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Spotify valued at $4 billion as more investment secured, Deezer confirms US plans

By Chris Cooke | Published on Friday 22 November 2013

Following reports earlier in the month that Spotify was busy raising more cash to keep the streaming firm’s ever growing team supplied with candy bars for at least another year or so, the Wall Street Journal confirmed yesterday that the digital company had secured another $250 million in investment. As expected, US-based Technology Crossover Ventures have led on the latest funding round.

According to the Journal, the latest stint of investment values the Spotify company somewhere “north” of $4 billion. And while the valuations attached to loss-making tech start-ups are a nonsense on one level, interest in what Spotify is valued at will only increase in 2014.

Partly because of the PR battle the firm is quietly fighting with those in the artist community who feel the streaming service is screwing over the musical talent. Multi-billion valuations – and what share of those billions the company’s founders and major label shareholders could earn – will only fuel that fire.

And while in practical terms it doesn’t really matter if some high profile artists go around bad-mouthing the business (after all it’s not really affecting Spotify’s content supply), it is an irritation as the outfit looks to start wooing Wall Street, or the big web industry players, for the inevitable IPO or massive sell-off that will presumably occur in the next few years.

And, of course, because that big deal will surely appear on the agenda in the near future, that’s the other reason Spotify’s current valuation is news. Expect increasing comparisons between Spotify and its publicly listed rival Pandora, which currently has a market cap, according to the WSJ, of $5.7 billion.

Pandora is bigger than Spotify in terms of customers (over 70 million active users, versus Spotify’s 24 million), though its younger rival is operating in many more countries, and actually brought in more revenue last year. Though both companies have seen losses widen in 2013.

And, while Spotify and Pandora are both market leaders in their respective strands of the audio streaming space (fully on-demand versus personalised radio), arguably neither have yet fully proven they have a long-term sustainable business model. After all, running costs are way higher for the streamers than the social media firms whose IPOs they presumably want to ape.

But hey, well done Spotify on raising more dosh, and good luck with the spring 2014 launch in Japan that everyone thinks the new financing will help to fund. And because we should remind you all that “other on-demand streaming services are available”, let’s note that one of the founders of Deezer has just told news agency AFP that his company will finally arrive in the US market next year.

Deezer, of course, is always keen to remind us all that it is just as big and important as Spotify, though not as “evil” obviously (Deezer might kick artists in the shins, but would never stamp on their heads). Following recent speculation that the Deezer geezers, who have so far avoided the particularly competitive US market, would soon be arriving Stateside, CTO Daniel Marhely told AFP: “The launch date is not final yet. But 2014 will be an American year for us”.

It seems likely Deezer will seek to launch in America with a significant partner in place. Logic says that that would be one of the big mobile firms in the US, both Deezer and Spotify having been busy of late signing up tel co partners elsewhere in the world, the phone firms bundling streaming music into their 3G and 4G packages, providing the streamers with free marketing, easier-to-access revenue, and big ‘user’ figure boosts.

Though that said, some are speculating that Deezer might launch in the US with a different kind of partner – maybe a Microsoft – and that it’s not out of the question that that partner could take a healthy slice of the company as part of the deal, or maybe even buy the French-based start-up outright. So that’s fun.

Of course, while Thom Yorke et al like to think of the streaming music start-ups as being sinister corporations designed to line the pockets of their founders and investors at the expense of the artist community, as these high cost, low (or no) profit company’s move towards ‘the big sale’, perhaps it’ll be the idiots of Wall Street they’ll screw over, as the City boys pay way over the odds for an invite to the latest dot com party.

So, actually Thom, the streaming music millionaires are really an offshoot of the Occupy Wall Street movement. Look out for Jay Z appropriating their identities for an overpriced fashion line any day now.