ROLI has filed for administration and will reboot as beginner-focused Luminary as the company struggles with losses. Current employees remain, and even the Seaboard is apparently coming back in stock – but this could be a cautionary tale for “hypergrowth” in music making.

The UK-based startup had always been something of a puzzle to the instruments industry. On one hand, they had innovative products – those famous squishy keyboards – plus loads of celebrity endorsements (like Pharell and Grimes). They also have been able to hire an incredible amount of talent, including acquisitions of the FXpansion software development team and (at one point) the widely used JUCE framework and its star developer.

But on the other hand, it was clear ROLI was burning investment money in pursuit of a growth strategy that seemed potentially unrealistic to an outside observer.

And at the moment, I’m not really going out on a limb saying that, because I can just quote CEO Roland Lamb talking to Business Insider about the decision to file for administration:

“Ultimately, what happened was the pro-focused products we initially developed, although successful within their marketplace, the marketplace wasn’t big enough given our venture trajectory,” Lamb told Insider on Wednesday. “We had our eyes set on hypergrowth, and that proved to be difficult.”

“Hypergrowth” is an interesting term, as most enduring names in the music tech business in fact have pursued very conservative, gradual growth. Household names like Ableton or Roland or Avid have been almost like blue-chips for musicians. And the losses ROLI accrued were real – the most recent filing is back to 2019, with pretax losses of £34.1 million on revenues of £11.4 million. Lamb describes the process of the reboot as involving “dark nights of the soul.”

So let’s get to what this means.

Let me also say – the best to ex-ROLI and current Luminary employees through this period. (There is no immediate change to headcount in the restructuring, Luminary tells CDM.)

The tech itself remains innovative, expressive, and presented in an appealing and futuristic product. But if advanced users get that, will beginners – enough to support growth of the rebooted company?

What happens to ROLI

I expect the major concern for electronic musicians is what will happen to the folks working for the company and the tools you rely on in your music-making. Here’s what we know:

Pharrell- and Grimes-backed music startup Roli files for administration and reboots as Luminary to refocus on beginner musicians [ Business Insider, who got the exclusive on the story (it seems directly from ROLI) – paywall ]

ROLI, the company. ROLI has filed for administration – you can read up on what that means in UK business law. This is not the same as filing for “bankruptcy,” but it is a related process, in that you are acknowledging your company will be unable to pay all its debts and protects you from action by your creditors. That timespan is limited, but then what administration allows you to do is to try to prevent the company from being liquidated by executing a restructuring plan. And in the case of ROLI, that means relaunching as Luminary.

Meet Luminary. Luminary will take on the venture debt and all of the ROLI intellectual property and assets. That means as far as we’re concerned as consumers, it effectively is ROLI with a different name. But some of $75.7 million in investment in ROLI won’t be paid back, even as some unknown portion of that is taken on by Luminary. (Essentially, some venture funders can decide to move their debt over to the new company.)

There’s another term for this approach – “pre-pack (pre-packaged) insolvency,” and it’s apparently fairly common. There’s an equivalent under US Chapter 11 filings and law in other countries (Germany, Canada, etc.). You decide on a restructuring plan, then declare insolvency – that’s the pre-pack part, in that you restructure first. I’m not a business lawyer, but at least that explains how ROLI already has a plan going forward as Luminary.

ROLI’s employees. Insider reports that 70 employees will wind up in the new business. Clarification: Luminary tells CDM that at least as far as the transition from ROLI to the re-formed Luminary, staffing remains the same – “less than 100 staff,” but retaining every current ROLI employee.

There has been a running series of departures of some of the former leadership team and staff, including engineers from the FXpansion team. That raises some concerns looking forward about brain drain, given Luminary is talking about pushing its subscription-based software business. (Congrats to Angus Hewlett on becoming CTO at Image-Line – a company with a long track record of happy musicians via its FL Studio product.)

JUCE. This essential framework for C++ development across platforms and plug-in formats actually found a new home already last spring. ROLI sold off JUCE to PACE Anti-Piracy. Now, PACE is not exactly beloved by the developer community even as it is widely used, but yes, that effectively meant JUCE was understood to be reasonably safe as a platform post-ROLI.

Seaboard hardware. Insider also reports that the flagship Seaboard controller will become available again soon. (I assume that means the RISE model, but there aren’t details yet. I do still like mine.)

