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Deezer negotiating public listing via merger with French SPAC

By | Published on Thursday 14 April 2022


Deezer could be about to follow the lead of rival streaming service Anghami in becoming a publicly listed company via a special-purpose acquisition company.

According to the Wall Street Journal, the streaming firm is close to agreeing a deal to merge with I2PO, a special-purpose acquisition company with a focus on entertainment and leisure which listed on the Paris stock exchange last July.

SPACs – sometimes known as blank cheque companies – are businesses with no active operations that raise money on the investment markets with the intent of using that cash to buy a privately-owned business outright. Middle East based digital music firm Anghami got itself listed on the Nasdaq stock exchange in the US by merging with a SPAC, and independent music firm Reservoir likewise got itself a Nasdaq listing via a SPAC deal.

Although active in the subscription streaming market pretty much from the start – and the first to undergo rapid global expansion – Deezer remains a relatively small player in the digital music space. MIDiA estimates that it commands just 2% of the premium subscription market, dwarfed by market leader Spotify, and a long way behind the likes of Apple Music, Amazon Music and YouTube Music, and even the China-only music streaming services of Tencent and NetEase.

Despite that small market share, 2% of the premium subscription market would still equate to over ten million paying subscribers, and when you take free tier users into account, Deezer talks about having an active userbase of sixteen million.

Those sound like relatively big numbers. Although, with the economics of music streaming, where up to 70% of a service’s revenue is paid over to the music industry each month, you arguably need significant scale to have a viable long-term business.

Concerns about Deezer’s ability to reach that scale were raised the last time it looked into getting itself listed on the Paris stock exchange, that time – in 2015 – via a more conventional Initial Public Offering. That IPO was called off at the last minute, with “market conditions” cited as the reason.

Nevertheless, there remains a decent helping of optimism regarding future growth of the wider digital music market within parts of the investment community.

And while it might be tricky to see Deezer ever really taking on Spotify or Apple in the conventional subscription streaming market-place, some investors may well see an opportunity to build additional digital music products around things like livestreaming, memberships, NFTs and other digital collectibles on top of a platform like Deezer.

Which might be why French entertainment SPAC I2PO sees an opportunity to be seized in the France-based global music streaming firm. WSJ’s sources reckon an announcement on that I2PO/Deezer deal could come in the next few days.