Merger deal could see DJs paying more to keep partygoers entertained

AlphaTheta’s proposed deal to acquire Serato could also reduce innovation, choice, and access to DJ equipment and software.

AlphaTheta Corporation (AlphaTheta) announced last year a deal to acquire Serato Audio Research Limited (Serato). AlphaTheta is involved in the manufacture of DJ equipment, including mixers, controllers, DJ players and all-in-one systems under the Pioneer DJ brand, and both parties are involved in developing DJ software.

After conducting an initial Phase 1 investigation, the CMA in the UK found that AlphaTheta and Serato compete closely to supply DJ software – with the latter being seen as the market leader. The deal, if allowed, would create a supplier almost double the size of its nearest rival, consolidating the market and potentially impacting the price, quality, and innovation of DJ software. The CMA is concerned that the remaining (largely much smaller) suppliers would not provide strong enough competition to constrain AlphaTheta and Serato once combined.

The CMA also found that the deal could weaken competition in various DJ hardware markets by restricting or worsening AlphaTheta’s rival DJ hardware manufacturers’ access to Serato’s software. Maintaining current levels of competition in all relevant DJ hardware types is particularly important given AlphaTheta’s already strong position these markets.

The investigation also revealed concerns that AlphaTheta’s DJ hardware competitors could be disincentivised to innovate or share information with Serato as this could then be used by the combined business in their own DJ hardware product development.  Also, AlphaTheta could, after the deal is completed, reduce its own innovation efforts to stay only marginally ahead of its rivals.

Joel Bamford, Executive Director for Mergers at the CMA, said:

DJs and entertainers depend on having access to the best equipment and software in order to put on a good show.

We’ve found this deal could substantially reduce competition in DJ software, resulting in increased prices, less innovation, and less choice.

We’re also concerned it could negatively impact the hardware markets by allowing the combined business to leverage Serato’s leading software to harm its hardware competitors, ultimately affecting DJs and consumers.

It’s now up to AlphaTheta and Serato to address our concerns.

Both AlphaTheta and Serato have 5 working days to respond with meaningful solutions to the CMA, otherwise the deal will be referred to a more in-depth Phase 2 investigation.

More information can be found on the AlphaTheta / Serato case page.