Reason Financials 2021

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JiggeryPokery
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Post 04 Aug 2022

They're up!

https://www.allabolag.se/5565462206/bokslut

They're down!

Screenshot 2022-08-05 110012.png
Well. What can you say? Man alive!

Even I'm genuinely amazed by the extent of that turnaround. That's jawdroppingly unexpected, unless Alla's low-pay data entry drone misplaced a decimal point and it'll be fixed tomorrow and then it's suddenly champagne and flowers and new Yachts for Verdanian Oligarchs in NATO-protected ports all-round. As it stands, only the one new yacht this year, and nothing left in the kitty for ongoing server maintenance to fix that licensing downtime for the wonderful subscribers who've saved Reason from those criminal leeching Perps with their nasty always-on software license keys! ;)

Joking aside, though it's hard to resist, (I'm not having a dig at Plussers, btw, just the officially-stated RS view that places perpetual users as somehow inferior people who don't pay their way in maintaining RS's standards of living),they've genuinely somehow managed to make of loss of $2m on $6.1m revenue, which itself is a staggering revenue drop—in a Major Upgrade Year to boot—of well over 1/3 on 2020. That's an outstanding amount of spaffage of post-Covid goodwill and misplaced product focus.

That's the weakest reported revenue since the nadir of *2012*, and what would be classed as "company downsizing" levels of turnaround in just twelve months in some boardrooms. That's living the good LIFO right there. And consider too, this: these results are from before the 2022 recession started, so even given real ongoing growth in R+ numbers, if we take RS statements at face value, they still risk having a fair number of both sub and upgrade drop-offs as the cost-of-living crisis hits ever-harder in the next few months. Don't mention the war! :lol:

Any of them. :cry:

Discussion question, and this isn't even really related to Reason specifically, but any software payment that isn't professionally required and tax-deductible: Is the churn of young, new hobbyist users still living at home with dispoable income for subs enough to add growth to cover older users with their extended financial commitments no longer able to regularly make either a sub or upgrade payment as their disposable income contracts to literally less than zero?

Also, with these figures, does the CEOs statement that the numbers of Perps and Plussers is almost comparable inadvertantly put an upper limit on the actual number of Reason active users? I think it does, but there's a lot of unknowable variables and it would need another full year of R+ to establish revenue changes to compare Y-o-Y, and not just this initial 2021 growth from zero users to comparable-to-Perp numbers. Personally, I think the upper limit it puts on all still-paying Reason users has be well under 50k to be returning only $6m in an Upgrade year, that's generously assuming 70% of Perps upgraded to R12. But there's a very wide margin of error and I've made my own assumptions on certain aspects. Don't take it too seriously. Make up your own figures too! But you know, even "mostly inaccurate" speculation by definition must also be partly accurate! Wisdom of crowds and all that.

One can argue it's a good decision to offer both subs and perpetual licenses and not have just the one basket. Indeed. That's a fair point. But they can have as many baskets as they like, but they still need the eggs.
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Last edited by JiggeryPokery on 05 Aug 2022, edited 2 times in total.

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Loque
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Post 04 Aug 2022

Not sure what happen at RS...if it was subscription, no shop page anymore, high investments, no major version, no sold new RE, VST market challenges, ignoring old loyal customers, invest in marketing, DAW competitions,... Maybe all of them...

But that win drop is noticeable...
Reason12, Win10

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MarkTarlton
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Post 04 Aug 2022

I stopped spending, just perpetual upgrades these days, and I have skipped a few since 2.0. I was spending hundreds/thousands, also use Reason less since starting in 2002. I still love it, used to open it everyday and spend hours.

MuttReason
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Post 04 Aug 2022

Dear God but those are some difficult numbers.

It's not so much the red ink in the EBIT line. RS is a small business and these are all small numbers in absolute terms, it is possible to go into the red for a year as a result of unforeseen events (like, er, a botched software launch) and then recover the following year if you have forgiving and generous shareholders (er, um, like Verdane... well, maybe). A loss one year after successive years of profit doesn't necessarily mean the end game for a small business (although having been in that position myself I know it's bloody frightening).

