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  • Apple acquired music recognition app Shazam in December for a reported $400 million.
  • It was clear Apple would integrate Shazam into its streaming service Apple Music — but neither company has given more detail.
  • Shazam’s earliest big investor thinks Apple could get up to 7.5 million new Apple Music subscribers as a result of the deal — a nice bump to its existing 30 million subscribers.
  • Analyst Mark Mulligan said the acquisition is probably a combination of subscribers, plus the valuable data Shazam can give on what streaming services people use and what songs they really like.

To understand what Apple might do with its latest acquisition Shazam, you have to understand its evolving business model, according to early investor DN Capital.

The venture capital firm’s chief executive, Nenad Marovac, first invested in Shazam in 2004, when its music recognition tech involved users dialling a number, holding up their phones to a source of music, then receiving an SMS “tag” which identified a song. Now, the song recognition is done through an app.

“The way Shazam started off its business model was that after five [SMS] ‘tags’ you had to pay for it,” said Marovac. “Then it moved into lead-generation for MP3s, then it became an affiliate for streaming companies.”

In other words, if you identified a song, then clicked a link inside Shazam to buy the song through iTunes, a cut of your payment would go to Shazam. But that became less profitable when streaming took off.

Apple once dominated music consumption, when people bought individual MP3 tracks through iTunes. Since the advent of Spotify, it hasn’t kept up. Shazam might be a way to drive growth once again.

“Since Apple has launched Apple Music, it’s still a way behind the curve, behind Spotify,” said Marovac. “Shazam has 150 million active users a month, and about 300 Read More Here