HOWZAT

Unlike Britain, Shazam has no responsibility for marketing the service internationally. Roest is pursuing a “plug and play” strategy to speed up the creation of a global business and keep his costs down.

Deals have also been reached with entertainment groups. Shazam earns less, but its service is wrapped into an existing package. Competition is limited to a service run by Philips in Spain, and Roest believes the sheer size of Shazam’s musical database should deter other entrants.

Some markets are more resistant than others. The main problem is building up the database of local music in countries such as India and Brazil, which have strong traditions of their own. In China, price controls of 3p on mobile calls mean that it is hard to make the service pay.

To speed up the international roll-out of the business, a further $5m (£2.7m) was raised from investors last March. These funds are being used for a new application of Shazam’s technology. As it was designed to recognise music in noisy pubs and clubs, it also turns out to be a foolproof way of checking artists’ royalities on the radio, television and internet.

Plug Shazam into a personal computer, connect it to digital broadcasts and it records each track played. For accuracy in distributing royalties, it beats the labour-intensive sampling traditionally used by performing-rights organisations. “I would love to say we are great strategists and thought this out carefully,” said Roest. “In fact, the business was built around a consumer principle and this other piece crept up on us.”

In the longer term, he expects Shazam’s revenues to split equally between music recognition and airplay reporting. In America, where $1.5 billion of royalties are distributed each year, Shazam has already signed two deals that could be worth $6m to $10m over the next five years in licence fees.

It is exactly the sort of stable, high-margin business that investors like, but selling the technology to smaller performing-rights organisations is more complicated. Because they do not run their own networks and buy data from suppliers, they want Shazam to act as a systems integrator.

With 40 people in west London, however, Roest is reluctant to budge from building two global businesses in a way that keeps costs down and margins high.

Sales are running at £2m a year and are expected to rise to £4m by the end of the year. In three to five years, Roest believes sales could reach £20m to £30m, with profits of £10m to £15m, opening up the possibility of a lucrative exit for investors.

To achieve this growth and keep ahead of the market, Roest is looking to Wang for more product refinements. Later this year, you will be able to download any track to your computer once Shazam has identified it.

Roest is also toying with a karaoke version. Because Shazam knows exactly where you are in a song, it can match the music to the lyrics. “I don’t know how the British public will react to this,” he said, “but I do know the Japanese and Koreans will go mad for it.”

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