Tribune To Acquire Sony Audio Recognition Unit Gracenote For $170 Million

Global consumer electronics conglomerate Sony is getting a tiny bit leaner with the sale of Gracenote, a business unit that provides audio recognition and metadata solutions to a number of device manufacturers and media companies. Tribune will spend $170 million to buy out Gracenote in a deal that is expected to close in the first quarter of 2014, and will combine it with Tribune Media Services (TMS).

The sale comes five years after Sony acquired Gracenote in a deal worth $260 million.

Gracenote’s Music Roots

Gracenote was founded in the late 1990s to provide audio fingerprinting technology to the music industry at a time when record labels were seeking to curb massive piracy of digital songs.

Formerly named CDDB, the company transitioned its business to provide technology that would recognize which songs were being played on digital music players and programs, and provide metadata like artist and album information associated with those tracks.

Today, Gracenote has metadata for more than 180 million tracks and is used to power information retrieval for music services like Apple’s iTunes, Rhapsody, Spotify, and Xbox Music. Its database gets more than 550 million lookups each day, which adds up to more than 16 billion each month.

While much of the overlap in Tribune and Gracenote clients is in the video world, music will continue to be an important part of the company’s overall business.

New Opportunities For TV And Second-Screen Apps

Over the last 15 years, Gracenote has built a steady business around recognizing what music users are listening to on their laptops and through streaming media services. More recently, however, it has gradually expanded to support video services as well.

It turns out that the same type of automatic content recognition (ACR) software that could be applied to music could also be used to identify what’s happening on TV. Gracenote has been applying that technology in a few areas: first, to help enable dynamic, personalized ads to viewers based on user profiles; and second, to power second-screen, social TV apps.

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In the former case, Gracenote is working with TV manufacturers like LG to provide ACR capabilities, while also partnering with video ad companies to dynamically insert ads. It’s also trying to get networks and brands on board to begin offering more personalized ad messages.

In the latter case, the company has offered up its APIs to third-party application developers who want to know what’s playing on the TV and serve up appropriate content around that. One example is Zeebox, which was named as a customer very early this year.

In both cases, Tribune will combine Gracenote with TMS to help power its entertainment metadata services. The companies had already been partners, with the TMS data set integrated into Gracenote’s video offerings.

Sony Retrenches

For Sony, the sale comes as it attempts to reduce costs and refocus its efforts around hardware and manufacturing. The parent company announced a quarterly loss of nearly $200 million in October and reduced its full-year earnings outlook as a result.

Sony has been making cuts in its media business, and has come under pressure from investor Daniel Loeb to spin off the entertainment unit. Getting rid of Gracenote, which provides technology not just to Sony, but to a number of its competitors in the consumer electronics world, therefore makes a bit of sense.

In the short term, I’ve been told that not much will change for the Gracenote team. As a business, it operated largely independently from Sony as a parent organization, and it will continue to operates as a standalone business unit as part of TMS. Over time, however, the companies will look for synergies that could bring them closer together.