DIY marketplace Etsy has announced plans for a massive $275 million acquisition of used music instrument market Reverb.com. That’s likely to turn heads both in online retail and musical instruments.
As reported by VentureBeat, the deal has an approximate $275 million value, in cash, as the NYC-based Etsy buys out Chicago’s Reverb.com.
It’s a massive bet on the value of the used market. It might prove risky, too. Facebook is pushing its own market offerings, leveraged by its epic (and politically controversial) power of user data and the market. And it seems the market is vulnerable to music store giants (like Thomann in Europe) who can offer used product (and service) alongside new distribution.
Etsy does seem up to the challenge. The company has some real experience in handling fragmented markets, and in building relationships with sellers – a key to this business. The one sure-fire outcome for the moment is that Etsy and Reverb do profit from the deal. Reverb should see that benefit when the deal is expected to close later in 2019. Etsy’s whose stock price was flying high already has seen some increased share value, and has strong performance with acquisitions.
Etsy also has unique skills in its cloud tech, search, and product discovery, and promises to improve Reverb’s performance.
If it worries anyone, this could pose concern for independent manufacturers. Eurorack makers have long expressed a fear that a modular “bubble” could make it difficult for new products to compete with used equivalents. The modular market is presumed to be especially vulnerable to that phenomenon, because if modular makers don’t continue to find new customers, the amount of used gear begins to accumulate faster than would-be customers for the new stuff. At least modular buyers have proven deep pocketed and interested in new stuff. The desktop market faces the dual pressure of loads of used gear and cheap mass-market products and clones. I wouldn’t panic yet, though – this danger exists with or without Etsy and Reverb. And I’m personally glad at least music gear finds new love rather than winding up in landfills like so many electronic items.
Reverb already offers the potential of being a storefront for music gear – something Etsy has tried for musical instrument makers on and off over the years. (See my personal notes at the end.) So it might even be that Reverb will court these very manufacturers outside of the usual gear distribution channels.
I think the real trends to watch are how investors are valuing areas of musical instruments, and just a importantly, where value in the communications chain may lie. Facebook at the moment is poised to dominate musical life and the business transactions around it, from artists posting Instagram pics to Facebook Groups to its own marketplace. That includes intangible value (artist buzz) and tangible (if you buy a used synth directly through Facebook, which is possible already).
Reverb might advertise heavily on Facebook-owned properties to acquire customers, but they’ve also built a sticky destination site all their own. They’ve added significant editorial content and community features around the marketplace, too. Indeed, if independent music tech publishing has declined, the integrated editorial-marketplace seems to be the wave of the future. Etsy says they will (wisely) continue to operate Reverb independently as a site and brand, serving an audience of musicians whose interests are far from the “put a bird on it” ethos of Etsy. Even as Reverb advertises on Facebook- and Google-owned properties, they have an opportunity to create value chains for musicians outside of the dominance of those two companies, whether individual musicians, DIY enthusiasts, or smallish manufacturers.
The issue with this as with all acquisitions of this size is whether the hunger for growth will outstrip the actual demand for the product, and whether Reverb.com will continue to innovate post-acquisition. That’s a polite way to say, these things don’t all have happy endings – as when Etsy shuttered a French marketplace it bought.
I’ll try to talk to Reverb’s management during the transition, once things settle down. I did read in one report that there will be a new CEO at Reverb, but I’ve yet to confirm that.It’s certainly a big moment in our industry, though. And it seems a smart move, if an awfully big number (without knowing the existing data or projections behind that).
Side note:
CDM has some history with Etsy, going back to their early days. I knew co-founder Jared Tarbell first through his generative creative coding before his Etsy adventure in the really early days, and I started the MusicMakers series in Etsy’s offices in Brooklyn with partner MAKE Magazine. (We re-dubbed the series Handmade Music for a time, and Etsy stayed involved until I relocated to Berlin.) We even had some attendees get stuck in Etsy’s antiquated elevator during an event. Bre Pettis showed up before starting MakerBot, known mainly to us as a vlogger who worked with Etsy, back when “vlogger” was a word because YouTube wasn’t yet dominant.
None of this is terribly relevant, other than to say times have changed. And it’s also safe to say the “maker movement” isn’t exactly at a high point. Maker Media, of Make Magazine and Maker Faire, abruptly imploded this year, though founder Dale Dougherty is working to get some version of the community back. Etsy, too, has refocused as a market for vintage and personalized products, not just handmade.
The ongoing question for CDM and friends – and one I’d love to hear from you about – is how best to support the DIY end of this spectrum. I think ultimately it’s a distinct niche from what Etsy or Reverb – or perhaps even MAKE – were able to serve.