It's the significant fall in sales revenue that's the worry, down from over €10m to under €6m in just a year. Worse topline numbers since 2012, as JiggeryPokery says. Wow. That radical a drop in topline revenue is concerning, losing around 40% of sales y-o-y is a big problem for any business and we're not even fully into the new Great Recession yet (that pleasure awaits in the final quarter of this year, apparently).

I also remember the CEO saying something about how the company was performing better than ever before. He would have said that about FY2020 I think when the net sales were MUCH higher than for 2021 but based on this data certainly was not the company's best year commercially, net sales were higher under the Props back in 2016. Either way, clearly that statement has not aged well given this latest set of numbers.

I don't know the status of this filing (I'm assuming it's the UK equivalent of Companies House?) so is it possible there are other RS entities that also file separate accounts alongside these accounts? It does look like these are all the relevant numbers though, and the number of employees also seems to line up.

And yes, the sales numbers would imply a pretty small user base. If the entirety of the RS customer base was on Reason+ today and paying monthly or annual subs, based on the latest net sales number RS would be at around 25k total active paying users worldwide. Actual number of users will be higher of course if active users of older versions and R12 licence owners are included. Don't know what Ableton Live user numbers are like but I'm guessing it will be a v large multiple of that.

Being small and niche isn't a problem, but losing sales volumes at that rate IS a problem. And making a loss isn't great either, if that happens again next year then life will get messy.

Oh dear. I'm really fond of this company and their products despite all their faults, oddities and inanities along the way. This is not a picture of good health.

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avasopht
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Post 04 Aug 2022

Well ... the exact same thing happened in 2012.

Revenue dropped to 56M SEK ...

But I'd have put that down to the pay-what-you-want offer.

Maybe last year's drop was due to the half-price R+ subscription leading to people delaying their perpetual upgrade ... ..... .... could also be jumping ship.

Hard to tell now.
---

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Overtherainbow
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Post 04 Aug 2022

Thank for this link, JP!

So many things were already said on this forum... Hopefully, it won't take the CEO more than another year to realize he is selling a DAW so the company can survive and flourish.

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EnochLight
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Post 04 Aug 2022

avasopht wrote:
04 Aug 2022
Well ... the exact same thing happened in 2012.

Revenue dropped to 56M SEK ...
That's a good point. But... If you take a look at the Du Pont Model ("a clear way to summarize and explain a company's profitability..."), back in 2012 - which was arguably their worst year to date - they scored -101.76% on that, but for FY 2021 they scored -30.08%. Still not great, as those number should certainly be positive, but FY 2021 was not as bad as FY 2012 using that model. So... there's THAT. :lol:

Let's hope we can chalk this up to Reason 12's growing pains, a pandemic/inflation/recession/war, and see if Reason 13 can improve things. Honestly I figured that between VST support in Reason 9.5, and now RRP in Reason 12, that we'd see a massive drop off in Rack Extension revenue. I'm guessing that mostly would have showed up in FY 2020 though, yet that proved a pretty decent year using that chart. When 9.5 (supporting VST) dropped in 2017, there does seem to be a revenue decline going into 2018-2019, which could correlate to less people buying RE's? Beats me.

Anyway, this is all lovely armchair CEO talk. Hopefully Reason Studios can pull through.
Win 10 | Ableton Live 11 Suite |  Reason 12 | i7 3770k @ 3.5 Ghz | 16 GB RAM | RME Babyface Pro | Akai MPC Live 2 & Akai Force | Roland System 8, MX1, TB3 | Dreadbox Typhon | Korg Minilogue XD

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jam-s
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Post 04 Aug 2022

Do only I see some parallels on RS management on those numbers and the RS12 release with this supercut from Chernobyl? :twisted: ;)



roentgen = bugs or revenue
RBMK core = Reason release

etc.

kurtg
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Post 05 Aug 2022

I hope they get better financially. I think m1 version + vst3 which was promised in R12 will help. I have a perpetual license, but If I was R+ subscriber; I already stopped the subscription about missing those features, until they release it.

