Reason Financials 2021

[MuttReason]

From my reading of the numbers, the issue isn’t what they spent last year. I think it’s fair to assume they’ve had to throw money at fixing R12. I’d expect their expenses to be higher and that would obviously affect profitability.

The issue is the year on year collapse in the net sales number. Their sales numbers just fell off a cliff.

No amount of business ingenuity can offset a big drop in topline revenue. If a business doesn’t have the money coming through the door that it expected, life gets tough, fast.

2022-23 will be a critical financial year for RS based on these numbers, they need to turn this round.

[arnigretar]

Where are these numbers? Is there news or a blog I missed?

(Edit): I thought MuttReason was first post. Didn't have enough coffee. Sorry about that! Will go over this now

[arnigretar]

This is a big drop. Much more than I expected. I was thinking they were getting so many subscriptions world-wide that it would be helping the company. But at least not now. Maybe some time later (if they survive). But like you pointed out--this happened in 2012. Ten years ago. Maybe 2022 is a good year (hopefully). But there is always Reason 11 to eternity.

[Pepin]

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).

That's a good point. Are subscribers renewing or ditching R+ once their promo period is up?
A lot of annual subscriptions were / will be up for renewal this year.

[JiggeryPokery]

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, they can still be in an ok place on the overall balance sheet to weather seasonal high and lows and bounce back, and I don't think anyone here has suggested in they're trouble in the short term. But near-halving income in a year. In the 2013-2019 period it was a steady rise and decline as RE's grew then peaked.

But sample pack expenditure and some videos on Instagram? That's your takeaway from that chart to explain near-halving revenue?

OK, take a moment: ask yourself, what does increased expenditure have to do with dropping $4m revenue despite claimed growth in the user base, including a major upgrade? They're mutually exclusive figures: If I sold a single copy of an RE and was paid £50 for it, but I'd paid someone £200,000 to make it, what's my revenue?

Well, it's still $50, isn't it? That's my income.

It doesn't matter that my profit in that scenario is -£199,950, because that's a different figure, applied after revenue (EBITDAFTW!). So in that hypothetical sense you can spend as much as you like, but your revenue is your total income and has nothing to do with expenditure you made to achieve it.

And in any event think about what you're suggesting for another beat: a few tens of thousands spent on sample packs isn't going to make but a light scratch in the non-stick surface of two million wooloogs, is it? If they were releasing one pack every day of the year, at say $50 a pop that's only going to be $18,250 a year. It's a drop in the ocean even on $6m revenues and is probably in the expenditure column as "Other" it's so insignificant (well, to them, it's a lot of money to most of us mortals ). The biggest outgoings are rents/taxes/wages/capital etc. (I don't know about Swedish rental prices, but if it's like elsewhere, those will be rising steadily. The easiest thing to cut is always wages.)

[jappe]

Sad, but I hope and think they can come back after analyzing what went wrong.

Personally I quit my sub because the sound packs wasn't always perfect.
It's the only potential value for me I saw in a sub.
I needed them to be consistently perfect.

I also stopped purchasing REs.
It didn't seem they wanted me to, since they hid the shop link.

[DaveyG]

This is a big drop. Much more than I expected. I was thinking they were getting so many subscriptions world-wide that it would be helping the company. But at least not now. Maybe some time later (if they survive). But like you pointed out--this happened in 2012. Ten years ago. Maybe 2022 is a good year (hopefully). But there is always Reason 11 to eternity.

The difference is that they were not owned by venture capitalists back in 2012. The VC world is a brutal one. They buy companies that they believe they can "add value" to, sometimes by merging them with another company but too often by just ruthlessly cutting costs. Their aim is to grow a business and sell it for a profit, usually within 5 years, but it is often not very healthy for the business involved. And the downside is that VCs do not always get it right. They are quick to offload anything that is not performing to expectations, even at a loss. I'm pretty sure the VCs were behind the rushed launch of R12 and the subscription. If they think it is not working they will be looking to to cut and run. Anyone wanna buy a software company?

[TritoneAddiction]

I also stopped purchasing REs.
It didn't seem they wanted me to, since they hid the shop link.

Yeah hiding the shop for the very long time they did seemed like a strange move. I mean I understand they wanted to push Reason+ as much as possible. But making any other way to sell products as hard as possible maybe wasn't the best choice. A few weeks, fine. I get it. But the shop was hidden for a looong time. If I was new to Reason during that time I probably wouldn't even know about the whole rack extension market, besides Reason Studios own REs in R+ of course.
The CEO said they made a lot of money from the R+ subscribers. But the question is, how much money did they loose by making all the other options so unattractive and unattainable?

I can only speak for myself here. But for me, before the R12 release I was pretty pumped to upgrade. It would have been an easy sell for them. I just wanted to make sure there weren't any bugs before I pulled the trigger. Well since the release was the way it was, I waited and waited and waited. And after several months still hearing some people reporting major bugs I completely lost interest. So they definitely lost out on easy money from me.

