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EC opens “in-depth” investigation into Apple-Shazam deal

Written by NatTech staff
23/04/18

The European Commission has begun what it says is in depth investigation into Apple's proposed plans to acquire music-recognition service Shazam. At stake is the issue of “commercially sensitive data” about customers.

The EC’s concerns centre around whether the deal would result in less choice by European consumers if the deal was to go ahead. Concerns stem from Shazam's strong market position in the music recognition apps market and Apple's market position in the music streaming services market.

The commission is also worried about Apple's access to "commercially sensitive data" about what people are listening to on rival apps, which Apple might then be able to use to target those users and bring them over to Apple Music. As a result, the Commission thinks competing music streaming services could be put at a competitive disadvantage.

Shazam offers the leading music recognition app for mobile devices in the European Economic Area (EEA) and worldwide. Music recognition applications allow consumers to recognise music based on a short audio sample by using microphones built into their mobile devices. The UK-based company, formed back in 1999, mainly generates revenues from online advertising, and commissions earned on referrals of users to digital music streaming and download services, such as Apple Music, Spotify and Deezer.

"The way people listen to music has changed significantly in recent years, with more and more Europeans using music streaming services," said commissioner Margrethe Vestager in a statement.

"Our investigation aims to ensure that music fans will continue to enjoy attractive music streaming offers and won't face less choice as a result of this proposed merger," said Vestager, who is in charge of policy that pertains to issues of competition.

The logic for Apple, should the acquisition be approved, is that it will be able to bundle Shazam with its own products, open up a new user base and take out a potential rival on top of that. Moreover, Shazam's technology has proven to work well, as has its business model - after all, Apple would not be paying $400 million if anyone could do what Shazam has built up and done. Apple bought Dr Dre's Beats in 2014 but has chosen to buy any streaming services in its time, opting instead to build its own Apple Music offer.

“While at this stage the Commission does not consider Shazam as a key entry point for music streaming services, it will also further investigate whether Apple Music's competitors would be harmed if Apple, after the transaction, were to discontinue referrals from the Shazam app to them,” the commission added in its statement.

European Commission decided to investigate the deal following requests from Austria, France, Iceland, Italy, Norway, Spain and Sweden. The Commission now has until 4 September 2018, to take a decision.