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Apple's Emagic Takeover

The Inside Story Of The Deal That Changed The Music World
Published September 2002
By Mark Wherry & Matt Bell

The music technology world changed overnight on June 30th, as Apple announced their acquisition of German sequencer heavyweight Emagic, becoming the first computer manufacturer to own a music software company. Our team brings you the latest news on how and why the deal went through, and what the changes may mean for Emagic and their PC and Mac users.

On the first of July 2002, the music technology industry awoke to the news that Apple Computer had bought out Emagic. While this was unexpected, perhaps the more surprising news was that Emagic's Windows product line will be discontinued at the end of September this year — a move that has upset a large number of users, and caused a huge outpouring of anti-Emagic feeling from formerly contented PC users. However, the effects of Apple's acquisition will have wider implications for everyone using computer-based music productions systems, not just those who use Logic for Windows. So why would Apple want Emagic? Why would Emagic want Apple? And, at the end of the day, what does it mean for musicians?

APPLE/EMAGIC TAKEOVERNo-one at Emagic would talk to SOS on the record, citing legal obligations to remain silent, but we were able to obtain comment from various sources close to the management at Emagic, on the basis that they were not going to be identified in print.

Why It's Happened

Many people (particularly PC-based Logic users) have been asking themselves why this deal came about, and what the motivation behind it was. Many rumours are circulating, including unconfirmed stories that the delay in the release of the Logic Control control surface caused Emagic a significant dent in profitability last year (some versions of these stories have been around for months).According to these stories, Emagic refused to release the controller until they and their Logic Control co-development partner Mackie had all aspects of the software and hardware interfacing working, rather than releasing a half-functional controller. This was undoubtedly the right thing to do as far as end users were concerned, and since its release, Logic Control has been a great success — apparently it has been partly responsible for a doubling in Emagic's business during the first six months of this year. Nevertheless, it seems that the uncertainties caused by last year's delays may have caused the Emagic management to start looking around for some means of making sure that the Logic Control situation could not recur during a future cycle of product development. Word has it that the feeling at the top of Emagic was that it was important to put the company on a rock-solid long-term financial footing — something they clearly feel closing the Apple deal has achieved.

Emagic's Logic Control is already the most successful hardware controller to date, but at what cost to the company?Emagic's Logic Control is already the most successful hardware controller to date, but at what cost to the company?

Of course, this cannot have been the sole motivation — though no reliable figures are available, it is clear that the main owners of Emagic must personally have benefited considerably from the sale. There is also a persistent (though unconfirmed) rumour that some of Emagic's management initially opposed the idea of dropping Windows support — apparently an Apple prerequisite if the deal was to go ahead — though presumably the attraction of the long-term financial support from Apple was enough to overcome this.

As a result of such stories (and, no doubt, a good deal of wishful thinking on the part of Logic's PC users), there has been much discussion on Internet forums about whether the source code for Emagic's Windows products, including Logic Audio, could be released under the GNU General Public Licence for other programmers and/or companies to work on. However, all such speculation looks certain to remain unfulfilled, as our sources inform us that the Apple deal explicitly precludes this. This makes sense — why would Apple want anyone else to be able to get their hands on the Emagic technology they've just paid for? Furthermore, given Steve Jobs' unequivocal mission to bring the benefits of the Apple Macintosh to as many Windows users as he can persuade to make the switch, this move is hardly surprising. Clearly, he wouldn't want anyone else giving Windows Logic users a reason not to do this.

Despite this, we are told that the 'no Windows' edict to Emagic does not, apparently, extend to non-Emagic products — so according to our sources, Emagic's distribution deal with SEKD for Samplitude and Sequoia products will continue "for the time being". However, it remains to be seen for how long SEKD will wish to leave the worldwide distribution of its Windows-based software in the hands of a company which now produces only Mac OS-based products.

Changes at Emagic

So what does the change of ownership mean at Emagic? What's actually happened to the company? Well, Emagic have been bought out entirely and are now a wholly owned division of Apple. According to our sources, the purchase also includes the core Logic code, and this throws up another reason why hiving off the PC side of Emagic's business would be impossible. Past Emagic statements suggest that the Mac and Windows versions of Logic share about 80 percent of the same code (after all, if you're developing cross-platform products, it makes sense to have a high proportion of platform-independent code; it's this factor that's made it possible for Emagic to simultaneously release Mac and Windows versions of Logic products). This in turn means that the Windows source code for Logic doesn't actually exist as a separate entity.

