Music site Spotify to seek funding to attain $8.4 bn valuation: report
13 Apr 2015
The world's largest subscription music streaming service Spotify Ltd plans to raise new financing, aiming to raise its valuation to $8.4 billion, according to media reports over the weekend that cite unnamed sources.
The Wall Street Journal reported that the latest round of financing, which amounts to around $400 million, is likely to come from US banking giant Goldman Sachs Group and Abu Dhabi sovereign wealth fund and others.
The new valuation will be about double what the company was worth when it raised funds in November 2013 and 8 times than its value in 2011, when it launched its US service. Rival Pandora Media Inc's market capitalisation is around $3.55 billion.
There is also market speculation that Spotify's hefty fund raising may be part of its plan for a prospective initial public offer (IPO) in the future.
Spotify, with its headquarters in London and Stockholm, is a commercial music streaming service for mobiles, tablets and desktops. It was launched in 2008 by Swedish startup Spotify AB.
Music can be browsed by artist, album, genre, playlist or record label and paid users get advertisement-free content and can download music to listen offline. The service has over 60 million users, a quarter of which are paid users, as of January 2015. The ad-free version is charged around $10 a month.
The company purchases rights from major record labels and publishers for their music such as Sony Corp, EMI, Warner Music Group, and Vivendi SA's Universal Music Group. Sony and Universal own a 15-per cent stake in Spotify.
Currently, Spotify is available in Western Europe, the Americas and Australia and New Zealand.
The company has been trying to create subscription music service ahead of technology giants Apple Inc and Google Inc.
Apple with its declining sales from its iTunes store, and equipped with its revamped Beats Music, is trying to make exclusive deals with top bands and artists to promote its new service which will cost $9.99 a month with no free tier.
Other music providers rivaling Spotify include internet radio provider Pandora, rapper entrepreneur Jay Z's Tidal Music and iHeartMedia Inc's iHeartRadio.
In January 2015, Spotify teamed up with Sony to power a new music service named PlayStation Music. The service is accessible to new and existing Spotify members via the PlayStation Network in 41 markets.
The record labels owning stakes in Spotify have been pushing on the company to change its business model by restricting its free service. Spotify argues that its free service is attracting new customers and it is the best way to lure them for subscription.
According to some sources, Spotify has been exploring new ways of attracting subscribers, such as its podcast-like Spanish lessons along with songs, news, comedy etc to broaden its programming and reduce its dependence on major record labels.
With the new fund raising, Spotify will move up the elite list of billion-dollar technology startups led by $45-billion Chinese smartphone maker Xiomi, $40-billion Uber taxi service, $20-billion hospitality provider Airbnb, $15-billion Snapchat and $10-billion Dropbox.