Music Streaming Battle Looms, Apple To Buy Shazam, As You Tube Takes On iTunes
As the music streaming market heads to a new era with High Res Audio set to take centre stage next year Apple is tipped to buy out Shazam for $700 m while Spotify and China’s Tencent Music Entertainment will buy minority stakes in each other, Google is also tipped to roll out a new YouTube audio streaming service.
The move comes as both smartphone and network audio manufacturers look to launch new UHD Audio products next year with CES set to be a platform for several new product launches.
According to sources Apple is finalizing a deal to acquire Shazam, the app that lets you identify songs, movies, and TV shows from an audio clip.
For Apple, the obvious benefit of acquiring Shazam is the company’s music and sound recognition technologies. It will also save some money on the commissions Apple pays Shazam for sending users to its iTunes Store to buy content, which made up the majority of Shazam’s revenue in 2016, and drove 10 percent of all digital download sales, according to The Wall Street Journal.
Another option is that Apple shuts down the service to hurt Spotify and Google’s Play Music service as well as their new YouTube audio streaming service.
Currently Shazam sends over 1 million clicks a day to music streaming sites, Shazam also has a deal with Snapchat. It’s unclear how the acquisition will affect any of these agreements.
The Verge claims that the real benefit for Apple may come from Shazam’s augmented reality tech.
The technology lets users scan magazines, books, posters, advertisements, and other physical products which could then launch 3D animations, product visualizations, and 360-degree videos. If Apple wanted to, say, build its own version of Google Lens, this could be a good place to start. It would also build on the company’s existing ARKit efforts, which have made iOS a leading platform for AR developers.
With over 1 billion downloads, Shazam has been popular in its nearly 19 years of independence, but the company only pulled in $54 million in revenue in 2016, while losing $5.3 million in the year was a signal it still had a long way to go. Now as a part of Apple, turning a profit won’t be an issue.
It’s also been revealed that YouTube plans to introduce a paid music service in March, according Bloomberg.
The new service could help appease record-industry executives who have pushed for more revenue from YouTube. Warner Music Group, one of the world’s three major record labels, has already signed on, said the people, who asked not to be identified discussing private talks. YouTube is also in talks with the two others, Sony Music Entertainment and Universal Music Group, and Merlin, a consortium of independent labels, the people said.
Paid services from Spotify and Apple Music have spurred a recovery in the music business, which is growing again after almost two decades of decline.
Yet major record labels say the growth would be even more significant if not for YouTube, which they criticize for not compensating them enough, considering how much people use the site to listen to tunes. Music is one of the most popular genres of video on YouTube, which attracts more than a billion users a month.
YouTube hasn’t had the same success as Apple or Spotify in convincing people to sign up for its paid music services, though it’s not for lack of trying. Google introduced audio-only streaming service Google Play Music in 2011. YouTube Music Key came along in 2014, giving subscribers ad-free music videos. That morphed into YouTube Red in 2016, letting users watch any video without advertising.
YouTube must overcome several hurdles to meet a March target. Not only has YouTube been trying to negotiate new deals with Universal and Sony for more than a year, but it also has talks with Vevo looming early next year. Vevo, owned by Universal and Sony, distributes music videos for their acts.
Though the music industry had hoped Red would be devoted to music, YouTube has positioned it as a home for original video projects like science-fiction comedy “Lazer Team” and a reboot of “The Karate Kid.”
YouTube hired former Warner Music executive Lyor Cohen last year to help oversee its music operations and serve as a liaison to the record business. Google folded much of the staff for Google Play Music into YouTube earlier this year, and Cohen announced plans to create a new paid service.
At the same time Spotify and China’s Tencent Music Entertainment will buy minority stakes in each other, the companies have said.
Neither the value of the deal nor the new shareholding sizes were disclosed, but reports have suggested they will both be taking a 10% stake.
Tencent Music Entertainment’s owner, Tencent Holdings, will also separately buy a minority stake in Spotify.
Spotify launched in 2008 and now provides music streaming to 140 million users globally, of which 60 million pay for its premium advertising-free subscription.
The deal gives Spotify exposure to the Chinese music consumer market, as the country is not one of the 61 regions it currently operates in.
The company is widely expected to list its shares on the stock market next year.
Although the details of the deal are unclear, it sends a signal to investors that Spotify is thinking hard about its strategy in China, said music industry analyst Mark Mulligan, managing director at MIDiA Research.
“China is very much a missing link for Spotify,” he said. “As it progresses towards a public listing, that’s really a box it needs to have ticked to convince investors it really is a global player.”
Tencent Music Entertainment owns music streaming companies QQ Music and KuGou, which have a combined monthly user base of 450 million people.
Its parent company is one of China’s internet giants, known for the WeChat app and investments that include online gaming.
Mr Mulligan said working with TenCent mitigates some of the risks Spotify would face making a solo push into the tricky Chinese market.