Emagic CEO Sven Junge.Emagic CEO Sven Junge.

The acquisition of Emagic's code by Apple is interesting for another reason — it prevents one particular piece of history repeating itself, one which cannot have been far from Apple's minds as their lawyers inked the deal. In 1992, Emagic founders Gerhard Lengeling and Chris Adam left C-Lab, where they had been programmers on C-Lab's Notator MIDI sequencer, and took their code with them to form Emagic. This was only possible because they owned the code themselves; now that Apple have bought it, they could not, for example, leave and start all over again for a second time. What's more, one of our sources tells us that, as you might expect in such a takeover, Apple insisted that key Emagic personnel had to remain as part of the deal, and apparently provided "extremely good incentives" to ensure that they did — the phrase "golden handcuffs" is being used a lot!

So the core personnel at Emagic remain the same. For the moment, the story seems to be that so does everything else, Emagic having maintained most of its independence, despite nasty rumours to the contrary. One of these was that Emagic would now be rolled into Apple entirely, that Emagic's name would disappear from its products, and that Emagic's international sales and tech support network would now be in the hands of Apple offices worldwide. Given Apple's relative lack of experience at directly supporting a user base of pro and semi-pro musicians, this rumour was greeted with dismay at SOS and elsewhere.

However, the word is that Apple always wished to keep Emagic as a separate entity even before the deal was signed, and that this feeling has become even stronger following the upsurge of feeling once the deal was made public. This story has it that since July 1st, top Apple executives have been in contact with the Emagic management, making it clear that they wish the Emagic brand to remain intact. Another source tells us that emails from the very top have been sent around at Apple's international offices, warning them that despite the takeover, Apple's regional offices will have no involvement at this stage in how Emagic are going to be run. According to the same source, this and other action by Apple guarantees that Emagic's main offices in Germany and the USA will remain open "for years". What's more, it seems that Emagic's international sales arrangements will remain unaltered, even in territories such as the UK, where the company is currently represented by a third-party distributor (in this case, Sound Technology). Indeed, our sources claim that all existing worldwide distributors will remain exclusively responsible for Emagic sales and tech support for the foreseeable future. What's more, we're told that Emagic's existing products will not be rebranded as Apple products. Word has it that there was some discussion that Emagic's standard logo and company strapline on products and advertising would start to include the phrase 'Emagic — a wholly owned division of Apple' — but even this idea has now been abandoned.

Does this story stand up to scrutiny? Well, many of Emagic's distributors, from Japan to the UK, have indeed been told that their relationships with Emagic will continue as before, and it certainly seems true that no Emagic engineers or staff have been made redundant since the takeover. There are even rumours that Emagic's technical staff may be expanding in the near future. The most speculative of these have suggested that Apple may be intending to use Emagic's engineering staff as the basis for a new European Apple R&D facility, but it is unclear whether this has any solid foundation at the time of going to press. Emagic's engineers have all been retained, however — our source claims that they've all been given free Macs, like other Apple employees — and we are told that even the Windows software engineers will now be put to work on Mac products following the takeover. This, however, partly contradicts other stories circulating around the company, which suggest that there is a possibility that Emagic will honour their deal with Apple to the letter, and not produce any new PC products, but that they will, nevertheless, continue to produce the odd new feature and small-scale upgrade for Logic 5 for Windows until the warranties for current PC-based customers expire in two years from now. Apparently this may include making available upgrades up to v5.4, but it seems doubtful that there will ever be a v6.0 upgrade for Windows users.

Certainly this general approach is in line with the official Emagic statement posted on their web site on July 4th, where the company committed itself to honouring its Windows users' warranties until they expire, and not just up to September 30th. One source claims the mood amongst Emagic's management is of contentment with this timescale, as after two years, they feel that any remaining PC users' computer hardware will be requiring an upgrade anyway, and that users will either crossgrade to the Mac, or change music software in order to remain Windows-based. However, another way of explaining this is that Emagic are legally obliged to honour the warranties anyway. Many aggrieved Windows users have been talking belligerently on Internet user groups of taking legal action against Emagic. It would seem that any such claims can have no legal basis unless Emagic do something to infringe their legal commitments to its PC customers — such as renege on the warranties. This might be the real reason why the support will continue until the warranties expire.

What's In It For Apple?

