As Apple strives to boost iPhone X production in China to meet strong global demand for its latest flagship smartphone, the tech giant is also focusing on another important element in its business: Apple Music.
Signaling its aim to grow the streaming music service, the Cupertino-based company announced this week that it is acquiring a UK-based firm that operates the popular music-recognition app Shazam.
Apple didn’t disclose financial terms of the deal, but media reports have pegged the purchase price at US$400 million, making it one of Apple’s biggest acquisitions in years.
The acquisition of Shazam Entertainment makes sense for many reasons, the most obvious being that it could help Apple boost its music subscription service, whose user numbers currently lag far behind that of Spotify.
Apart from its song-identifying software, Shazam is a valuable asset because of the huge amount of data it has gathered, and continues to collect, about people’s music tastes and related information.
By using the data smartly, Apple can put together better playlists on its music streaming service and offer more curated content, which can help lure more subscribers.
Besides these factors, the key attraction for Apple in seeking out Shazam could well be the app’s augmented reality (AR) capability.
Apple has made no secret about its ambitions in the AR space, with CEO Tim Cook describing the technology as more profound than virtual reality (VR).
Shazam lets users identify songs, movies, TV shows, and commercials from short audio clips. The app has been very popular among smartphone users on both iOS and Android platforms for more than a decade.
While it is known for song recognition capabilities, helping users identify unfamiliar songs, the app has also been building AR features.
The technology, for instance, allows superimposition of graphics over real-world images captured by a smartphone’s camera, as a BBC report noted.
This opens up possibilities for AR advertising tools and new revenue sources, including through AR glasses, which Apple is rumored to be working on.
It seems Apple has been preparing for the Shazam acquisition for a long time. The company had in the past integrated Shazam service into its Siri digital assistance service enabling Siri to identify music for iPhone users.
Now, with the purchase of the British app developer and software maker, Apple can ensure deeper integration of Shazam with the iOS platform to improve the user experience.
An Apple spokesperson said in a statement Monday that “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, and we look forward to combining with Shazam.”
Apple Music is one of the tech behemoth’s fastest growing services with more than 30 million paid subscribers, and has emerged as a growth engine. However, the user numbers are still only about half of that of Sweden-based music streaming service Spotify.
The Shazam acquisition suggests that Apple aims to do a lot of things to enhance Apple Music services and boost its subscriber base to catch up with Spotify.
The acquisition, incidentally, came just a few days after Spotify and China’s Tencent announced that they were forming a strategic partnership through equity investment in each other.
The partnership could help Spotify, the world’s largest streaming platform with more than 60 million users, in developing the Chinese market with Tencent support. Apple Music, on the other hand, may have to just focus on other markets.
Apple, which currently generates more than half of its revenue from the sales of iPhone devices, needs to explore another revenue stream to reduce its reliance on iPhone.
By prioritizing Apple Music, the company could better position itself to take advantage of a fast-growing market while simultaneously giving customers more reasons to keep buying its products.
Apart from the music identification feature, Apple is betting on Shazam’s visual recognition technology, which allows users to scan things like magazines, posters, and packaging material.
But the real focus of Apple could be Shazam’s capability in AR, which Cook has identified as a key tech application for the future.
AR works by examining, mapping and understanding the real world and then putting virtual objects on top of it.
Apple’s newly launched ARKit enables developers to integrate AR into their works, using the iPhone to get a highly detailed picture of the phone and its surroundings, and enable developers to put virtual objects on top of it.
Shazam has taken AR to the next level by using it as a marketing tool for advertisers. By scanning mini codes on the advertising material, Shazam users can unlock lots of special features from 3D animations to game and product visuals.
The company currently has a number of advertisers using its AR solutions, including names such as McDonald’s, Coca-Cola, Nestle, BMW and Marvel.
AR marketing solutions have a proven track record of luring customers and boosting the business of the clients. But all these were riding on the Shazam app’s huge installed base across the world.
If Apple kills the Shazam stand-alone app after the deal, and opts instead to embed the technology within the iOS ecosystem, it may not be a wise move, at least as far as the reach of AR solutions is concerned.
We’ll just have to wait and see what Apple does with its new acquisition and how its steers the integration.
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