Spitfire business things

[ridgero]

It's really crazy that a VST forum is discussing and speculating about the finances of a company that is present in the same forum. Personally, I find it extremely inappropriate.

Besides, you all only know a fraction of the company's background information and you are speculating wildly.

I really understand why many leave this forum.

 

[sundrowned]

It's really crazy that a VST forum is discussing and speculating about the finances of a company that is present in the same forum. Personally, I find it extremely inappropriate.

Why is it inappropriate?

I find it mildly unfair because the UK seems to make it so easy to look up company information. Other countries seem to at least require registering before looking up. But I'd like to see other company accounts.

I don't think it's inappropriate though. It's publicly available information, and it's quite interesting.

 

[Alex Fraser]

Why is it inappropriate?

I find it mildly unfair because the UK seems to make it so easy to look up company information. Other countries seem to at least require registering before looking up. But I'd like to see other company accounts.

I don't think it's inappropriate though. It's publicly available information, and it's quite interesting.

Important to also underline that these are the accounts of a Limited Company. Not an individual person or persons.

Shareholder privileges etc mean that publicly available accounts (and therefore) analysis are fair game. Such public info is routinely used here in the UK to access initial credit worthiness etc.

(I will concur though that it's a new and surprising angle for forum discussion.. I’d also note that there’s 36 pages of accounts. Hands up who read them all before passing comment.. )

For business nerds: In the footer of SA's webpage, you'll see the company number published. That's there by law and provides searchable data to find things like the accounts poured over in this thread.

 

[Cinemachine]

It's common (in the UK) to discuss company finances due to the transparency they are required to have. People look at this even when it comes to jobs, to gain a better understanding of longevity and security.

Spitfire have done well over the past years to be able to handle the loss in one year due to expenditure, (for reasons we can only speculate). IF it is indeed Abbey Road it could be them working to make this their new flagship. Abbey Road is likely seen as long term return investment which would make sense as you see operating costs are the main difference from the previous financial year, and we're gradually being drip fed sections.

Turn over | Profit since 2019 - 2023. Spoiler for those that don't like to see numbers.

Turnover 2019: £9.797m - Prof' £0.151
Turnover 2020: £13.503m - Prof' £1.35m
Turnover 2021: £21.306m0 - Prof' £4.164m
Turnover 2022: £21.004m - Prof' £1.533
Turnover 2023: £18.732m - Prof' -£0.779m

 

[SupremeFist]

No more libraries in the "Originals" series according to the statement…

 

[Quantum Leap]

It’s true Vi is full of accountants who a hobbyist composers. What’s wrong with that? I’ve noticed this before. Haha. I’ve been trying to tell you guys for years that Spitfire can’t sustain the company and the high quality of product in this small market. Prices are too low and everyone expects the world for $300. This is resulting in the extinction of many companies. Spitfire’s numbers are a disaster. I wish they had adopted a smaller more modest model where they make a careful profit and don’t overload a small market with similar products. They really have something to offer, like Berlin, EW, Vienna and others, but I’m just not a fan of the take over the world mentality. It’s not good for anyone.

 

[wayne_rowley]

Originals was great (when it wasn't repurposed older libraries removed from the market and with any useful legato patches stripped), as was LABS - that's stopped too it seems.

They have shot themselves in the foot with pricing - because only a pro who needs the library right now and can cover the cost as a business expense will buy a library at full price. Everyone else (the hobbyists) are going to wait for the regular sales and get it at 40%-50% off.

If they are going to focus on high-end libraries they really need to get their quality control sorted and fix their current libraries. I have stuff that's years old that's almost unusable due to fundamental problems that have never been addressed (e.g. baked in rebowing in Spitfire Solo Strings).

Historically it's been a release and forget model, but that won't wash for premium priced libraries. I've commented before what I think of their software development model/processes from what I can see of it, and it's not good.

I think their problems are beyond just the financials.

Wayne

 

[Delboy]

I digress somewhat but the realease of the latest Abbey Road One .. makes me now think ... boy this is like buying one of those weekly magazines where u build a model and you get a very small part for £2.99 and to build this massive aeroplane or ship you really need 200 or more weekly parts and you never really finish it. This AR1 orchestra seems to me being the same model for Spitfire ... how many parts does it take to make an orchestra .. 4 ? so it looks like we get multi small parts for each part then at the new price of £31 each (im sure it was cheaper before 24) ... do the maths. ... this orchestra may never ever get completed. I have given up bothering getting anymore.