Apple CEO Steve Jobs.Apple CEO Steve Jobs.Although a major computer manufacturer buying a major soft- and hardware developer is largely unprecedented in the music technology industry, observers from other industries will more be familiar with such action, since Emagic are merely the latest in a line of creative technology-based acquisitions over the last couple of years. The process deserves closer scrutiny, as it may give some clues to why Apple wanted to buy Emagic, and also as to what will happen to Emagic next.

Apple's buyout spree began most notably when they acquired technology from Macromedia in 1998, apparently to enhance future versions of QuickTime. While Apple weren't giving away any details, the technology they'd acquired was known as Key Grip, a desktop video-editing program that was still in development. This turned out to be an incredibly savvy move when one year later, in April 1999, Apple released the first version of desktop-video application Final Cut Pro. Two versions have followed since, and Final Cut Pro continues to go from strength to strength, making a big impact on the video-editing industry, which previously relied heavily on expensive hardware-based workstations from Avid.

Apple's Final Cut Pro was based on Macromedia's Key Grip...Apple's Final Cut Pro was based on Macromedia's Key Grip...The purchase of Key Grip also led to the creation of iMovie, a consumer-friendly video-editing application launched by Apple in October 1999 with the iMac DV range of computers. With hindsight, it's now clear that this move was the beginnings of Apple's 'the Mac is the hub of your digital lifestyle' strategy, giving people who had previously had no interest in owning a computer a reason to buy a Mac.

...as was iMovie......as was iMovie...

Another popular 'i-application' for Apple has been iTunes, and like iMovie, this was also the result of an acquisition: this time, the popular SoundJam MP3 player, previously sold by Cassady & Greene. However, since Cassady & Greene were only the publishers and not the developers, there was very little they could do when Apple bought SoundJam and gave the lead developers new jobs. Interestingly, this is quite similar to the way the original Logic programmers took their products with them from C-Lab!

... and iTunes was based on Casady & Greene's SoundJam. It seems highly likely that Logic will provide Apple with the basis for some kind of basic desktop music application.... and iTunes was based on Casady & Greene's SoundJam. It seems highly likely that Logic will provide Apple with the basis for some kind of basic desktop music application.

It's a similar story regarding Apple's recent developments in DVD software. In April 2000, Apple acquired DVD authoring technology, products and the engineering team responsible from the German company Astarte. As in the Final Cut Pro and iMovie story, one of Astarte's products, DVDirector, became DVD Studio Pro, catering for the professional market, and Apple used the same technology and engineers to create iDVD for the consumer market.

While the story of Apple's previous acquisitions and their spin-offs might not, at least on the surface, appear to be relevant to musicians and those working in digital audio, it should give you a strange sense of familiarity. For example, if you replace Key Grip with Logic Audio, and Avid and their high-end workstations with Digidesign (who, of course, are owned by Avid) and Pro Tools, suddenly you can see how the story might end!

Unfortunately, despite the anonymity of our sources, none of them were prepared to reveal too much about Apple or Emagic's future plans, or any new software or hardware products that might now arise from joint cooperation. Apparently Apple's existing policy of not publicly announcing (or admitting the existence of) anything that cannot be shipped or executed within 30 days of the announcement now applies, so information outside the innermost circles is scarce even within Emagic. However, one of our sources did guardedly say that they could "imagine that Apple would want to make use of the new resources and know-how to create products that would be enticing to beginners". With this in mind, and thinking back to the way iMovie and iTunes came about, it's fair to say that the Emagic buyout will probably result in the arrival of some kind of cut-down music application for beginners, possibly bundled with new Macs. Plenty of rumours are in circulation — some of them informed, some merely guesswork — that this might be called iLogic or iMagine, but according to our sources, neither of these is a likely title for what may eventually emerge.

Clearly, however, Apple are not afraid to compete directly with their third-party developers when they produce new products by acquisition and takeover. They cut into the desktop video-editing market share of Adobe's Premiere with Final Cut Pro, to take one example, and this might mean that, in the desktop music and audio market, companies like Steinberg, MOTU and Digidesign will now have a hard time competing with Apple/Emagic. This could be especially true if an cutdown Logic-type application were to be bundled free with every Mac, thus locking new users into the mindset of naturally progressing to different versions of Apple's own product, without needing to consider the competition. The traditional political balance between the platform manufacturer and the various music software companies has been completely skewed by the new deal, but at this stage, it's too early to determine what the long-term consequences of this important shift will be.

