Apple (NASDAQ: AAPL) has confirmed today that it has acquired Shazam, a music recognition and augmented reality app. The application listens to clips of music and then matches them with corresponding clips from its massive database, allowing users to identify songs that they might hear in passing in everyday life. The deal has been valued at approximately $400 million, which is a large drop from the roughly $1 billion that the app was valued at during the last funding round. Still, the deal is one of Apple's largest acquisitions to date, second only to Beats, another music-based company Apple bought for $3 billion in 2014.
In a company statement about the deal, Apple spokesperson Tom Neumayr said, "We are thrilled that Shazam and its talented team will be joining Apple. Since the launch of the App Store, Shazam has consistently ranked as one of the most popular apps for iOS... Apple Music and Shazam are a natural fit." Shazam spokesperson Giovanni Bossio echoed this sentiment: "Shazam is one of the highest rated apps in the world...and we can't imagine a better home for Shazam to enable us to continue innovating and delivering magic for our users."
The catalyst for the deal was an ongoing interest by Snapchat (NYSE: SNAP). The company was open to discussing a possible acquisition due to its already highly successful integration with Shazam's music recognition technology. However, due to Snapchat's rocky start on the stock market after its IPO, the company's buying power was questionable. Spotify likewise could not proceed with a deal due to the price. Eddy Cue, Apple's senior vice president of Internet Software and Services, saw in Shazam an opportunity to shore up Apple Music, which is a main competitor of Spotify. Shazam already allows users to buy music directly through iTunes, and Cue believes the app can be built upon to allow users to discover more variable music-related content.
That Snapchat and Spotify expressed interest in acquiring Shazam themselves is not surprising. Shazam was one of the first wildly popular apps on iOS, and is used across multiple platforms by hundreds of millions of people around the world. Conveniently for Apple, Shazam is already well integrated into Siri, Apple's voice assistant. However, the technology that Shazam utilizes has potential to be used for a number of purposes across Apple's products. It could help augment Apple Music, which when combined with Spotify receives over one million clicks daily. If Apple chooses to shut down Shazam, it would take away those referral clicks from Spotify as well. One other very plausible outcome of the acquisition is that Apple may try to create a music identification feature similar to what Google (NASDAQ: GOOGL) created for its Pixel 2 smartphone, which perpetually scans the world for music, and shows its users any songs that are currently playing directly on its lock screen. By incorporating something similar with Shazam's technology, Apple would prevent its own smartphones from lagging behind Google's product innovation.