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In January, Native Instruments (NI) – the German company behind industry-standard products like Kontakt, Massive, Traktor and Maschine – announced they were entering preliminary insolvency. But why?

 

In 2023, NI submitted a financial filing showing £250 million of debt versus $25 million earnings – a much higher debt-to-earnings ratio than is typical. Many have speculated that this is due to debts accrued following a buyout, not as a result of a poor product line or mismanagement. Given the rise in interest rates since that debt was taken on, it has become harder to deal with than it once was.

 

In 2020, Francisco Partners – a large US-based tech-focused private equity firm – bought NI in a leveraged buyout (LBO). Essentially, they took out a loan to buy NI, then loaded the debt onto the balance sheet of NI itself.

 

Following the LBO, NI merged with Izotope, Plugin Alliance and Brainworx and formed parent company Soundwide – likely increasing its debt further.

 

Since then, there have been signs that NI could be in trouble: in January 2023, Soundwide laid off 8% of its employees, and it was fully dissolved later that year.

 

 

What Comes Next?

 

Following NI’s preliminary insolvency announcement, we didn’t hear anything for a while, then on 19 March, NI CEO Nick Williams released a statement outlining a few key points:

• An active merger and acquisition process is underway with interest from “parties with deep roots in audio and technology”.
• NI will shortly be transitioning from “preliminary insolvency” to “insolvency”.

 

Interest from “parties with deep roots in audio and technology” sounds more positive for producers than interest from a generic equity firm – but this could come to nothing.

 

 

The transition from preliminary insolvency to insolvency is an escalation in proceedings and creates legal pressure to close a deal.

 

So, what does this all mean for you? What is likely to happen, and should you do anything right now if you own NI products?

 

 

I use Kontakt and own instruments for it. What will happen to Kontakt?

 

At the moment, all we know is that NI CEO Nick Williams has said “business continues as usual’, so you can keep using Kontakt at present.

 

By some, Kontakt is considered to be the jewel in NI’s product crown. It makes a lot of money for the company from both license sales (customers) and license fees (developers). It’s also industry-standard software and is relied upon by professionals at the top of their game across the creative industries.

 

Therefore, no matter what happens to NI, we think it’s unlikely that Kontakt will cease to exist.

 

 

NI may be forced to sell assets, or break up entirely, in which case there will be plenty of parties interested in acquiring Kontakt as a valuable asset. In the event of Kontakt being bought, the buyer will almost certainly want to keep Kontakt and its ecosystem running as smoothly as possible to maintain revenue.

 

If NI retains ownership of Kontakt, they’ll want to maintain it as a major revenue source.

 

Of course, anything could happen, but Kontakt users can feel quietly confident that the product will continue to exist whether its owners are NI or someone else.

 

That said, it’s probably a good idea to download any Kontakt libraries you own, just in case of any disruption.

 

 

I use Native Instruments synths like Massive X, FM8 and so on. What should I do, and what happens to those?

 

Again, all we know at the moment is that business continues as normal. NI’s synths are individually less valuable than Kontakt, and they don’t have the same ecosystem built around them. Therefore, their future is more uncertain.

 

That said, they are all very popular instruments and, though not as individually profitable as Kontakt, provide substantial revenue streams for NI. So, whoever ends up owning them would want to maintain that income by supporting the synths going forward

 

Some synths may be more likely to receive future updates than others following a change in ownership. For example, FM8 was released nearly two decades ago and hasn’t received a meaningful update in years, so it's more likely to become unsupported than, say, Massive X, which is relatively new.

 

Whichever NI synths you own, it’s probably a good idea to download them and make a note of all your serial numbers and license details, just in case.

 

 

I use iZotope plugins. What happens to those?

 

iZotope merged with NI in 2023. If you own any of their audio restoration, mixing and mastering plugins like RX, Ozone and Neutron, you’re right to be concerned about what might happen next.

 

The good news is that iZotope is a valuable brand, and their products are industry standards – particularly RX – so there will certainly be buyers interested in taking them on. Because iZotope is its own entity (under the NI umbrella) it will likely be easier to sell and to continue as is.

 

However, as with everything discussed in this article, we know nothing for sure. It’s best to download your installers and note the license details.

 

 

 

I use Brainworx or Plugin Alliance software. What happens to that?

 

Brainworx and Plugin Alliance may not have quite the same value as NI’s instruments or iZotope’s plugins. Therefore, they’ll be less of a priority for any potential buyers.

 

As a plugin marketplace, Plugin Alliance’s value comes from its relationships with developers. NI’s insolvency could wear at these relationships – particularly if things drag on. This won’t affect any perpetual licenses you already hold from Plugin Alliance, but could affect licenses you have on subscription.

 

Brainworx makes excellent plugins, but unlike NI or iZoptope’s, but none of them have reached the heights of indispensable industry standards like Ozone to mastering engineers or Traktor to DJs. It certainly does have value, but might not be a priority in proceedings.

 

As standalone brands, both Brainworx and Plugin Alliance are candidates to be sold off separately, which could mean they both continue without much disruption to service.

 

The other possibility is they’re sold off as part of a bundle with other NI assets. In this scenario, they could continue to exist or be wound down by a buyer in order to focus on more profitable NI products.

 

As ever, we don’t know exactly what will happen, so download any plugins and make a note of your license info.

 

 

I use Maschine or Traktor hardware to DJ or produce. What do I need to know?

 

Things get a little more complicated with NI’s hardware brands Machine and Traktor. Hardware is often less profitable than software and relies on supply chains and manufacturers. Additionally NI’s hardware is deeply integrated with software – the two rely upon each other to work.

 

For now, your hardware will continue to work, but if you’re a professional DJ using Traktor, or a producer using Maschine, it may be worth considering other options, just in case of a sudden halt in support.

 

Image by Muhammad Ahmed from Pixabay

 

I have a Komplete software license, will it even work?

 

Yes, as of now, your Komplete software license will continue to work. But, as previously mentioned, it’s a good idea to download any products you want to use in case of any disruption.

 

 

What happens now?

 

For now, NI customers will just have to sit tight and hope for the best. However, as outlined in this article, there are reasons to be optimistic, and this positive outlook is backed up by a similar case of insolvency which had a happy ending.

 

In 2023, Berlin-based audio and video software company Magix filed for preliminary insolvency in Germany – exactly the same process that NI is still going through. Just over 13 months later the process was complete. The company kept operating throughout, staff were paid, and crucially, customers were mostly unaffected. Their line-up of products survived, and their community and customers continue to use their products to this day.

 

So, though things are up in the air, there’s a good chance you’ll still be using your favourite NI products in months and years to come.