Spotify buys powerful music data company The Echo Nest

Spotify has acquired US music intelligence company The Echo Nest in a deal that many believe is better readying the company for an IPO.

The initial public offering was hinted at last month when the popular streaming service hired a US financial reporting specialist. However, contrary to what media reports suggest, Spotify say the acquisition (the sum of which is undisclosed) will use The Echo Nest’s tools for curation to drive music discovery and to grow global music consumption, and also to facilitate the music experience for its partners’ audiences.

The Echo Nest is renowned for being the algorithm behind most online radio. Its music intelligence platform powers iHeartRadio, Nokia’s Mix radio and has been contributing to Spotify’s radio service since December 2011.

Daniel Ek, Founder and CEO, Spotify says the decision was made with the user in mind.

“At Spotify, we want to get people to listen to more music. We are hyper focused on creating the best user experience and it starts with building the best music intelligence platform on the planet,” he says in a statement. “With The Echo Nest joining Spotify, we will make a big leap forward in our quest to play you the best music possible.”

While Echo Nest developers had already linked its IDs to Spotify, along with other API (application program interface) providers Twitter and Seatwave, the increase of assets Spotify now takes on gives the Swedish company unlimited data to better serve its users, create new revenue pathways and become even more appealing to investors should it announce an IPO.

Jim Lucchese, CEO of The Echo Nest says his company is “beautifully obsessed with understanding the world of music.”

“Joining forces with Spotify gives us the opportunity to continue doing so as part of the fastest-growing service in the world,” says Lucchese, “we’re thrilled to be part of a team equally as passionate about connecting more people with more music.”

Currently Spotify offers on-demand access to over 20 million tracks and uploads more than 20,000 more everyday. Lucchese has told Billboard Echo Nest and Spotify are hoping to build out their offerings to developers of music apps.

The Echo Nest says its API “will remain free and open to support its robust developer ecosystem. The developer community is crucial to the success of both Spotify and The Echo Nest and will remain a priority for the combined companies.”

In January last year The Echo Nest hired two Gracenote executives (John Sierotko, formerly Gracenote’s SVP of Worldwide Sales & Marketing and Scott Ryan, formerly VP Sales) to amp up its global growth and in December its multimedia rival Tribune Co. acquired Gracenote for US$170 million.