 

[Vik]

The Spitfire product range is huge, and (in my opinion) has simply masses of products that overlap. I think there is little to be done that they haven't already done in terms of traditional sampling.

They (and all other companies in the VI business) can create new products designed to be a lot more complete than the current ones. Using such products would be a lot more satisfying than dealing with the combination of overlaps and incompleteness.

After all, those who have bought several/many libraries won't need many of the instrument sections they have paid for. The reason it's easy to end up with eg. 30 variations of V1 legatos of which we use maybe only 5 is that we often have to buy a full ensemble when all we need is eg. a better bass pizzicato.

There's a reason why we usually can go to a shop an buy eg 6 new teaspoons (or one at a time) without buying a lot of knives, forks etc: we don't need all those overlaps or unneeded extras. That's why I think the new Abbey Road strings, which are sold one section at a time, and (even better) the Orchestral Tools solution (which allows us to not only buy eg. only the violas, but also has an elegant solution for downloading only the mic options we need) are good examples of how shopping usually works: we buy only what we want to buy.

For instance, I like the bass pizzicatos in Spitfire Studio Strings, and believe I don't need the other sections … but if I could buy the basses, maybe I'd want to buy more from the same library. That's what happened when I bought the OT Tallinn cellos: now I'd like to have the basses as well. I really hope SF moves in that direction, especially since they don't have downloadable demo presets (like Performance Samples), 30 day trials (like VSL), trial subscriptions (like some companies) or a la carte shopping (like OT) – except for the new Abbey Road sections and possibly only a few more libraries.

I'm sure they have designed their shopping model the way they have in order to generate more income. But at least in my case, it has led to me almost never buying SF stuff anymore, even if they are one of my fav. VI companies.

 

[Eptesicus]

I think it is clear that what they need to release, and what the market needs, is more supersultando-talsto-pontiflautando libraries.

 

[lutheal]

Turn over | Profit since 2019 - 2023. Spoiler for those that don't like to see numbers.

Turnover 2019: £9.797m - Prof' £0.151
Turnover 2020: £13.503m - Prof' £1.35m
Turnover 2021: £21.306m0 - Prof' £4.164m
Turnover 2022: £21.004m - Prof' £1.533
Turnover 2023: £18.732m - Prof' -£0.779m

What's really telling here is the profit margin.

In 2021, it was about what it should be for a software company, just around 20%.

And Mike is right that often companies will invest a lot in one year and not reap the benefits til the following year, so it might look like they had a "bad year" but really they were just investing in the future.

But 4 out of 5 of these years, the profit margin is dismal. 2019 and 2020 both had a 1% profit margin (that's really low), 2022 had 7% profit (not terrible but not great) and then the loss this year. They certainly can get a lot of sales, but it seems their costs are out of control.

 

[Alex Fraser]

Originals was great (when it wasn't repurposed older libraries removed from the market and with any useful legato patches stripped), as was LABS - that's stopped too it seems.

On LABS it seems pretty simple. They gave responsibility 100% to CH (remember the tattoo?) and then he parted ways with the company. Also, how many LABS do you need to build a mailing list? I doubt one a month. It was getting excessive. (Foghorns? I love them but $$.)

No more libraries in the "Originals" series according to the statement…

The group has continued to invest in new product development and took the decision in the year to focus on those areas of the business that are most relevant to its customers. A consequence of this renewed focus included the closing of the Group's record label, and the cessation of new products for the Originals product line.

Yep, flat out cancellation assuming they mean a hard stop to new Originals releases as opposed to merely not recording new material for the line. Surprised we're not talking about this more.

That's really interesting. Also slightly annoying as the cancelled North Keys contained four instruments, only one of which they've released as Originals. RIP Spitfire Rhodes.

It's also clearer now why the old Albions made a sudden necro-appearance and perhaps an indicator that they're still making coin at the mid-upper end of the market and have no real reason to discount.

Another thought: If Originals represented a long-term project to move older sample data to the new player...well that's probably been thrown into the back of a drawer too. All hail our Kontakt overlord.

Not sure if that's good or bad. Also can't quite believe I've spent working hours on this...

 

[Tone Deaf]

1) could be the ex-CEO Will Evans.

"Revenue for the year... was lower than the prior... a continuation of the expected decrease in e-commerce following the peak activity during covid pandemic". They anticipated a decline in turnover and probably have a longer term strategy thats in action currently, meaning a bigger hit this year for future benefit. I don't think the company has been merely fumbling along with it's eyes closed.

