Apple is acquiring audio recognition company Shazam for a reported $400m, which would make it one of Apple’s biggest investments to date.
There are a few different reasons why Apple has decided to spend part (albeit a tiny part) of its enormous war chest of cash on Shazam. The most obvious is that Shazam can help Apple develop its Apple Music business. Shazam’s main business model is taking commissions for referring consumers to different music services when they use the service to identify a song. Taking Shazam into the Apple ecosystem would have the double benefit of both saving all the commissions that Apple currently pays to Shazam and give it the ability to shut off referrals, should it wish to, to Spotify and Google Play Music, which the WSJ puts at about 1m referrals per day.
The $400m could also be used to take advantage of Shazam’s new augmented reality platform, which allows brands to create experiences when users scan magazines, posters etc. It would be a good addition to Apple’s ARKit. Maybe we’ll see some of Shazam’s tech in Apple’s much rumoured but as yet unlaunched AR Glasses too?
As with any deal of this kind what Apple is also buying indirectly is data. Lots and lots of data on Shazam’s users that has been developed over a ten-year period. Spotify’s ability to match users to different genres of music and hold data on musical tastes is something that Apple would want. Buying Shazam gets Apple instant access to that data, which can then be put to work across all the different parts of Apple’s ecosystem, from Beats radio to the iTunes store.
The acquisition could also be used to help Apple enhance Siri its core phone business. The newly launched Pixel 2 phone from Google has a feature that uses a similar technology to Shazam to identify songs that it ‘hears’ and then displays the song details on the phone’s screen…even without an internet connection. With music becoming an increasingly important part of every digital platform’s strategy, Apple can leapfrog the competition and use Shazam and its technology to develop new services – a very Apple thing to do, not to be first into the market, but to do it better than the rest.
One last thing…Homepod. With the battle for control of the home’s entertainment and utility service well and truly on, with Apple’s launch of Homepod, Amazon’s Alexa and Google’s Assistant, the acquisition of one of the world’s best known and used audio recognition technology could make a big difference. It wouldn’t be surprising to see Shazam’s technology integrated into Apple’s Homepod soon.
Whether reducing costs, blocking competition, buying music consumption data, adding AR technology or beefing up its audio capabilities as the global voice battle hots up, it looks like a good deal for Apple. Reports suggest both Snap and Spotify were also interested in buying Shazam before Apple moved, so we may also be about to see a rush on AR / Audio technology companies as the major platforms add capabilities ahead of a new voice / AR battleground.