True Shared Growth Happens in the Free Market

[Market Economy Op-Ed] Kontakt, the Virtual Instrument, a Good Precedent for Mutually Beneficial Growth Without Government Intervention

For mutually beneficial growth between large and small and medium-sized firms, there must be shared interests that give each side reason to help the other

Mutually beneficial growth that coerces cooperation should be scrapped

One of the things the Moon Jae-in administration has emphasized is win-win cooperation and mutually beneficial growth between large corporations and small and medium-sized enterprises. The argument is that if either large firms or SMEs pursue business with only short-term profits in mind, they may threaten the corporate ecosystem, making mutually beneficial growth through win-win cooperation necessary. But what exactly is this “corporate ecosystem”? What constitutes a desirable ecosystem is left entirely to the government’s judgment. As a result, when the government steps in to create an environment for win-win cooperation, it may actually disrupt the corporate ecosystem by forcing cooperation even where it is unnecessary.

There is, however, a market where mutually beneficial growth through win-win cooperation has been realized without active government intervention: the virtual instrument market. Virtual instruments are so important today that they can be considered the foundation of the music industry. This is because almost all music is now produced using virtual instruments. Among them, Kontakt, developed by Native Instruments (NI), is especially well known. It is no exaggeration to say that there are now almost no composers who do not use Kontakt. Kontakt itself is the protagonist of a compelling story of mutually beneficial growth.

Kontakt differs quite significantly from other virtual instruments. Other virtual instruments can function as instruments on their own within a computer, but Kontakt becomes an instrument only after loading what is called a “library.” One might ask why anyone would choose such an inconvenient method, but this is precisely where Kontakt’s potential lay. Other existing virtual instruments were already instruments in themselves, so there was no unified standard and they were not compatible with one another. As a result, trying to use multiple instruments at the same time placed a heavy burden on computers due to excessive processing demands.

Kontakt solved that problem by becoming not an instrument itself but a platform that contains instruments. It could load multiple libraries with a unified standard simultaneously, and the computer needed only to process Kontakt-related operations. Thanks to this, composers could use as many different instruments at once as they wanted without worrying about overtaxing their computers. As Kontakt gradually gained popularity because of this convenience, its position as a mainstream virtual instrument became firmly established as a variety of libraries were developed.

This also lowered barriers to entry for new firms in the virtual instrument market. It had been quite difficult to develop ordinary virtual instruments and compete with established firms armed with advanced technology, but Kontakt libraries could be developed relatively easily even without high-end technical expertise. As more composers came to use Kontakt, new firms could survive in the market even by adopting a strategy focused solely on developing Kontakt libraries. In fact, as firms emerged that specialized only in developing Kontakt libraries, advances were made in areas such as tone quality and realism. This was possible because the effort that would otherwise have gone into programming could be devoted elsewhere.

NI has grown by coexisting and cooperating with numerous SMEs devoted to developing libraries that run on its Kontakt platform. It mainly collaborated with companies with strong recording technology to develop realistic virtual instruments. For NI, what was profitable was not crushing smaller firms with good technology and growth potential, but helping them develop even better libraries. These conditions were not artificially created by the government.

For truly meaningful mutually beneficial growth to be possible, both SMEs and large corporations must have reasons to help one another. NI and the companies developing Kontakt libraries had a shared interest in actively helping each other produce better libraries. But government plans tend to show an inclination to reorganize relations between large firms and SMEs according to government intentions, without considering whether such shared interests exist. If artificial relationships are created in this way where there is no common interest, can cases like NI really emerge? If the government truly wants an ecosystem of mutually beneficial growth, then plans for mutually beneficial growth that force cooperation should be scrapped.

Youngjun Kim, CEO of SFL Korea

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Original title: 진정한 동반성장은 자유시장에서 이뤄진다

Author: Young-jun Kim

Date: 2020-01-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=23&idx=22325