What The Future Holds

So, apart from the positive repercussions for the financial future of Emagic, what will the results of the Apple deal be for Emagic and their users? One story has it that the Apple are keen to produce a cut-price, Titanium-styled version of Logic Control for the mass market. Our sources did rather vaguely state that the Emagic hardware development team is apparently looking forward to making use of its "fresh opportunities", which suggests that they are being tooled up for something new.

However, given the current situation with Mackie, who developed the Logic Control with Emagic but have now started selling their own version, Mackie Control, for use with other MIDI + Audio sequencers (see this month's SOS News), the story may well remain speculation, even if it was originally true. However, it would be in line with Steve Jobs' reputation for being obsessed with the physical appearance of the products he sells, irrespective of how well they work (remember the Apple G4 Cube? It looked great... but sold like hot sand in the Sahara). Most hi-tech musicians would agree that Logic Control is functionally a well-designed piece of kit, and if this story is true, it's not necessarily good news; cutting the price of Logic Control in half and giving it a ritzy new casing might well make a piece of gear that looks flashy, but doesn't actually do the job it's supposed to half as well. And this brings us to the negative side of how the Apple deal might work out over time for Emagic. Conspiracy theorists and sage commentators alike have already speculated that Apple might merely have bought Emagic to strip them of their technology, produce some budget music software spin-offs, and then close them down. Under this grim scenario, the pro Windows-based Logic user base of musicians will not be the only losers — so will the Mac users in the slightly longer term.

Although this is no more than a rumour at present, it does have a basis in precedent. One of Apple's acquisitions of recent years was Spruce Technologies, a companying specialising in DVD-authoring software. However, unlike the pieces Apple acquired from Astarte, which were used as a basis for DVD Studio Pro and iDVD, Spruce had no Mac product line — all of their products were Windows-only, competing mostly at the professional end of the market. While Apple are still offering a level of support for Spruce's former product line, development of these products has ceased. Clearly, Apple wanted some of Spruce's market share for their own Mac DVD authoring solutions. Let's hope this doesn't point the way to future developments with Emagic, as musicians only stand to lose out in such circumstances.

Unsurprisingly, such suggestions are denied by all of our sources; the claim is that at this time of stock market uncertainty, a company like Emagic, which has shown consistent profitability over time, was deeply attractive, and it was this that attracted Apple, not the prospect of looting Emagic's technology. Moreover, so the argument goes, a lot of money has changed hands in order for Apple to buy Emagic, and by so doing, they have bought a profitable company. Why throw all that money at a functioning company and then destroy all chance of enjoying future profits from it by shutting it down?

These arguments do make sense; Emagic is surely more attractive to Apple as a going concern, rather than as a moribund one, and at the moment, there is no indication that anything untoward is going to take place. Indeed, looking at the other side of the coin, rumours are already circulating about what benefits the deal might bring now that Emagic have Apple's considerable financial resources and manufacturing capabilities behind them.

Emagic have confirmed that the first of these will take the form of an extension of their Logic crossgrade policy for PC users, as announced on July 4th. This will take the form of Apple discounts on new Mac hardware for registered PC Logic users, although it's not yet clear whether this will be a worldwide initiative. Aside from such rearranging of the deckchairs on the PC Logic Titanic, though, the main benefits of the deal will clearly go to Mac users. Our sources claim that it is very likely that the entire Emagic product line will soon be available through Apple's terrestrial and on-line retail outlets worldwide. And although no information is currently available on how the deal will affect development of a Mac OS X version of Logic — Emagic will only say that it is "progressing very nicely" — it is not unreasonable to speculate that the path to an OS X-compatible version of Logic for OS X will now be easier than it was before, due to Apple and Emagic's development teams sharing information more closely than previously.

There are also plenty of new Apple technologies that could be of potential benefit to Emagic's recording applications — witness current speculation that Apple/Emagic may use the new Xserve technology to create some sort of new stand-alone, rackmountable audio recording device. And then there's that story about the Mac-styled, cheaper Logic Control...

It's worth sounding a note of caution before getting too carried away. Although our sources were close to the people at the top of Emagic, and may well be telling the truth as it is perceived within Emagic presently, the fact remains that Emagic's management no longer have total control over their destiny. So while it may be true for now that Emagic will retain a great deal of independence from Apple, as is currently claimed, it could all change at a moment's notice if Apple change their mind, or feel that Emagic are not in some way living up to their expectations. Despite this concern, the fact remains that with Apple behind them, Emagic are potentially better placed than ever to deliver products for musicians which are optimised for a specific platform. Only time will tell, however, whether this potential will be realised.

Published September 2002