Updated: what about the pro offerings and Seaboard? A Luminary spokesperson emphasized to me that they are not abandoning that portion of the business, and write in a statement to CDM:

“We’re excited to work with Hoxton Ventures to further the future of ROLI and LUMI instruments. While Luminary’s mission to make piano learning fun for beginners with LUMI has grabbed the headlines, we’re also looking forward to bringing back the Seaboard in 2022 and continuing to develop our MPE software. All existing ROLI instruments and software will continue to be supported.”

That hardware had been unavailable. Insider blames part of ROLI’s revenue woes not only on lack of targeted growth but also the pandemic. It seems reasonable to assume that industry-wide parts shortages, plus disruptions to shipping and assembly (especially as ROLI assembles products in London) may have impacted hardware production. (It’s also I think a common misconception that the pandemic was universally good for the music instruments industry.) The exact contribution of the pandemic to ROLI’s situation is unclear, however, especially without a financial filing since 2019.

Financial filings reveal that even with powerful software from FXpansion and on iOS, most of ROLI’s business remained in hardware. And that pro-focused hardware never reached revenue or growth targets, as the company’s losses mounted.

What’s next with Luminary

CEO Roland Lamb and chief people officer Corey Harrow go on with Luminary. That means focusing on their light-up keyboard Lumi (US$299) and its companion app, which are intended to help you learn to play music. I was going to use the phrase “Peleton for music” – but of course that’s exactly how Lamb pitches it. You pay $79 a year and the app works with the light-up keyboard to teach you to play.

It goes without saying that venture finance at the moment absolutely adores subscription models. What’s unclear to me is whether consumers will love them as much as the investors do. And hey, that’s you (among other folks, some of whom may have very different experience levels and interests than you).

But the play here is simple: assume there are more beginners out there than there are advanced users and hope they want to pay the $299 + $79/year to learn to play music.

But wait, does this actually make sense?

I’ll leave aside the question of whether you want to have keys light up to tell you which notes to play in the first place. For what it is, Lumi is attractive, modern, innovative – it’s probably the most immediately appealing light-up keyboard/app combo. It’s not the only one, though. Casio makes light-up keyboards, for example. So does Yamaha. Now, they’re definitely conservative in design. They don’t even really look like they were designed this century. But on the other hand, these “legacy” brands also have massive distribution and marketing efforts that mean that if you walk into a brick-and-mortar music store with your kid asking about what to play, you’ll see these products – whether that’s relevant in the 2020s being a separate question.

Oh yeah, and it’s also worth noting that the piano, as always, has to compete with the guitar. Gibson also has an app and learning system. And – speaking as a lifelong keyboardist and pianist here and former contributing editor to Keyboard mag who did cover stories with pretty famous people – I’m told guitarists are cooler and sexier to most people. (No accounting for taste.)

But that’s only looking in music. Maybe the more relevant question is how music in general stacks up to competition from all the other things you can do with your time and money. And then you have to hope that on top of lots of other entertainment subscriptions, people will want to take on a hardware investment and a subscription in order to learn to play music with whatever time they have left.

Heck, to be perfectly frank, if you give me a choice between a Lumi and an Xbox, I’d take the Xbox. I might even take a Super NES and Mario Kart. (Huh. I should really get that in the studio. But I digress.)

Seriously, though, this is a question every industry player now pushing SaaS (Software as a Service) will have to answer, if they want to achieve any growth at all, let alone Lamb’s “hypergrowth.” There’s a gap between “we want SaaS to work because that’d be good for us as investors” and “SaaS is proving to be a solid investment with real consumers.” It’s also obvious that a subscription to Reason, to Lumi, to iZotope stuff, to Adobe Creative Suite… these are not all created equal.

I don’t think I’m saying something at all controversial here; this kind of skepticism is as easily overheard in the music instruments business as ground loop hum. And we’re not even having to risk our own investment.

So without making a prediction about SaaS either way – maybe it will prove to be a winner – it’s safe to say these are the questions everyone will be asking. They’ll be asking not only about Luminary, but about all music tech companies seeking venture funding for growth using subscriptions.

And we do have a bumper crop of those right now, partly because 2020 numbers were as good as they were, driven by pandemic-lockdown at home use. It meant that the economy of how much time you had, at least, did suddenly jump in 2020.

The question now is, will music tech be able to compete as lockdowns gradually end, and people have less time at home making music again – especially beginners or casual users who may ultimately decide they would rather do something else.

I hope Luminary does find a model that’s sustainable, and all my best to those going to the new company – and to those who may be moving on. These larger questions will continue on loop industry-wide for the coming years, it seems.

As I write this, ROLI’s site is here:

https://roli.com/