As Spotify continues to inch towards a public listing, Apple is making a move of its own to step up its game in music services. Sources tell us that the company is close to acquiring Shazam, the popular app that lets people identify any song, TV show, film or advert in seconds, by listening to an audio clip or (in the case of, say, an ad) a visual fragment, and then takes you to content relevant to that search.
We have heard that the deal is being signed this week, and will be announced on Monday, although that could always change.
One source describes the deal as in the nine figures; another puts it at around £300 million ($401 million). We are still asking around. Notably, though, both of the numbers we’ve heard are lower than the $1.02 billion (according to PitchBook) post-money valuation the company had in its last funding round, in 2015.
In all, Shazam has raised $143.5 million from investors that include Kleiner Perkins, London’s DN Capital, IVP and strategic investors Sony Music, Universal Music and Access Industries (which owns Warner Music).
Shazam last noted that it passed 1 billion downloads, but that was back in September 2016, meaning those numbers are likely higher now.
But in the world of apps, high numbers do not always translate into profits: In September 2017, Shazam reported made £40.3 million ($54 million) in revenues in its 2016 fiscal year, which was a turnaround from the declines between FY 2014 and 2015. It made a statutory pre-tax loss of £4 million ($5.3 million) in 2016, which was still a loss but significantly smaller than the £16.6 million loss in FY 2015.
The company’s CEO Rich Riley noted earlier this year, however, that operating at or near profitability is the intention as it’s been growing; and he also hinted that the company was, as a result, likely an acquisition target.
Shazam launched way back in 1999, well before the days of apps, as a service you reached by way of a SMS code — in fact, its first name was 2580, after the number you typed in the UK to access the service.
Since those early days, it’s launched a number of related services. Artists on Shazam lets you follow famous people and see what music they are Shazamming.
Its augmented reality brand marketing service lets you discover content based on pictures that you snap with the app. “You came for music, stay to experience McDonald’s Karaoke, MTN Dew VR Racing and much more,” is the company’s pitch on this feature.
It also integrates with other apps like Snapchat and Apple’s Siri, and it currently sends lots of traffic to other music apps like Spotify and Apple Music, which pays it when those clicks convert to purchases.
It’s not clear what will carry on post acquisition, and which of these might be something that Apple would integrate into its own business (and how), but it’s notable that much of what Shazam does is very synergistic with what Apple is working on already: AR, and more features to attract more users to the Apple Music platform.
Apple has made dozens of other acquisitions, and one of the biggest has been in the area of music: it acquired Beats for $3 billion in 2014, which became the basis for Apple Music. That service has around 30 million users as of September of this year. As a point of comparison, Spotify has over 60 million paying subscribers, with 140 million overall.
We’ve reached out to Shazam and Apple for comment. We’ll update this story as we learn more.
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