Market Insight

Spotify acquires The Echo Nest

March 07, 2014

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Spotify, one of the world’s leading music streaming services, has acquired The Echo Nest, the music metadata service that provides recommendations, audience and audio analysis.

The Echo Nest API is currently used by Spotify’s largest competitors Deezer and Rhapsody as well as Clear Channel’s iHeartRadio.  Spotify and the Echo Nest companies have indicated that the latter’s API will remain open to developers and competitors upon acquisition as openness is a priority for the combined companies. Rdio has since decided to end its partnership with The Echo Nest because it does not want to share its data with rival companies.  The Echo Nest may find that more of its customers end their partnerships due to Spotify’s ownership of Echo Nest data.

 Financial details of the deal were not disclosed.

Our Take

Acquiring The Echo Nest gives Spotify control over data that many of its rivals are using. This sort of arrangement is by no means unheard of in digital music: for example Gracenote, when owned by Sony, was openly involved with Apple’s music services, Genius playlists and recommendations as well as iTunes Radio despite the fact that Sony operated its own music service. Gracenote is also known to have been integrated into other consumer electronics devices, devices which competed directly with its parent company, Sony. Spotify has the opportunity to keep The Echo Nest open under its ownership and cooperate with other music services that it competes with. Whether or not Spotify chooses to do this on either a full, or partial basis, is a question of how much of a competitive advantage exclusive use of the data gives the streaming service.


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