“We could not exclude a real chance that the merger would result in a substantial lessening of competition for DJ software, resulting in price rises and/or a lower quality offering”: AlphaTheta takeover of Serato is blocked

The proposed takeover of Serato by AlphaTheta has been stopped in its tracks by the New Zealand competition regulatory agency, the Commerce Commission.

AlphaTheta, previously known as Pioneer DJ, announced the $50 million takeover of the New Zealand-based music software firm last year. Had it gone ahead it would have brought Serato and Rekordbox DJ together – together they account for 90% of the DJ software business.

In a statement, NZCC 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.

“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.”

The decision will have pleased competitors, including American audio manufacturer InMusic (the parent company of Akai, Denon DJ and Moog Music) who had threatened legal action and taken out full page advertorials in the New Zealand to publicise their criticisms of the takeover. InMusic CEO Jack O’ Donnell warned the Auckland Post last year of the downsides of the takeover: “In any market when you eliminate competition, it has an effect on consumers. It’s going to raise prices, eliminate innovation and limit choice. So it’s a big thing for a small industry.”

In a joint statement, AlphaTheta and Serato said they “disagree with and are disappointed by the ruling of the New Zealand Commerce Commission against the acquisition.”

The proposed agreement is one that would have capitalised on both parties’ “complementary expertise” and “accelerated” their combined ability to deliver incredible products to DJs and Producers around the world, said the companies.

“Regardless of the disappointing outcome of the judgement, we remain excited about the future,” said Yoshinori Kataoka, CEO of AlphaTheta. “Through this process we have built on our 15 year relationship with Serato, leading to the commencement of a number of exciting new projects for DJs and Producers.”

A similar investigation into the takeover is happening in the UK by the Competition And Markets Authority and there is a possibility that the NZ judgement will tilt the balance against AlphaTheta over here too. What happens after that regarding the takeover remains to be seen. It could well be the deal is delayed indefinitely.