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hamsterfactor
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Post 05 Aug 2022

+1
kurtg wrote:
05 Aug 2022
I hope they get better financially. I think m1 version + vst3 which was promised in R12 will help. I have a perpetual license, but If I was R+ subscriber; I already stopped the subscription about missing those features, until they release it.
:reason: Suite 11  |  :reason: 12 perpetual license  |  :re::refill: |  macOS 10.15  |  iMac

jonnyretina
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Post 05 Aug 2022

Unsure how much of an impact it had, but by early September 2021 there became unlicensed versions of Reason 11, Reason 12 and many Rack Extensions available on the internet after Reason's CodeMeter protection was broken. It's difficult to know just how many lost sales that has resulted in since.

Mataya
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Post 05 Aug 2022

The only time I would consider subscribing is if they offered EVERYTHING. Meaning every rack extension and every new RE and every Reason studios devices. You subscribe to Plugin alliance, you get them all. You subscribe to mcDSP, Waves, Slate et.c, you get it all.
Reason for me are Re's and it's been like that since they introduced them. To be subscribed to 20 years old Subtractor and NN11(or what is it called) and a few new nice devices is not a deal for me and for a lot of Reason users.

M

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JiggeryPokery
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Post 05 Aug 2022

EnochLight wrote:
04 Aug 2022

Let's hope we can chalk this up to Reason 12's growing pains, a pandemic/inflation/recession/war, and see if Reason 13 can improve things. Honestly I figured that between VST support in Reason 9.5, and now RRP in Reason 12, that we'd see a massive drop off in Rack Extension revenue. I'm guessing that mostly would have showed up in FY 2020 though, yet that proved a pretty decent year using that chart.
Yeah, all those socia-political issues have an impact for sure. It's a perfect storm. And business ups and downs tend to be cyclical, so absolutely 2022 might be up, if "people prefer to subscribe" is true, but to me seems a weird thing for the CEO to write. Maybe he can afford to subscribe to heated seats on his BMW too and thinks that's a good idea? Do they account with Sage? https://www.theregister.com/2022/08/01/ ... g_dispute/ He can post in his next blog and sing the praises for subs on his $2m losses! If subs are better, then as a company are they should be subscribing to all services they could pay outright for, because the "barrier to entry is lower". :lol: Sure it is! But the journey to the waterfall of throwing endless good money after bad is also closer!

Speculation: 2020's good results could be somewhat of Covid-bump, e.g. lapsed non-pro hobbyist creators with no work-at-home option getting back into some music-making with a sudden influx of masses of additional spare time, and probably a lot of them were stuck on Reason 4-8 and figured they deserved new content and upgraded. For just a one-off payment of £130 from their government grant monies it would have been very much worth it to all of them jumping over multiple upgrades to get a lot of content and feature updates in R11 at a time when they couldn't get hold of a Switch and just veg out in front of the telly with their kids and spouses playing Animal Crossing. :lol:

It'd be fascinating, though sadly impossible, to see the M-o-M revenue stats Region-by-Region as lockdowns circled the globe to test that theory.

IIRC both R11 and R12 came out about the same time of year too, and the difference between 2019 and 2021's results is still huge. That suggests a lot of people upgraded to R11, and say, R9.5 to R11 probably was decent value, where R10 to 11 arguably wasn't. Yet...

Maybe... HD alone wasn't that big a factor in upgrade decision-making for a lot of people? Especially considering R11 users seeing few other benefits in this cycle, and it was just loud people being vocal on forums bemoaning a lack of HD support? As a feature, even unfinished, maybe it just wasn't that big of a deal in the wider user-base? Combined with the fact that 12 isn't anywhere near damned finished yet with its display issues even a year later, maybe a lot people otherwise interested in HD at the time just held off until a few fixes were made and it matured. Perhaps more upgraded this year after a couple of revisions (despite remaining graphic error), and the upgrade price was effectively reset back down to its "traditional" price in offers and sales?

