Echo Nest Deal Gives Spotify a Local PresenceMarch 07, 2014
The Boston Globe
by Kyle Alspach
Music streaming service Spotify on Wednesday said it will acquire The Echo Nest, a little-known Somerville firm that provides the technology behind many popular Internet music services, including Spotify.
The deal will make Somerville the largest engineering outpost in the United States for Sweden-based Spotify, according to one of The Echo Nest’s venture capital investors, Antonio Rodriguez of Matrix Partners.
Terms of the acquisition were not disclosed, although Rodriguez called it a good deal for all of the investors involved. The company had received $27 million in funding since launching in 2005 out of the Massachusetts Institute of Technology Media Lab.
The Echo Nest’s technology is used to help consumers discover songs and personalize playlists on music services. The company taps artificial intelligence to analyze massive quantities of data located on the Internet, and uses that analysis to make recommendations based on the songs users’ select. The Echo Nest claims it has data on 35 million songs from 2.7 million artists.
By contrast, Spotify’s chief rival, Internet radio service Pandora, utilizes data created by hired experts about songs and artists, what is known as the Music Genome Project.
Other music services that are customers of The Echo Nest include Clear Channel’s iHeartRadio app, MTV, and Rdio. About 400 music applications in all use the company’s technology.
Spotify would not say whether competing services will be allowed to continue using The Echo Nest’s technology.
“We will work with the team at The Echo Nest to determine next steps on those relationships,” a Spotify spokesman said.
The Echo Nest has 63 employees at its headquarters in Somerville near Davis Square. The Spotify spokesman said all employees will remain following the acquisition, and called The Echo Nest “a big part of the growing tech scene in the Boston area.”
“We want to help support and foster the local tech community there,” he said.
Spotify reports having 24 million active users, 6 million of them paying subscribers. It reported revenues of $571 million in 2012. About 70 percent of revenue is paid to the owners of song rights, the firm has said.
By contrast Pandora reports 76 million active users, and revenues in 2013 of $600 million.
Rodriguez, a board member at The Echo Nest, said the acquisition gives Boston the upper hand in music-related technology over the tech mecca of Silicon Valley.
“We are going to have the largest US-based Spotify engineering group here — not the Valley, but here,” he said.
Brian Whitman and Tristan Jehan founded The Echo Nest while working as researchers in the MIT Media Lab. They will continue to hold roles with the company.
“You’re about to see some great stuff from the new Echo Nest-enabled Spotify,” they wrote in a blog post Thursday.
Spotify founder and chief executive Daniel Ek said the addition of The Echo Nest will help the service make a big leap forward in terms of satisfying consumers.
The acquisition comes just a few months after The Echo Nest expanded to offer advertising technology to music services. The technology has aimed to help the services generate more revenue with better targeting of ads.