Apple is buying Shazam for an undisclosed sum in the new year. With Shazam’s expertise in music recognition and Augmented Reality, this deal makes a lot of sense.

Apple reported they have 27 million Apple Music subscribers in June 2017. While in March, Spotify reported a subscriber base of 50 million. There’s no signs of this gap closing and as a result, Apple Music has been in the shadows of Spotify since they launched. Apple need a hook to entice Spotify users to make the switch.

Integration of Shazam could be the hook for many people to make the switch. Shazam’s music service has been incredibly popular with users since 1999. Their patented technology is used by more than 1 billion people, all over the world.

It’s not hard to imagine how this can be tied in to Siri at an operating system level.

Spotify acquired audio detection startup Sonalytic in March 2017. The terms were not disclosed for the London based startup. Shazam’s technology is widely recognised to be the best in the industry and with their latest valuation, we’re sure it was out of the question for Spotify.

Shazam have also recently entered the Augmented Reality market, applying the same use case in a visual way. Entering this market was based on many requests of Shazam’s partners who want to enhance their products in a visual and interactive way.

With Shazam’s technology and distribution, the augmented reality opportunity made a lot of sense. Shazam went on to invest heavily and now have proprietary Augmented Reality technology and use cases that make a lot of sense for Apple to own and integrate at an operating system level.

It’s not the first time Apple and Shazam have flirted with the idea of working together. It was reported back in 2014 that the two were working together to integrate Shazam’s technology at an OS level.

Most of Apple’s Augmented Reality technology to date has been a series of acquisitions including Flyby Media, Metaio, Perceptio, Emotient and PrimeSense.

Our source says Apple and Shazam are currently working out the final details of the deal and are expected to complete it just after Christmas.

Given Shazam is a profitable business that was valued at $1 billion in 2016, we expect this deal to be significant. Perhaps bigger than Beats.

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