Why Apple is buying Shazam now after years of declining popularity
Shazam was one of the earliest smartphone apps to capture the public's attention. Its simple yet useful function - identifying a song that's playing on the radio or elsewhere - has earned it more than 1 billion downloads since it was released for the iPhone in 2008.
But it's popularity has dropped off in recent years. On Tuesday, it was ranked 92 on the Apples iTunes most downloaded apps chart, and it didn't even crack the top 100 apps in the Google Play Store.
Even so, Apple announced Monday that it's purchasing Shazam. Neither Apple nor Shazam disclosed the purchase price, but Tech Crunch, Recode and Bloomberg put it at around $400 million, citing unnamed sources. If that's the case, it would be one of the priciest acquisitions in Apple's history.
"We are thrilled that Shazam and its talented team will be joining Apple," a spokesperson for Apple said in a statement obtained by the Verge. "Apple Music and Shazam are a natural fit, sharing a passion for music discovery and delivering great music experiences to our users. We have exciting plans in store."
The company didn't explain the nature of those plans. Several analysts speculated that the app's value may not lie in its function of identifying music or the technology underlying it, but in the data the company has collected over the past decade and a half.
That database is substantial. The company began offering music recognition software in 2002, years before the iPhone even existed. It was only available at first to users in the United Kingdom, who would dial "2580" and hold their cellphones up to music. After a few moments, Shazam would send a text message containing the song's artist and title.
By the time it released an iPhone app in 2008, Shazam already had six years of data under its belt.
"The only reason they've been successful is they've done it for years, and they've got a strong install base of customers," Daniel Ives, head of technology research at GBH Insights, told the Los Angeles Times. "For Apple, it's about buying that customer base and data."
That data could help Apple compete with companies like Spotify, which curates playlists of new music for its subscribers based on what they're listening to.
"Spotify has made the discovery of new music front and center of what makes it a compelling proposition," Mark Mulligan, an analyst with Midia Research, told the BBC. "Apple just doesn't have the same amount of data about listening tastes as Spotify, meaning it can't drive recommendations with as high a degree of accuracy and precision. Shazam essentially gives it a shortcut to having a massive database."
In fact, Spotify was interested in buying the company but couldn't afford it, Tech Crunch reported.
Currently, Shazam has partnerships with both Apple and Spotify. Spotify sends about a million referrals to each of the competing companies every month, according to TechCrunch.
The acquisition is in keeping with Apple's ambitions in the music industry.
The company arguably changed the music industry in 2001 with the release of iTunes and the first iPod. The company continued investing heavily - most notably by acquiring Beats Music and Beats Electronics, a headphones and speakers company combined with a streaming service founded by rap mogul Dr. Dre and producer Jimmy Iovine. The price was $3 billion in 2014.
The next year, it launched Apple Music, a music-streaming service and live radio station akin to Spotify and Pandora. The service has since gained more than 27 million subscribers, the Associated Press reported. That's less than half of Spotify's user base of more than 60 million.
Shazam could be a way for Apple to catch up. As Ives told the Los Angeles Times, "They're putting more fuel in their gasoline tank."