In my view, we are seeing a trend typical of any business development, large and small, where the founders drive the business to the point where it peaks and it is often sold on to corporatista types with access to funds (usually other people's money in the form of shareholders or lenders) flanked by accountants with an array of self fulfilling data and absolutely no idea about the beating heart of the actual business. The usual pattern is that the revenue/profit continues for a short period and then begins to decline so they cut this and implement that until the penny drops that they are really just trading on past glories. This is the eternal cycle so watch out you Apple crazed groupies. As for Spitfire's sales policy, it makes sense to me that they should run a two tier business and sell cut down this and that to the 'Hoi Polloi' while offering the full repertoire at high margin prices to the upgraders and pro's alike.

 

[Markrs]

What's really telling here is the profit margin.

In 2021, it was about what it should be for a software company, just around 20%.

And Mike is right that often companies will invest a lot in one year and not reap the benefits til the following year, so it might look like they had a "bad year" but really they were just investing in the future.

But 4 out of 5 of these years, the profit margin is dismal. 2019 and 2020 both had a 1% profit margin (that's really low), 2022 had 7% profit (not terrible but not great) and then the loss this year. They certainly can get a lot of sales, but it seems their costs are out of control.

Small correction 2022 was a 10% profit year.
"Turnover 2020: £13.503m - Prof' £1.35m"

 

[sundrowned]

What's really telling here is the profit margin.

In 2021, it was about what it should be for a software company, just around 20%.

And Mike is right that often companies will invest a lot in one year and not reap the benefits til the following year, so it might look like they had a "bad year" but really they were just investing in the future.

But 4 out of 5 of these years, the profit margin is dismal. 2019 and 2020 both had a 1% profit margin (that's really low), 2022 had 7% profit (not terrible but not great) and then the loss this year. They certainly can get a lot of sales, but it seems their costs are out of control.

Does the profit margin matter that much to a company like Spitfire? As long as everyone involved is getting paid, they're making good sales, and aren't making repeated losses. Isn't that the main point of a company like that? It's a small to medium sized creative business.

 

[wayne_rowley]

As for Spitfire's sales policy, it makes sense to me that they should run a two tier business and sell cut down this and that to the 'Hoi Polloi' while offering the full repetroire at high margin prices to the upgraders and pro's alike.

It makes sense if your quality control is up to scratch. Otherwise your high-margin customers won't remain as customers for long...

 

[Alex Fraser]

Does the profit margin matter that much to a company like Spitfire? As long as everyone involved is getting paid, they're making good sales, and aren't making repeated losses. Isn't that the main point of a company like that? It's a small to medium sized creative business.

Couple that with a YouTube/Tech House style policy of ploughing everything back into growth perhaps?
Make sure everyone is paid whilst amassing 1000's of hours of recordings and develop new software that the business can mine on repeat for years to come.

I mean..what comes after Abbey Road Orchestra has been shipped?

 

[Tone Deaf]

Does the profit margin matter that much to a company like Spitfire? As long as everyone involved is getting paid, they're making good sales, and aren't making repeated losses. Isn't that the main point of a company like that? It's a small to medium sized creative business.

Yes and no. Since we are discussing the perceived business model/activities, it stands to reason that any profit after tax/shareholder distribution should be held in reserve both as a safety net and as a war chest for future developments. Let's also not forget Spitfire's collaborative approach to development where in many cases they provide the basic tools and marketing 'franchise' clout but rely on skilled and enthusiastic labour input for a percentage cut in the profits of a project. In other words, profit share. Now that's probably a hard pill to swallow for the luvvies who expect everything for nothing but let's not lose sight of the fact that profitability generally translates into favourable results for us consumers who have the luxury of stick or twist if we do not like what is on offer.

 

[Tone Deaf]

It makes sense if your quality control is up to scratch. Otherwise your high-margin customers won't remain as customers for long...

Indeed, and I would suggest it would be a smart move if Spitfire finished and improved some of their flagship libraries.

 

[gamma-ut]

Does the profit margin matter that much to a company like Spitfire? As long as everyone involved is getting paid, they're making good sales, and aren't making repeated losses. Isn't that the main point of a company like that? It's a small to medium sized creative business.

Yep, you'd expect the bulk of the costs to be staffing and the situation with tax credits means it makes sense to spend big on some classes of investment as long as that pays off. It's possible they ploughed a lot into recording, their app and Pianobook in the expectation they'd be able to collect a few years later and tax advantage of the corporate tax credits at that point.

Obviously, there's a risk there if those investments don't pay off but there's nothing here to say they're in trouble. Also, 2020-2022 were punishing years for any company operating in or around entertainment.