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This morning the volume got turned up in the streaming music business when Spoitfy announced the acquisition of The Echo Nest, a music intelligence company that helps Justin Bieber fans discover Miley Cyrus.

spotify-logoTerms of the deal were not disclosed, but the tie-up should cause some tense negotiations in the coming months given that The Echo Nest also provides the same services to Spotify’s top competitors, such as Rhapsody, Microsoft’s Xbox Music, Rdio and Vevo.

The Echo Nest’s music discovery technology is like a personal DJ that creates playlists based on listener’s preferences. The company also helps music services and ad networks learn how to target different music audiences.

An Echo Nest spokeswoman confirmed the company powers both Xbox Music, as well as, Rhapsody’s radio.

“The Echo Nest will work with their team to understand these relationships and determine the next business steps,” she said. “The bottom line is that The Echo Nest will meet all contractual obligations to all customers.”

I’ve reached out to both Rhapsody and Microsoft, and will update the post when I learn more.

Update 4:26 p.m.: A Microsoft spokesperson says in a statement, “Microsoft has a long-standing partnership with The Echo Nest and we look forward to continuing this relationship to further enhance outstanding music discovery with Xbox Music. We have no further comment at this time.”

Spotify said the acquisition will support its strategy to grow global music consumption and overall revenue back to the music industry by building the best user experience and music discovery engine for millions.

“We’ve been fans of The Echo Nest for a really long time and honoured to have their talented team join Spotify,” said Daniel Ek, Spotify’s founder and CEO, in a statement. “We are hyper focused on creating the best user experience and it starts with building the best music intelligence platform on the planet. With The Echo Nest joining Spotify, we will make a big leap forward in our quest to play you the best music possible.”

The Echo Nest will continue to operate out of its headquarters in Somerville, Mass., and operate an office in San Francisco. It says The Echo Nest API will remain free and open to support its developer ecosystem. In a statement, it said the developer community is crucial to the success of both Spotify and The Echo Nest and will remain a priority for the combined companies.

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