Shazam Limits Free iPhone App, Adds $5 App

Shazam, which names songs by listening to a clip that’s playing on the radio or stereo, is one of the most popular cellphone applications to date — and one of the rare few to turn a profit. It’s been downloaded more than 10 million times and has sold out its inventory of advertising space, according to maker Shazam Entertainment. After listening to and identifying the song that’s playing, Shazam also links to iTunes, taking a cut from the fee people pay to download songs from Apple.

However, Shazam says it makes most of its money by selling the app to paying customers, such as on BlackBerry smart phones or through deals with carriers such as Verizon , chief executive Andrew Fisher said.

“When we started, we charged for the product,” he said, adding that the free iPhone version was a “departure.”

Shazam had hoped that mobile advertising and iTunes downloads would sustain the free app, but with the recession, that has not happened. The company is now fixing that detour by tacking on a $5 charge (like all paid app downloads from its App Store, Apple keeps 30% of the charge). Mr. Fisher says mobile advertising was one of the first victims of the recession, and he doesn’t expect ad rates to bounce to levels to sustain free apps for at least two years.

A free version of Shazam will still remain on the iPhone, but it will only name up to five songs a month. To get more, customers will have to cough up for the premium edition. Existing Shazam users, however, can keep using their free, unlimited versions.

“Historically, people have been conditioned to pay for applications,” Mr. Fisher said. He said he doesn’t know how many people will download the premium version. It adds music recommendations, top-hits charts and a search feature to look up a song by name or artist.

[via Wall Street Journal]

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