Tech ETFs slumped on Monday as European regulators launched an in-depth investigation of Apple’s (AAPL) planned $400 million purchase of Shazam, the music recognition app developed in the UK. Under the deal, there is concern that it could reduce choice of music-streaming services.
The European Commission said an initial probe found Apple may encourage Shazam users to switch to its own music streaming service. Shazam already presents users with links to Apple’s iTunes download store to buy songs where links to the iPhone maker’s music download service generates revenue for Shazam.
Although Shazam isn’t considered a “key entry point” for music streaming services, the Commission will consider whether Apple Music’s competitors would be harmed if Apple discontinued referrals from the Shazam app.
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What About Spotify?
According to The Verge, “The primary worry appears to be that Spotify (SPOT) and Apple currently gain 1 million clicks per day through the Shazam app. While Shazam is still live, if Apple were to shut it down or only direct referrals to its own music service, Spotify could lose a significant amount of traffic. Additionally, officials point out that Apple could use Shazam’s data to unfairly target its rivals’ users and “encourage them to switch to Apple Music.”
Apple Music currently has about half as many paid subscribers as Spotify, the world’s biggest streaming platform. Data and large sets of personal information play an increasingly important role in the EU’s antitrust and merger reviews as companies holding large amounts of data can exclude new competitors from markets.
“The EU is also considering changing its merger review rules to include a wider swath of technology deals that normally wouldn’t fall within its purview, such as a merger involving an acquired company that generates relatively little revenue but holds commercially valuable data,” according to the Wall Street Journal.
Tech ETFs Slump as Apple Probed by EU for Shazam
On Monday, the Technology Select Sector SPDR Fund (NYSEArca: XLK), the largest tech-related ETF, dropped 0.57% while the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech-heavy Nasdaq-100 Index, declined 0.48% according to Yahoo Finance at 3 p.m. Eastern time.
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Shazam was founded in 2002 and is led by executive chairman Andrew Fisher and Rich Riley, who joined in 2013 as chief executive.The deal would be Apple’s biggest acquisition since it bought Beatsfor $3 BN in 2014.
The most Shazamed song is “Wake Me Up” by Avicii, the Swedish DJ and producer who died in Oman on Friday while on holiday, with over 23 million searches.
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