Sony Acquires Gracenote

"Sony Corporation of America announced on Tuesday that it is acquiring Gracenote, the provider of music metadata and recognition technologies, for US $260 Million in cash plus other unspecified consideration. Sony intends to keep Gracenote as a separate business unit. The deal is expected to close by the end of May.

This move follows fairly quickly after Macrovision's acquisition last November of Gracenote's competitor All Media Guide (AMG). Those two companies -- and a third, Muze -- compete to offer the most complete and most accessible databases of music metadata; they seek to integrate their data into media player devices, PC "jukebox" software, and online music services. Gracenote also offers music fingerprinting technology that it acquired from Philips in 2005, customers for which include the social networking site imeem.

The acquisition is a smart one for Sony on many levels. First, it is a hedge against a future -- which we view as likely -- in which consumers will no longer pay directly for music recordings. Rich, pervasive, high-quality metadata is going to be vitally important in the ability to build music services that consumers will actually pay for. In acquiring Gracenote, Sony is doing more than acknowledging the importance of metadata: it is positioning itself to succeed in garnering revenue from music services, where it has very visibly failed in the past.

Even better, the deal will put Sony in a position of control over key information that its competitors will need to build their own products and services. In other words, it will be able to charge companies like Samsung, Sandisk, and possibly even Apple (iTunes uses Gracenote's database) a "toll" for accessing metadata and music recognition services.

Unlike the Macrovision-AMG deal, this one involves one of the leaders in media fingerprinting technology: Gracenote and Audible Magic are the two major players in the music market. This ought to be both good and bad news for other fingerprinting technology vendors, especially the several that are appearing in the video market -- startups like Vobile, Zeitera, iPharro, and Advestigo as well as bigger players like Philips and Thomson. The good news is that the value of this technology is being recognized; the not-as-good news is that the market will demand synergies with other technologies, data, or services in order to realize that value. Fingerprinting vendors will need to find such synergies as the opportunities for new types of online media services become clearer."

By Bill Rosenblatt, DRM Watch