Spotify buys AI firm Niland to power recommendations, stave off Apple Music advances

Posted:
in iPod + iTunes + AppleTV edited May 2017
In an escalating war with Apple Music, streaming music market leader Spotify on Thursday announced the acquisition of Niland, a small machine learning startup whose technology will help deliver song recommendations to users.




Announced via Spotify's website, the Niland acquisition is Spotify's fourth this year, and marks an ongoing initiative to stay ahead of competitors like Apple Music.

A small startup headquartered in Paris, Niland developed machine learning algorithms to analyze digital music. Prior to Spotify's purchase, Niland offered music search and recommendation services to "innovative music companies" through custom APIs.

For example, Niland marketed its AI and audio processing technology by offering content creators and publishers a specialized audio search engine. Customers were able to upload tracks for processing and receive a list of similar sounding songs. The technology could also be used to surface similar tracks within a particular catalog, making for a powerful recommendation engine.

Going further, Niland's tech can extract complex metadata pertaining to mood, type of voice, instrumentation, genre and tempo. The firm's APIs automatically process and tag these sonic watermarks for keyword searches like "pop female voice" or "jazz saxophone."

Some of the same features went into a music recommendation engine that offered suggestions based on mood, activity, genre, song style and other factors. Spotify is most likely looking to integrate the AI-based engine into its app in the near term.

"Niland has changed the game for how AI technology can optimize music search and recommendation capabilities and shares Spotify's passion for surfacing the right content to the right user at the right time," Spotify said in a statement.

Niland's team will be relocated to Spotify's office in New York, where they will help the streaming giant improve its recommendation and personalization technologies.

The move comes amidst a wider race to deliver the perfect personalized listening experience. Industry rivals are looking for ways to develop customized playlists, and Spotify appears to be investing heavily in intelligent software.

Apple Music, on the other hand, touted human-curated playlists when it launched in 2015. Since then, Apple has integrated its own software-driven recommendation assets, the latest being iOS 10's "My New Music Mix."

News of the Niland acquisition arrives less than a month after Spotify announced the purchase of Mediachain Labs, a blockchain startup focused that developed technologies for registering, identifying, tracking and managing content across the internet.

The buying spree comes amid rapid growth for Spotify, which in March hit a milestone 50 million paid subscribers. Counting free-to-stream listeners, the service is said to boast more than 100 million users.

By comparison, Apple Music reached 20 million in December, though Apple executive Jimmy Iovine in a recent interview said the product would have "400 million people on it" if a free tier was offered.

Comments

  • Reply 1 of 3
    How are they still going? It's a great service don't get me wrong, but they've been making losses EVERY year and the balance sheet only gets further into the red every time. Do investors actually expect it to eventually break even then start making profit? Or is the end-game to simply become a big name and wait to be bought out by a bigger name.
  • Reply 2 of 3
    carnegiecarnegie Posts: 736member
    adm1 said:
    How are they still going? It's a great service don't get me wrong, but they've been making losses EVERY year and the balance sheet only gets further into the red every time. Do investors actually expect it to eventually break even then start making profit? Or is the end-game to simply become a big name and wait to be bought out by a bigger name.
    Yes, investors expect they'll eventually start making a profit. If Spotify did an (conventional) IPO today, there would be considerable demand for its stock (and, I think, for good reason).

    Companies often take a long time to start producing profits. Sometimes it's because their business model is fundamentally flawed or there are other problems with how they operate or what they're trying to do. Sometimes it's because it takes time for them to reach the scale that's needed.  Sometimes they choose not to make profits sooner - the business model is fine but they prefer to spend money trying to build the business rather than realize some as profits (so that, e.g., they will eventually be even bigger or more profitable).

    In Spotify's case it's more the latter two reasons. Its model is mostly sound, there are even substantial (and uncommon) advantages in it. There should be little doubt that it will work. But Spotify has been spending what might otherwise be profit (or at least mean smaller loses) in order to build the business into something better long term. By most accounts, those efforts are generally working. I think Spotify will become profitable soon - maybe this year, maybe next year. I suspect it's reached the point where it can decide to become profitable whenever it wants to. One of the advantages of not being public is that there is perhaps less pressure to do that sooner, so it can continue to focus more on the long-term potential of the company. But this isn't the kind of situation we see or saw years ago with some tech companies, where people look at the business and struggle to figure out how they'll ever make money. With Spotify that path is pretty easy to understand.

    Could competition disrupt Spotify's business enough to prevent it from becoming profitable? Sure. But that's part of the reason it's spending money now trying to grow into something entrenched enough to be able to avoid that.
    croprravnorodomike17055
  • Reply 3 of 3
    retrogustoretrogusto Posts: 745member
    It would be interesting to know more about what Spotify gained from this acquisition that they didn't already get from their acquisition of The Echo Nest a few years ago. It sounds pretty similar. It's possible that they did this to get the employees and keep their technology out of the hands of Apple.

    I also think Spotify is likely to be profitable soon, partly do to the economies of scale created by their growing paid subscriber base, party due to the fact that they have lately been able to negotiate more favorable deals with big record labels, who want them to succeed partly because they are providing the labels with good revenue, partly because the labels own large stakes in Spotify, and partly because labels are afraid of Apple having too much control if it achieves a near-monopoly in this space.
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