Sing It: Shazam Has Astonishing Clout In the Music World

Jesse Redniss explains how Shazam drives a large amount of all digital music sales, and why Apple has no complaints.

Apr 8, 2014 at 2:00PM

Perhaps you have Shazam – or competitor SoundHound – installed on your smartphone. These apps are able to identify songs after listening to just a small snippet of sound, and their impact on the music world is incredible.

On its own, Shazam drives about 10% of all digital music sales as users identify songs and then click through to buy the music from Apple (NASDAQ:AAPL), (NASDAQ:AMZN), and other retailers. Toss SoundHound into the equation, and we're talking about two apps that have carved out a large and valuable chunk of the music industry. This helps explain why Carlos Slim's America Movil (NYSE:AMX) invested $40 million in Shazam last year, giving it about 10% ownership.

Jesse Redniss, chief strategy officer of Mass Relevance, says music has magnetism and Shazam has found a way to harness the power of impulse buying into an irresistibly seamless transaction. Our roving reporter Rex Moore spoke with Jesse at the recent South by Southwest Interactive conference in Austin, Texas. In this video, Jess explains more about Shazam's symbiotic relationship with digital music retailers.

A full transcript follows the video.

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Jesse Redniss: I believe I've read some stats from Shazam that they actually drive about 10% of all digital music sales across the world. I'm pretty sure that I've read that a couple times, and I can check with Rich Riley, the CEO.

Rex Moore: We won't quote you on that if you ...

Redniss: I can search it right now, but I've seen it in their press before. It's pretty impactful, when you think about it. They're offering a service that is so relevant to a passion point -- that passion point being music.

You hear something; a song on the radio or a song in a show, you immediately want to know what it is, and if you want to you can immediately buy it. It's really easy, using the Shazam platform. It's a very easy transaction; a T-Commerce transaction that is so seamless that you can just buy a song.

It's a little bit harder when you start getting into, "Hey, I want to buy that jacket," or "I want to buy that car," much bigger purchase consideration sets. But with a song -- $0.99, $1.99, whatever it may be -- people get impulsive, people get passionate, and they immediately want to get it. Songs; music itself, has a great magnetism to it, to drive impulse buying.

Moore: Apple or Amazon, are they competitors to this, or do they just sit back and benefit? I'm unsure of how this works.

Redniss: I don't know. Obviously, Apple's business and Amazon's business is selling digital goods -- music, films, videos -- so in a lot of essence, yes, I'm sure that it is. But I believe that Shazam offers the opportunity to actually buy music through the Apple platform.

Shazam is getting a commission referral business by selling music, pushing it through to either Google (NASDAQ:GOOGL) Play, or through iTunes or what have you. I think Shazam is a great platform to funnel people onto the iTunes platform or onto the Google Play platform to buy. It's probably a symbiotic relationship that works out pretty well for both.

Rex Moore owns shares of Google. The Motley Fool recommends, Apple, and Google. The Motley Fool owns shares of, Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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