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Mixing and Matching

Digidesign buys M-Audio, acquiring large consumer base By Frank Moldstad

With the stroke of a pen, Digidesign has become a major force in the $500 million a year home recording business. Parent company Avid's $80 million purchase of M-Audio provides deep penetration into the consumer audio and home studio space, allowing Digidesign to focus on the professional audio market.

Not that Digidesign has been ignoring home studios -- Avid CEO David Krall noted in an analysts' conference call that home recording products are the fastest growing portion of Avid's audio business, accounting for a 40 percent year-to-year growth in the category. The company's home recording-oriented Pro Tools LE product line starts off with the $500 Mbox, a two-channel audio interface. Another product, Digi 002, comes in two versions: an eight-channel interface incorporated into a digital mixer ($2,495); and an eight-channel rackmountable interface without the mixer ($1,295).

ICON with D-Control
But Digidesign's line is primarily aimed at professional users. Its Pro Tools|HD systems start at $7,995, and go up to $13,995, with a wide range of additional options. The company's new $59,995 ICON system includes the D-Control console and provides 16 simultaneous channels of analog/digital I/O at up to 192 kHz, with 7.1 recording, mixing, and monitoring.

By contrast, the home studio market is M-Audio's core business. The high end of its product line is less than $1,000 (such as the $795 FireWire 1814, an 8-channel audio interface), with the majority of its products selling for less than $500. These include a wide range of audio hardware and accessories, from USB and FireWire audio interfaces, to MIDI keyboards and controllers, PCI sound cards, monitors, mics and preamps. M-Audio also distributes digital audio software, such as Ableton's Live, Propellerheads' Reason and several sound libraries.

Krall noted, "Digidesign couldve expanded the breadth of its offerings in this market segment on its own, but we believe the opportunities offered by combining the two companies at this time are highly compelling."

M-Audio's FireWire 1814
Dave Lebolt, general manager of Digidesign, added, "As a combined entity, Digidesign and M-Audio can tap into subsegments of this market that we would not otherwise reach as strongly on our own. At the same time, Digidesign will continue to focus in the professional audio space, including the expansion weve targeted in the mixing and live sound market, while M-Audio will further expand its reach into an even wider consumer base. As a result, Avid will have a range of new capabilities to address the audio business, and customers will have a broader set of audio options from one company to meet their increasingly diverse needs.

In addition to the gaining a major presence in the home studio market, Digidesign was also attracted to M-Audio's low-cost manufacturing strategy, which involves Chinese manufacturing and engineering facilities located in close proximity to each other. "One of the things we found very interesting about M-Audio as we learned more and more about them was they actually have some very efficient models regarding manufacturing," Krall said in the analysts' call. "Not just contract manufacturing but also an ODM [Outside Design and Manufacturing] model, where they do the engineering overseas as well in locations that are close to the manufacturer. Therefore, they source parts locally and use local resources on the design side. Thats actually very interesting to us," Krall said.

"We currently do a fair amount of manufacturing in China on the Digidesign side of our product family, and see a way to leverage some of those manufacturer relationships that M-Audio has established with Digidesign now. Also, there is the potential to leverage some very cost-effective elements of the M-Audio model. So, in many ways what were doing is introducing a low-cost manufacturing DNA into the Avid product family overall. And I wouldnt restrict those benefits just to the audio side of our business. Were actually thinking there could be some interesting applications broadly within Avid," Krall said.

Upon the expected closing of the deal later this month, M-Audio will become a business unit of Digidesign, retaining its brand name and and current office location. The same sales and support contacts will remain for M-Audio customers. M-Audio CEO Tim Ryan, who founded the company as Midiman in 1988, will continue to oversee its operations as General Manager.

A Q&A about the deal posted on both companies' websites did raise one intriguing possibility: "Does Digidesign plan to develop a Pro Tools application for M-Audio hardware?" The answer is no, for the time being. "Currently the Pro Tools LE software application is written specifically to operate with Digidesign's line of LE hardware interfaces for reliability, performance, and ease of setup."

But the statement leaves the option open, adding, "While the companies may discuss integrated product development initiatives in the future where it makes sense, there are no plans to develop Pro Tools for M-Audio hardware as part of this acquisition announcement."

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Related Keywords:Digidesign, M-Audio, acquisition, home studio, home recording, professional audio


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