It’s Sunday afternoon and it’s raining outside. You want to relax at home watching a classic, and you go for Quentin Tarantino’s Kill Bill. In one scene there’s a song you fall in love with, so you quickly grab your phone and get Shazam to recognise it. “The Flower of Carnage” by Maiko Kaji is quickly added to your Spotify playlist ready for listening tomorrow during your daily commute.
Millions of Shazam users have used it for things like this.
Chapter 1: The transaction
Like with Facebook’s acquisition of WhatsApp or Microsoft’s merger with LinkedIn or Skype yet another American giant buys a smaller company providing a popular consumer service for the sake of strengthening its market power. The European Commission is screening the acquisition of Shazam by Apple. According to media reports, the tech giant has paid $400 million for the UK-based company.
Apple owns the popular iTunes store and the music streaming service Apple Music. Both services are available across platforms and devices through different app stores and can be accessed in most operating systems.
The purchased company, Shazam, allows consumers to recognise songs (played on the radio, in a shop or on TV), purchase them or play them using different options proposed by the application like Deezer, Spotify and, of course, Apple music.
This merger would put Apple in a better position vis-à-vis its rivals concerning Shazam as a) an entry-point for new customers and b) a source of data to better target such customers. BEUC recommends that the merger is not approved without conditions. This would ensure that Apple will not use Shazam as a means to create anti-competitive advantages over rival service providers.
Shazam is growing fast. And this has attracted the interest of companies like Apple since this application is becoming an entry point for many consumers to access music streaming services online.
And it promises even more. Shazam started offering its music recognition services through Samsung smart TVs, which enable consumers to identify music while watching TV and then access the music pieces via “streaming partners, including Spotify, Napster and Deezer, for those who subscribe to these services”.
Chapter 2: The online music services market
There is currently a wide range of online music services allowing consumers to stream or download music online. BEUC’s members carried out several tests of the legal offers for downloading and streaming offered in different national markets. These assessments showed that this is a fast-growing sector where consumers can choose between a wide range of services with distinctive features, catalogues and prices.
For example, consumer groups Altroconsumo (Italy), Test-Achats (Belgium), Stiftung Warentest (Germany), OCU (Spain) and UFC-Que Choisir (France) have analysed different music streaming and downloading services available in their respective national markets showing a wide range of pricing models (including freemium and advertising-based offers and prices that ranged from 4,99 EUR to 19,99) and features (e.g. number of accounts available, high-quality depending on the usage features e.g. number of accounts available per subscription, high-fidelity quality etc.
These tests showed the variety of services that consumers can choose from within each Member State according to their own needs and expectations. This is what a thriving and competitive market looks like and it is important that this market continues to evolve providing consumers with competitive offers.
Giving the popularity of services like Shazam allowing consumers to discover music through different technologies and with the online streaming music market thriving in Europe, one cannot avoid wondering: what can go wrong if Apple, a company active in the market of online music services, buys a company that is used by consumers to access Apple’s own music services and also those of Apple’s competitors?
Chapter 3: The consumer concerns on the transaction
The acquisition of Shazam, used by more than 120 million consumers each month and growing strongly, by Apple raises serious concerns from a consumer viewpoint:
- If the Commission would clear the acquisition without any conditions Apple could make it difficult for consumers to pair a music streaming or downloading app other than Apple Music or iTunes with Shazam. This would make it almost impossible for consumers to use Shazam in conjunction with any music apps other than Apple’s own.
- When users of Shazam want to subscribe to a music streaming service, Apple might direct these potential new customers to its own (e.g. iTunes or Apple Music) services and at the same time make it more complicated to access competing offers.
- Apple has allegedly deployed anti-competitive practices towards rival online music services in its own AppStore, making it more difficult for providers like Spotify or Deezer to compete on their own merits with Apple Music. If the merger is cleared without any conditions, nothing prevent Apple from expanding the same practice to Shazam.
- Since Shazam also gathers consumers’ data concerning music preferences, this could enable Apple to take advantage over competing services by, for example, providing tailored products to attract new customers to Apple Music. Competitors will not have the same possibilities because they do not have access to such data. This could result in competitors not being able to bring better offers to consumers and compete on the merits for the consumer’s trust.
Last Chapter: BEUC recommendations
The market of online music services is flourishing in Europe. And we must keep it that way. This merger would put Apple in a better position vis-à-vis its rivals concerning Shazam as a) an entry-point for new customers and b) a source of data to better target such customers. BEUC recommends that the merger is not approved without conditions. This would ensure that Apple will not use Shazam as a means to create anti-competitive advantages over rival service providers. For example, it should not tie Shazam to Apple services. Competing services must be able to access consumer data in order to compete on the merits with Apple.
What can go wrong if Apple, a company active in the market of online music services buys a company that is used by consumers to access Apple’s own music services and also those of Apple’s competitors?
Not all of us are music-savvy like Quentin Tarantino. Consumers rely on services like Shazam, Spotify or Apple Music. And this variety of services should remain just that: a healthy variety.
 According to the company’s own statement: “Shazam connects more than 1 billion people. It took us 10 years to reach 1 billion tags, 10 months to reach 2 billion, 3 months to go from 10 to 12 billion...”
 Altroconsumo 278, February 2014
 Test-Achats 612, October 2016
 Stiftung Warentest 9/2006
 OCU, November 2016
 UCF-Que Choisir, 529, October 2014