Spotify acquires The Echo Nest as rumours of an IPO grow As part of a move to boost its discovery features (and the total value of the company), Spotify announced yesterday it had acquired The Echo Nest. Financial terms of the deal were not disclosed.
“We’ve been fans of The Echo Nest for a really long time and honoured to have their talented team join Spotify,” said Daniel Ek, Spotify’s co-founder and CEO, in a statement. “We are hyper focused on creating the best user experience and it starts with building the best music intelligence platform on the planet. With The Echo Nest joining Spotify, we will make a big leap forward in our quest to play you the best music possible.”
The Echo Nest’s API – which has been a key part of events like Music Hack Day – will remain open to external developers, with Spotify saying this openness “will remain a priority for the combined companies”. What that means in the long term is open to question, with one report suggesting that some existing customers will, when their contract term with The Echo Nest is up, have to seek an alternative or build their own recommendation algorithm. Bad news for Spotify’s rivals using the data company and it could also usher in a situation where third parties looking to tap into The Echo Nest will have to do so via the Spotify ecosystem.
The acquisition of The Echo Nest could also be a deft move to boost the value of the company ahead of an IPO. Bloomberg is reporting the company is in discussions with banks with regard to raising a credit facility that would indicate an IPO play is imminent. It notes that Twitter secured a $1bn credit facility just a month before its IPO.
This acquisition is an interesting move by Spotify as it looks to vastly improve its recommendations – an area it has been seen as lagging behind in when compared to other services. The deal must, of course, also be read against the launch of Beats Music in the US earlier this year and its aggressive focus on playlisting and human-led discovery. Added into this is Beats’ acquisition earlier this week of Topspin which all suggests the subscription streaming market is looking to super-charge itself where services, through investment, are seeking to create real points of differentiation.
In the past, Spotify has relied on third party services to do a lot of the heavy lifting with its discovery – with specialist like Playlist.net and Digster as well and other magazine- and label-centric apps within its desktop client plugging a lot of the holes here.
The company will really need to crack not just discovery in general (something it is doing more of as it builds its editorial team) but also discovery on the mobile platform (the third party apps on the desktop client do not, as yet, port across to mobile) if it is to convincingly compete with the new breed of streaming services that have come in its wake.
*This is an expanded version of a story that was originally posted on 6th March.