Listen to this article
Give us your feedback Thank you for your feedback.
What do you think?
Apple is close to buying Shazam, the British music-recognition service behind one of the world’s most popular mobile apps, in a deal that could help to bolster the iPhone maker’s music streaming service.
People familiar with the matter said the deal, which would value London-based Shazam in the hundreds of millions of dollars, could be announced as soon as next week.
The acquisition would be among the largest-ever deals for both Apple and London’s consumer technology market, at a time when Britain’s forthcoming exit from the EU has cast a potential cloud over UK start-ups’ ability to recruit and raise funds.
A price running into the mid-hundreds of millions of dollars would be a high valuation for a company that reported revenues of £40.3m and pre-tax losses of £4m for the year ending in December 2016.
Nonetheless, it is below the $1bn at which Shazam was valued in a 2015 fundraising. That could mean a sale now would disappoint its investors, which include Silicon Valley venture capitalist group Kleiner Perkins Caufield & Byers and Institutional Venture Partners, music labels Sony and Universal, as well as Carlos Slim’s telecoms group America Movil.
Apple declined to comment. Shazam did not respond to a request for comment. The proposed deal, first reported by TechCrunch, may require regulatory approval before completion.
Shazam, which began as a text-message-based service in 1999, long before the advent of the smartphone, is able to match just a few seconds of audio to its vast archive of songs. With more than 1bn downloads of its mobile app across both iPhones and Android smartphones, Shazam has used its vast network of mobile devices to launch advertising partnerships, augmented-reality applications and even a US television game show hosted by actor Jamie Foxx, called Beat Shazam.
Apple does not often make nine-figure acquisitions, preferring to buy smaller start-ups with specific technologies or talent. However, as its blockbuster $3bn purchase of music streaming and headphones company Beats in 2014 showed, Apple is prepared to pay up if it sees a strategic advantage or needs to accelerate the launch of a new product in response to competitive pressure.
Earlier this week, it emerged that Apple had bought a small podcast search company, suggesting that it is working to improve its audio services as it faces rising competition from the likes of Amazon and Spotify.
Carolina Milanesi, analyst at Creative Strategies, said that Shazam could help solve what she called Apple’s “discoverability problem” — helping users to find new things to listen to.
But Ms Milanesi also said that Shazam’s underlying audio technology could help to improve Siri, the iPhone’s virtual assistant.
“To me, this speaks more to AI than it does to the music service,” she said. “It’s a great example of an ambient computing company. It is sensing your environment.”
An outright purchase could allow Apple to integrate Shazam’s technology more deeply into its iOS operating system at a time when mobile devices are gaining new sensing capabilities, such as the iPhone X’s TrueDepth camera.
Google’s latest Pixel 2, which launched in October, and its Assistant already include the ability to passively listen in to music around you and identify the song.
Apple and Shazam have worked together for several years, including integrating the music recognition feature into Siri and linking with Apple Music. But Shazam also has partnerships with Snapchat and Spotify.
In an interview with the Financial Times in September, Shazam chief executive Rich Riley said that he was considering an initial public offering in the future but hinted at a possible sale. Shazam last year became profitable on the basis of earnings before interest, taxation, depreciation and amortisation.
“We haven’t stopped investing . . . But we think we with a nice balance sheet and operating at or near break-even that gives us a lot of control over our own destiny,” Mr Riley had said. “Whether that’s the IPO track or partnering with a larger platform, we’ll see what the future holds.”