Apple Buys Shazam for $400 Million – Apple acquired Shazam in the range of $400 million “as part of its bigger ambitions in the music business.” Shazam is a music recognition and discovery tool that has hundreds of millions of users and over 1 billion downloads. Snapchat and Spotify were also in talks to buy Shazam. Apple views Shazam as a mechanism to grow Apple Music. The music tech industry continues to consolidate, primarily from acquisitions by the tech giants. The five largest companies in the world (by market cap) are investing billions into music tech in order to gain a competitive advantage over the rest of the pack. We expect this trend to continue through 2018 and beyond.
YouTube to Launch Music Subscription Service to Compete with Spotify – YouTube plans to introduce a paid music service in March 2018 in order to compete with Spotify and Apple. The tech giants are competing for market share in the growing multi-billion dollar industry. The future of music will be built around digital distribution and Apple, Google, Amazon, Facebook and Tencent are all positioning themselves for market dominance. The tech giants understand the value of music and its ability to attract users to a broader global ecosystem. This is why Amazon gives away music streaming so users register for Amazon Prime. Now YouTube and Google and throwing another punch in the fight for world domination.
Tencent and Spotify Swap 10% Equity – It’s official! Tencent’s overseas investment splurge continues after the company confirmed a deal with Spotify that will see the duo make investments in each other. Tencent and Tencent Music Entertainment will both make an undisclosed minority investment ahead of Spotify’s IPO. Spotify will make an equity investment into Tencent Music Entertainment, ahead of their expected $10 Billion IPO in 2018. Tencent is Asia’s first $500 Billion company by market cap and Spotify is the world leader in paid music streaming subscriptions – Both companies will utilize capital raised in the public markets in order to fund strategic investments and acquisitions.
Kobalt Acquires Song Music Catalogue for $160 Million – After a three-month auction that attracted 14 bidders, SONGS Music Publishing sold its catalogue to Kobalt Capital’s fund, where it will be administered and serviced by Kobalt Music Publishing. Music catalogues are currently going for 10-15 times net publishers share (gross profit).
Apple Killing Downloads by 2019 – The end of an era is coming in 2019. Music downloads forever changed the world of music and helped to move consumers from physical (CDs, cassettes, etc.) to digital distribution. Prior to downloads, music consumers were forced to pay $15 for a CD that contained 2-3 songs the consumer actually wanted. Apple introduced the iPod and iTunes which allowed users to pay $0.99 for just the songs they wanted to hear. Now streaming allows the world to rent virtually unlimited music catalogues for $10 per month. Apple is transitioning from selling music to renting music to consumers. The company that brought music downloads to the world is closing the door and with that, the sun is about to set on the music download industry.
Kobalt Enters Deal with NetEase – Kobalt Music has inked a strategic licensing and distribution deal with fast-growing Chinese streaming platform NetEase Cloud Music that will bring 600,000+ songs to the Chinese marketplace. NetEase boasts over 400 million users on its digital platform and is a direct competitor of Tencent. Tencent and NetEase dominate China’s online gaming market and are now competing for users in music. The competition for music tech is increasing on a global scale and the world’s tech giants are all racing to gain competitive advantage and market share.
Today’s Awesome Quote! “[on iPod and iTunes Music Store] It will go down in history as a turning point for the music industry. This is landmark stuff. I can’t overestimate it!” – Steve Jobs