FWIW, It'd be shoddy to release R13 until R12 is actually done and displaying correctly for the people who, you know, paid them to produce it. As a £400+/£20pm flagship product the display issues are embarrassing. Heck, record some audio and go into comp mode and hit play for a good old laugh at Reason's little son et lumiere show (no, not at 100%/200%). Or lock your PC then come back a while later and have a happy giggle at Reason's wonderful new-found inability to redraw its windows correctly, until you've gone full Ari Aster and done a folkdance, jumped off a cliff and burned some heretics :evil: .
Last edited by JiggeryPokery on 05 Aug 2022, edited 1 time in total.

ReasonOCD
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Post 05 Aug 2022

Bring balance back, i never got round to purchasing it

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JiggeryPokery
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Post 05 Aug 2022

avasopht wrote:
04 Aug 2022
Well ... the exact same thing happened in 2012.

Revenue dropped to 56M SEK ...

But I'd have put that down to the pay-what-you-want offer.
No, that's incorrect: Pay-What-You-Want was 2011, which even at the time to anyone paying attention and not just a quid, was obviously an intentional write-off to kill off Record as a standalone product and get everyone back on the Reason. But we know now with the benefit of hindsight, that the long term goal of that writedown was making up that shortfall with Rack Extensions from R6.5, which were announced in Spring of 2012, and launched with 6.5 that Summer. It was a gamble, but it probably wasn't an especially risky one.

Alla doesn't show before 2012 now, so I can't get the 2010 and 2011 results to compare and see how much impact PWYW had (dunno if they'd be on Wayback...). They probably did claw back shortfalls of that R6 cycle in what might be consired the peak RE product era, 2014-17. Just in time for the financials to look good for investers ;)

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Arrant
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Post 05 Aug 2022

Don't discount how much of this decline in revenue could be due to poor RE sales. RS must have made a fortune on their (extortionate) royalties from third-party devs in at least some of the prior years. This has probably all but dried up now due to VST support, lack of RE releases and lack of developer interest.
Also, of course the R12 release was a disaster. Hoping VST3 and M1 support can help sales going forward, but the RE business is never coming back IMO.

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QVprod
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Post 05 Aug 2022

Something to also keep in mind is higher expenses as well. RS is paying to have all those packs created. That wasn’t an expense they had before R+. That plus a bad R12 release. A loss doesn’t surprise me nor alarm me. Considering the amount of content marketing they do now. They’re probably in an okay (for now) place.

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avasopht
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Post 05 Aug 2022

JiggeryPokery wrote:
05 Aug 2022
No, that's incorrect: Pay-What-You-Want was 2011, which even at the time to anyone paying attention and not just a quid, was obviously an intentional write-off to kill off Record as a standalone product and get everyone back on the Reason. But we know now with the benefit of hindsight, that the long term goal of that writedown was making up that shortfall with Rack Extensions from R6.5, which were announced in Spring of 2012, and launched with 6.5 that Summer. It was a gamble, but it probably wasn't an especially risky one.

Alla doesn't show before 2012 now, so I can't get the 2010 and 2011 results to compare and see how much impact PWYW had (dunno if they'd be on Wayback...). They probably did claw back shortfalls of that R6 cycle in what might be consired the peak RE product era, 2014-17. Just in time for the financials to look good for investers ;)
Sure, it was in 2011. It must have had an impact on upgrades the next year.

After all, who would be upgrading in 2012 if they already have R6? (other than people who didn't get the memo ;)).

That's why the PWYW explains the 2012 reduction in revenue (after all, they all seemed to continue upgrading the following years).

But I totally agree with you on the write-off and expectation of REs to make up for it.

If they got REs correct from the start, it could have been the App Store for plugins. They would have competed strongly with JUCE (offering forwards and cross-platform compatibility), and for bonus points could have also become the de-facto plugin format for hardware devices.

