Music Business

Spotify Paid $100 Million For The Echo Nest plus Industry Reactions

image from www.hypebot.comSpotify paid $100-$125 million to acquire The Echo Nest with up to 90% of the figure being equity in Spotify, sources tell TechCrunch. Based on the higher valuation, sources peg $15 million split between founders Brian Whitman and Tristan Jehan, and CEO Jim Lucchese, $20 million for employee cash earn outs over 4 years for 70 others employees and $90 million in deferred payments.

Reaction To The Deal & What's Next

The Echo Nest had received $23.6 million in funding since launching in 2008.  Major investors include Commonwealth Capital Venture, Norwest, Martix and Jim Pallotta.  Spotify has raised $538 million since its founding in 2006. 

image from addition to improved music data, yesterday's deal may be part of Spotify's preparation for an IPO, according to several sources. 

Music industry consultant Mark Mulligan says the Spoitfy Echo Nest deal has "established ideological fault lines between it and rival Beats Music. While Beats has put its faith in human curation Spotify has bet big on algorithms. It’s men against machines."  

Different approaches to music discovery is one thing, but what if you're a company like  Rdio, SiriusXM,, MTV, Twitter, VEVO who use The Echo Nest to power some or all of your music offering.  What if Spotify turns off its newly bought API? "There is a big difference between the aspirations of a newly acquired company and the actual behavior of the buyer 12 months or so down the line," says Mulligan "Indeed, a highly plausible scenario is that Spotify will eventually wind down the Echo Nest as a distinct entity, bringing all of its functionality behind the walls."  

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