitude of educational products, and integrated into somewhat an appendage of Pro Tools.  These projects require more programmers, more QA, more salespeople, etc.  The group (save Sibelius) seems fixated on saving the main UK office, but ignores the reality that Sibelius has changed quite a bit since growing out of that office.

Between this, and the possible hostile takeover possibility happening with MakeMusic, the notational software market could soon be in trouble.  But remember people, this is what drove you to Sibelius in the first place – you didn’t like Finale.  Now close your eyes and imagine an app that integrates notation smartly into the modern music making workflow.  Who will make it?  Does it already exist as a small niche product or is it yet to exist?  Will Finale or Sibelius figure out how to survive this decade?  I don’t know.  All I can say is that I stopped using both programs a long time ago.

► Translation from PR-speak to English of Avid’s divestment press release

Note: the news reports and press release don’t really paint a truly accurate picture of what’s happening at Avid right now.  Here’s my attempt:

Today Avid® (NASDAQ: AVID) initiated a series of strategic actions to focus the company on its Media Enterprise and Post & Professional customers and to drive improved operating performance. As part of these actions, the company is divesting its consumer businesses. With these changes, Avid will concentrate on core markets where its deep domain expertise, track record of technical innovation, and strong brand offer the greatest opportunity for success.

 We have no idea how to address the coming explosion of consumer products like the iPad, so we’re giving up.

“The changes we are announcing today make Avid a more focused and agile company,” said Gary Greenfield, CEO of Avid. “By streamlining and simplifying operations, we expect to deliver improved financial performance and partner more closely with our enterprise and professional customers. Our objective remains to provide these customers with the innovative solutions that allow them to create the most listened to, most watched and most loved media in the world. I’m excited about our future prospects.”

Our consumer base isn’t growing fast enough to support our business, so we’re sticking to the old suckers who have bought our stuff for years, regardless of quality or price.

Avid has agreed to sell its consumer audio and video product lines. The company’s consumer audio products are being sold to inMusic, the parent company of Akai Professional, Alesis and Numark, among others. Headquartered in Cumberland, Rhode Island, inMusic’s brands are best known for producing innovative products for music production, performance and DJing. The products involved in this transaction include M-Audio brand keyboards, controllers, interfaces, speakers and digital DJ equipment and other product lines. Avid will continue to develop and sell its industry-leading Pro Tools® line of software and hardware, as well as associated I/O devices including Mbox and Fast Track.

 Again, we have no idea what to do with this cool-kid hipster stuff like “DJ scratch tables” and “keyboards” and “newer software”.

Separately, the company’s consumer video editing line is being sold to Corel Corporation, a consumer software company headquartered in Ottawa, Canada. The products involved in this transaction include Avid Studio, Pinnacle Studio, and the Avid Studio App for the Apple iPad®, as well as other legacy video capture products.

 We’re not really well known for our video software or anything, so let’s sell that off too.  It’s not like pro software ever learns from what’s happening in consumer-land anyway.

The divested product lines contributed approximately $91 million of Avid’s 2011 revenue of $677 million. As part of the transactions, certain employees of Avid will transfer to each acquiring company. Avid estimates that the proceeds from these transactions will be approximately $17 million, subject to closing inventory adjustment, with a portion held in escrow.  Both transactions are expected to close today, July 2, 2012.

It’s not a “layoff”, it’s just a change of scenery!

Avid also plans to reduce the number of its employees as it streamlines operations, with approximately 20% of its permanent employee base impacted by the divestitures and headcount reduction plans.  The company currently expects to incur a restructuring charge of approximately $19 to $23 million related to these actions and other associated measures.

 We’re actually going to lose around 17% of our revenue by doing this, but don’t worry – the pro market will stay the same forever so it’s OK.

The company’s cash balance on March 31, 2012 was $49.7 million. The proceeds from the sale of these product lines should offset most of the restructuring charges paid in 2012.

We have around six months before we run out of money.
 Good luck to Avid, even those who don’t use your products don’t want you to die.  We need competition in the consumer markets more than ever.