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Consolidation Prize: Sonic Subsumes Daikin DVD

Peter Schworm

March 27, 2021 | The past decade saw a dramatic surge in the frequency of media marriages, as well as in the size and influence of the resulting unions. Viacom acquired CBS, Disney procured ABC and ESPN, and AOL bought Time Warner and its hefty share of the media world, most notably CNN. Financial interests even convinced longtime newspaper rivals like the New York Times and the Boston Globe to set competitive urges aside for the greater good of shared stockholders.

Executives coined words such as "synergy" to explain why somewhat disconcerting alliances like the Washington Post/Newsweek/Microsoft/NBC amalgam were good things. Still, the trend toward media concentration prompted much hand-wringing. Corporate interests would seep into newsrooms and color editorial decisions, critics said. Readers and viewers, largely unaware of the tangled ownership web, would be the ones to suffer.

The rapidly changing world of optical media authoring has not been immune to the merger frenzy. Still, the recent rapprochement of former DVD authoring foes Sonic Solutions and Daikin took the industry largely by surprise. That former Daikin engineers were the driving force behind Sonic's popular DVD Creator made the merger all the more unexpected.

But after the initial shock subsided, many analysts conceded that Sonic's acquisition of Daikin's DVD business made perfect sense. Combining forces brought together a potent line of authoring products that crosses platform and market lines under one roof, and the Mac focus of Sonic's high-end Creator solution makes it a perfect complement for Daikin's Windows NT-based Scenarist. Both companies' low-end consumer offerings-Sonic's DVDit! and Daikin's ReelDVD-don't really step on each other's toes either, with DVDit! sold primarily through bundling and integration channels and ReelDVD a predominantly aftermarket tool (and a fuller-featured one at that. By most accounts, the merger stands to benefit consumers and investors alike.

The merger also brought to light some private maneuverings at Daikin over the last several months. Daikin International isn't just a DVD company; it isn't even primarily an electronics company, given that much of its business comes from selling products ranging from air conditioners to vacuum cleaners to flourochemicals. Daikin's DVD products has to date been produced and marketed by Daikin's US Comtec Laboratories. This shouldn't be news to anyone in the DVD field, but the company's best-kept secret of late has been its relationship with Jim Taylor, author of the popular DVD Demystified, who joined Daikin in July 2000 as CTO for DVD. As Taylor has recently explained, his primary role at Daikin was to establish its DVD business as a discrete unit within the company, which among other things could prepare it for selling off. The idea of a merger with Sonic emerged as a likely consequence almost immediately. Indeed, Sonic's acquisition is purely of Daikin's DVD business unit, including the full authoring solution line and related employees. Among them is Jim Taylor, who comes on board as Sonic's new chief of DVD technology.

Though the merger will likely have a profound long-range effect on the authoring market, its immediate impact is not earth-shattering. The companies have consolidated their American staff at Sonic's Novato, California headquarters (just across town from Daikin's DVD business headquarters), and plan to market both DVD Creator/DVD Fusion lines and Scenarist, now known as Sonic Scenarist, through the same channels. New releases include Sonic Scenarist 2.5, and DVD Creator version 2.2.

According to the SEC 8-K filing on the merger, the sale of Daikin's DVD business brought the company 395,000 shares of common stock and 700,000 shares of preferred stock in Sonic Solutions. In the weeks surrounding the merger, Sonic stock has ranged in value from $1.50 to $2 per share, which values the transaction at $1.6-2.2 million. Daikin will retain control of Japanese distribution and sale of its products for a 14-month period following the announcement of the merger.

Sonic director of marketing communications Paul Lefebvre says there are no present plans to merge free-standing products, since both Scenarist and DVD Creator have unique features and functions. Current changes will involve merely adding enhancements and improving applications. But in time, the company may combine superior aspects of separate products, he adds.

Lefebvre says that the merger, in the works for some time, made sense in light of Sonic's desire to expand its Windows line into the professional authoring market. "Sonic has always been focused on delivering cutting-edge DVD production solutions," he says. "We believe that this merger gives Sonic a commanding presence in the professional DVD market with a cross-platform product line that extends from home to Hollywood."

Lefebvre said the companies' longstanding ties have help edthe merger avoid stumbling blocks as the two ventures join forces. "We have had a long relationship with the Daikin DVD team, both as collaborators and competitors. We understand their business and they understand ours," he notes. "The greatest challenge has been remembering that all of the products are part of the same product line."

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