[avasopht]

Let's be real ... music-making products have reached the point of diminishing returns.

We've already got EWQL, Spitfire, etc. etc. They already sound realistic. They've already got key switching, advanced patch scripting, and physical modelling that can be processed in real-time for a number of instrument types.

It's difficult for me to justify new purchases. And I struggle to think of what could be done differently for virtual instruments.

And maybe that's why you're seeing a move towards subscriptions offering regular content.

Presonus Sphere offers masterclass lessons (like a mini udemy for music-makers). Roland Cloud promises weekly expansions.

The Wachowskis had it right from the start - the greatest special effect is real life. And maybe that's the next phase in music making.

[jamesa]

The move to subscriptions distracted them from the core product(s). I also think the name change was a mistake. I see people refer to them as Propellerheads to this day (why would you throw away name recognition like that?). Reason is a great product. RE is a great technology. I hope they can make this work. So, if everything goes south, would a computer registered for offline work forever? I am seriously scared of losing access to a decade plus of music someday.

[EnochLight]

I mean... come on people - Reason Studios knew their financial situation long before December 31, 2021. It's not like they *just* balanced their checkbook and posted the results just so Jiggery could make a post. I will be curious if 2022 brings anything to the table that can dramatically increase the bottom line, though. So far in 2022 there has been largely just bug fixes in Reason 12, but seperately for sale it's been:

Chord Sequencer (Player)
BV-X (effect + instrument)

...and that's it. This would suggest that 2022 is not going to be a record-breaking revenue year in the slightest. Even if VST support and M1 support come in Reason 13, that's not going to sell a bunch of new licenses or subs - which begs the question: what exactly do YOU think would sell more Reason? Personally, I'm going with core-DAW improvements. Other than that, it's going to have to be more instruments, effects, and plugins - and I honestly don't know if you can support a company of 40+ people just making those in this day and age.

[avasopht]

Maybe now might be a good time to bounce all yer tracks .

[EnochLight]

Maybe now might be a good time to bounce all yer tracks .

[Yonatan]

Maybe they may also have invested a lot more? More employees etc ?
And this they might do to want to improve and progress?

[avasopht]

Maybe they may also have invested a lot more? More employees etc ?
And this they might do to want to improve and progress?

That wouldn't impact on revenue, which is the most concerning reduction.

[Yonatan]

Maybe they may also have invested a lot more? More employees etc ?
And this they might do to want to improve and progress?

That wouldn't impact on revenue, which is the most concerning reduction.

That sounds not so promising.

[jamesa]

Maybe now might be a good time to bounce all yer tracks .

Sometimes sarcasm doesn't translate well into a forum post. I am not sure if people are being serious or sarcastic. Well, at any rate, I will likely try to maintain a system that can open Reason files without an internet connection.

[EnochLight]

Sometimes sarcasm doesn't translate well into a forum post. I am not sure if people are being serious or sarcastic. Well, at any rate, I will likely try to maintain a system that can open Reason files without an internet connection.

It was a joke, but judging by what happend with the removal of the Line 6 amps, it's always a good idea to bounce your projects to stems anyway.

[jamesa]

Sometimes sarcasm doesn't translate well into a forum post. I am not sure if people are being serious or sarcastic. Well, at any rate, I will likely try to maintain a system that can open Reason files without an internet connection.

It was a joke, but judging by what happend with the removal of the Line 6 amps, it's always a good idea to bounce your projects to stems anyway.

I will put the bounces on an SSD and store it with all of my 4-track cassettes (self-deprecating humour, I haven't listened to those cassettes in many decades)

[MuttReason]

The Reason intellectual property will always have a residual value, as will the fact that there are enough people (just) interested in the software to amount to a monetisable user base. The question will be how Verdane react if this year’s numbers are repeated next year. I don’t think Reason would disappear but it might end up with new ownership. If top line revenue shrinks further, book value will decline too. I wouldn’t rule out a management buyout if that happens. My sense is there are more than enough people within RS who are passionate about their products and who would try to to keep Reason alive and turn the business round.

[DaveyG]

but it might end up with new ownership.

That is the absolute 100% certainty in all of this. It's just a question of who, when and under what circumstances.

And, yes, I always bounce tracks to stems early on in the process. I've been bitten before..

[crimsonwarlock]

but it might end up with new ownership.

That is the absolute 100% certainty in all of this. It's just a question of who, when and under what circumstances.

Maybe Bandlab should buy them. It did wonders for Cakewalk

[jam-s]

I think NI (or rather the new merger of izotope/NI/PA) or Behringer/MusicTribe could use a good DAW in their portfolio.

[hyperdeath666]

I think NI (or rather the new merger of izotope/NI/PA) or Behringer/MusicTribe could use a good DAW in their portfolio.

That might be true, but how does Reason fit into all this?

[jamesa]

I think NI (or rather the new merger of izotope/NI/PA) or Behringer/MusicTribe could use a good DAW in their portfolio.

How about https://inmusicbrands.com?