Had they also worked with Urs, everything in CLAP could have been in the RE SDK as well.

Hindsight eh ...
---

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avasopht
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Post 05 Aug 2022

QVprod wrote:
05 Aug 2022
Something to also keep in mind is higher expenses as well. RS is paying to have all those packs created. That wasn’t an expense they had before R+. That plus a bad R12 release. A loss doesn’t surprise me nor alarm me. Considering the amount of content marketing they do now. They’re probably in an okay (for now) place.
Yes, I was going to mention that.

Last year they had more revenue than in 2012, so it would have come down to expenses (including higher salaries and probably higher overheads as I doubt their new office is smaller than their last one).
---

RobBarnett
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Location: Wirral, UK

Post 05 Aug 2022

and prior to RRP and R+ they only had to maintain the Reason code for Mac and Windows. Now they have to maintain/code/test;
Reason Mac
Reason Windows
R+ Mac
R+ Windows
RRP VST3 Mac
RRP VST3 WINDOWS
RRP AU Mac
RRP AAX Windows
RRP AAX Mac

Think they vastly underestimated the effort/cost required for this increased scope

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JiggeryPokery
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Post 05 Aug 2022

avasopht wrote:
05 Aug 2022
It must have had an impact on upgrades the next year.
Yeah, maybe, given there was no major upgrade until R7 and there wasn't much in the way of big RE releases that first year. I don't recall how long the PWYW offer lasted, but it wouldn't have been into 2012. Was it month-long deal? So I guess a fair number of people still did pay the full price for the upgrade to R6, 6.5 through 2012, who missed out on the offer. And according to long-lost forum legend of the era, I'm sure I remember some claiming to have paid full price even during the offer. I also don't recall if I ever believed that, though ;)

(It's not on Wayback)
Last edited by JiggeryPokery on 05 Aug 2022, edited 1 time in total.

Popey
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Post 05 Aug 2022

I must admit to being surprised at this as after the ceo comments about subscribers made me think revenue would increase above expenses. Could this change also be due to all the deals for r+ and the reduced income compared to normal sub monthly price. Just wondering if they took this financial hit to get people on board initially but moving forward revenue will increase more if less sub deals (although appreciate they would have to not lose subscribers without offering a discount).

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JiggeryPokery
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Post 05 Aug 2022

MuttReason wrote:
04 Aug 2022
the company was performing better than ever before.
Image

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Kilsane
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Post 05 Aug 2022

avasopht wrote:
05 Aug 2022
QVprod wrote:
05 Aug 2022
Something to also keep in mind is higher expenses as well. RS is paying to have all those packs created. That wasn’t an expense they had before R+. That plus a bad R12 release. A loss doesn’t surprise me nor alarm me. Considering the amount of content marketing they do now. They’re probably in an okay (for now) place.
Yes, I was going to mention that.

Last year they had more revenue than in 2012, so it would have come down to expenses (including higher salaries and probably higher overheads as I doubt their new office is smaller than their last one).
I agree

As you rightly mention there is more additional expense to take into account, such as the new player to be developed in collaboration with third-party companies that must of course be paid, the 5 additional employees (it is in the report ) , R+ packs and many other things we don't know anything about
Reason is the richest DAW, between VST and its own format (Rack Extension) which DAW can boast of having so many tools for creativity

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QVprod
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Post 05 Aug 2022

Kilsane wrote:
05 Aug 2022
avasopht wrote:
05 Aug 2022


Yes, I was going to mention that.

Last year they had more revenue than in 2012, so it would have come down to expenses (including higher salaries and probably higher overheads as I doubt their new office is smaller than their last one).
I agree

As you rightly mention there is more additional expense to take into account, such as the new player to be developed in collaboration with third-party companies that must of course be paid, the 5 additional employees (it is in the report ) , R+ packs and many other things we don't know anything about
Right. Also patches for those players (for any sound designers hired) or any other RE they release since they release them at a much higher rate now. They definitely spent quite a bit last year.

You really can’t take this report at face value with all of that in mind.

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