Serato chief strategy officer Nick Maclaren (left) and CEO Young Ly. Though little-known in NZ, the 160-strong Serato dominates the global market for DJ software. Photo / Dean Purcell
After almost three years of global pandemic, you might have expected to find the managers of Serato - the Auckland-based maker of the world's most popular software for live DJs - a gibbering mess.
Instead, they've been growing revenue (already around $30 million pre-Covid) and hiring. Their now 160-strong company is about to upgrade to flash new offices created by Ponsonby Central developer Andrew Davies.
And this week the firm is opening its public beta of a new feature called "Stems" that will allow the 600,000 monthly active users of its US$9.99/month DJ Pro software to separate a song into its individual components in real-time (it will soon be added to Serato's US$11.99/month DJ Essentials and DJ Suite too.) All up, 2.2 million people worldwide now use its software.
Chief executive Young Ly and strategy head Nick Maclaren see Stems boosting the uptake of their software, and potentially being another huge global hit for Serato with a world-first technology.
Serato numbers the world's top DJs among its customers, and most of them play contemporary music. But, perhaps mindful of this reporter's age and lack of hip, Maclaren illustrates Stems by playing Easy Lover by Phil Collins.
He starts by playing the full song, then after a tap, just the bass. Then he adds the drums, then plays just the vocals, then the full music track minus the vocals before mashing it into Fleetwood Mac's Little Lies, initially with just the drum track playing.
Serato giving me the tools I crave pic.twitter.com/vHw7AerdGF
— fcz (@FOURCOLORZACK) October 3, 2022
It will be a new tool in DJs' boxes, but Ly and Maclaren also see creative directors using it to experiment with ideas. TikTokers could use it to find new grooves. "This is going to explode mashup culture," Maclaren says.
If you've watched one of those making-of documentaries on great albums, you'll be familiar with the mandatory scene where a producer breaks down a song into its individual components. But they have the benefit of all of the original, individually recorded components at their fingertips on a giant mixing desk.
Stems comes in at the other end of the process, allowing a DJ to deconstruct any track in real-time into its individual components.
Maclaren says it's like taking a painting, then breaking it down to its individual colours, then placing them in a palette for a remix.
"The ability to separate audio has been a pipe dream for as long as I've been in the industry says," says Maclaren, who joined Serato in 2009.
The breakthrough now has come via machine learning, or AI that allows software to teach itself.
"For an old coder like me, it's almost like magic," says Ly, who during his prior role as innovation head for Air New Zealand helped usher in the age of algorithm-driven pricing with Grab-a-Seat.
Ly says he smells a hit because even Serato's developers and maths nerds - who don't always have a direct interest in DJing, are playing with it. Co-founder and director Steve West (who these days spends most of his time on his latest venture ChargeNet) stayed on after a recent board meeting to hit the decks with Stems. DJs from around the world who've road tested it over the past month have apparently raved about it.
While there are competing products, Ly says Serato's Stems is designed to be user-friendly for DJs rather than built for audio engineers.
And MacLaren says processing on local hardware - rather uploading a track to be processed - is also unique.
"For a DJ, you're not going to have that ability to do cloud computing on the fly in a club, where there's often bad broadband," he says. "You can't ship a song to the cloud then wait for 10 minutes. The big breakthrough with Stems is that you can throw a song at it, and within a couple of seconds it's ready to go."
Covid initially looked like a disaster for Serato, but in the end provided a rich vein of new revenue - and one funded the year-long development of Stems.
"At the very beginning, there was so much uncertainty that we might be in trouble, because every bar and club and party in the world was shut down," Ly says.
"But as it turns out, everyone who was stuck at home wanted to learn a hobby. So suddenly at the hobbyist end, our DJ usage and our music production usage took off."
Meanwhile pro DJs took to social media and streaming platforms to maintain their profile. Serato responded with new features to help them stream, plus a partnership with the Amazon-owned Twitch.
There was another scare as global supply chain disruption hit the DJ mixer hardware made by the likes of Pioneer, Rane, Roland and Denon, who all bundle Serato's software. But as different manufacturers in different countries were hit at different times, it was another bullet dodged.
Then there was a boom as the world opened up and people returned to clubs.
The upshot: revenue actually rose by around 10 to 15 per cent per year and Serato could, again, pay for a new product organically.
"We've been profitable since the beginning," Ly says.
The CEO won't reveal financials, but the Companies Office records the blunt evidence that Serato has been able to expand without ever taking on outside investment. Co-founders Steve West and AJ Wilderland (AJ Bertenshaw before a recent marriage) remain the major shareholders.
Serato had its genesis in the late 1990s varsity student West wanted to play along to recorded music to help him learn bass guitar. He wanted to slow down songs to make it easier to find his feet as a beginner, but discovered there was no software to change the speed of a track - at least, not without inadvertently shifting the pitch.
He teamed with fellow maths and computer science student Bertenshaw to create a DIY solution.
The result, Pitch 'N Time, became Serato's first product and, helped by a signature endorsement by director David Lynch, was adopted as an industry-standard product by film studios. It remains a Hollywood mainstay.
Pitch 'N Time continues to monopolise its Hollywood niche even as Serato went to release the DJ software that gave it broader success as it was adopted by the likes of Fatboy Slim and Jazzy Jeff, and name checked in lyrics by Kanye West and Eminem.
"It's interesting for us because we've gone full circle. First AJ cracked Pitch 'n Time and then DJ was so successful for us we followed as a business," Ly says.
"Now this is us going back to our roots which is audio research - how to we solve really hard audio problems to help customers achieve what they want to do in audio."
With many Big Tech companies now mandating a return to the office, the "new normal" is starting to look a lot like the old normal.
Not so with Serato, where staff now get to choose where they work.
"During the first lockdown, we went fully remote and we proved that we were productive," chief executive Young Ly says.
"Then it was about the finer points. How do we keep the culture that we love, how do we solve disputes?"
With those elements resolved, "We're going to stay with a fully hybrid setup, which means basically means for me that our staff get to choose if they work from the office or home," Ly says.
The policy has given employees more flexibility about where they live.
One Serato staffer told the Herald he's bought a home in Auckland's northwest - far enough from the CBD for homes to be a bit more affordable.
"We've got people migrating further and further away. I truly believe this is how we let young people buy houses," Ly says.
"It's also allowed us to access to tap the global talent pool.
"So we've got some new people in the US now, and our new brand officer is actually based in Melbourne."
"I probably wouldn't have tried it pre-pandemic, because I wasn't sure if, as a whole, we could be more productive, but we've proved we can be.
"I'd say pre-Covid, for tech, working from home was a bit of a niche perk. Post-Covid, it's a valid lifestyle choice."
'I can imagine people being outraged that TVNZ signed a deal with me.'