As expected, Apple (NASDAQ:AAPL) has formally scored regulatory approval to acquire Shazam, the popular music-recognition service. The $400 million deal was announced in December, but hit a roadblock in April when the European Commission announced that it was opening an "in-depth investigation" into the proposed acquisition due to potential antitrust concerns. The European Commission's deadline to make a decision was Sept. 4.
Shazam refers users to various third-party music-streaming services, including Apple Music and Spotify, and regulators wouldn't want the acquisition to affect the competitive landscape, should Shazam theoretically stop referring users to competing services. More broadly, European lawmakers have been cracking down on data privacy, and Shazam possesses a valuable treasure trove of user data.
The European Commission has now determined that the deal "would not adversely affect competition."
"Data is key in the digital economy. We must therefore carefully review transactions which lead to the acquisition of important sets of data, including potentially commercially sensitive ones, to ensure they do not restrict competition," Commissioner Margrethe Vestager said in a statement. "After thoroughly analysing Shazam's user and music data, we found that their acquisition by Apple would not reduce competition in the digital music streaming market."
The investigation concluded that together, Apple and Shazam would not be able to preclude music-streaming rivals as a result of Apple getting its hands on Shazam's user data. That data "would not materially increase Apple's ability to target music enthusiasts," and any targeted marketing efforts would likely "only have a negligible impact." Moreover, the commission determined that Shazam's data really isn't all that special, and competitors can still access and use "similar databases."
Regulators also note that Shazam has "limited importance" as an entry point for music streaming, a fact it had previously acknowledged. Most users sign up directly with their streaming service of choice, and Spotify has incredibly strong brand recognition in Europe. Based in Sweden, Spotify has nearly 67 million monthly active users (MAUs), including approximately 33 million premium subscribers. Apple is the second-largest music-streaming service provider in Europe behind Spotify, regulators note. The Mac maker does not officially disclose how many Apple Music subscribers it has in the region.
What comes next
This regulatory investigation was the only thing standing in Apple's way, and it will move quickly to seal the deal nearly a year after it was initially announced. Now the task turns to integrating the U.K.-based company and figuring out how to use it to help grow Apple Music.
Not only can Apple try to convert Shazam users into paying Apple Music subscribers, but Apple can also use Shazam's underlying recognition technology to bolster its content discovery capabilities. Music streaming competition these days is heavily predicated on content discovery, and recognition is intimately linked to discovery. In this arena, Apple still has a long ways to go to catch up with Spotify.