Ten dode opgeschreven, nu Apple Music van start is gegaan? Spotify haalt een half miljard op en gaat vrolijk de strijd aan.
Spotify is valued at more than $8.5 billion after a massive $526 million round of new investment funding, The Wall Street Journal reports.
The company declined comment when reached by Business Insider.
The funding round comes as Spotify gears up to face a considerable new threat: the launch of Apple’s new music-streaming service, Apple Music.
There were reports that the company was raising funds, most likely at a valuation of more than $8 billion, but the final total is higher than anticipated. The new money also probably delays an expected Spotify initial public offering — the company just doesn’t need the money anymore.
The round was reportedly closed Tuesday, a day after Apple revealed Apple Music, and takes the total invested in Spotify to more than $1 billion. The streaming service now has 23 investors, including Fidelity, Coca-Cola, Goldman Sachs Group, and Kleiner Perkins Caufield and Byers.
The company will be particularly proud of the participation in the deal of Fidelity and Goldman. “Institutional” investors are a badge that raises a tech startup into a loftier investment echelon above those who merely receive tech venture-capital funding. Their presence indicates that traditional investors outside the tech sphere have faith in the company.
TeliaSonera is one of the investors in this new round, the Scandinavian telecoms company confirmed in a statement Wednesday morning. It said it was investing $115 million in return for a 1.4% stake. Its funds will help “ignite the joint innovation agenda within areas such as media distribution, customer insights, data analytics, and advertising.”
In the statement, Spotify CEO Daniel Ek said his company had “a long and great relationship with TeliaSonera and I’m pleased we’re able to take this to the next level together with this strategic partnership.”
Launched in Sweden in 2008, Spotify is considered the music-streaming industry leader, with a valuation (following this most recent round) twice that of its internet-radio competitor Pandora. As of Wednesday, it boasts 75 million active users, of which 20 million are paid subscribers (the rest use a free, ad-supported model). But Apple is throwing its vast weight behind its new service, announced at its WWDC developer conference on Monday, and reportedly hopes to net 100 million paid users.
It is not yet clear what Spotify intends to do with its massive new war chest. At the very least, the company now has a much bigger cash cushion that it can use to withstand competition from Apple Music.
Alternatively, Spotify now has the cash that may let it acquire other useful music tech startups, folding their talent and software into its own.
The company isn’t commenting publicly on the funding round, though it did publish a new blog post on Wednesday emphasising how much it was paying out to artists and how this would increase because of an uptick in paying subscribers. A “niche/indie artist” got an average of $0.7 million over the last 12 months, which will increase to a projected $1.2 million over the coming year, according to Spotify. A “global superstar,” meanwhile, received $7.7 million, which will jump to an estimated $13.9 million in the year ahead.
Spotify faces a difficult task heading off Apple Music, given the Cupertino company’s vast resources. As of February, Apple had cash reserves of $178 billion. Spotify operates at a loss. And the music industry is increasingly souring on offering free, ad-supported music, as Spotify does. Taylor Swift pulled her music from the streaming service in a high-profile falling out, contending that it failed to properly value her art. (This may help explain the company’s most recent blog post on average artist earnings.)
It’s not plain sailing for Apple either, however. Though Apple Music hasn’t actually launched yet, it already has the attention of US and EU regulators, who want to make sure the company hasn’t signed record labels into collusive, anticompetitive pricing agreements. Their fear is that Apple may have pressured music labels into removing their libraries from competitors like Spotify or got them to agree not to compete on prices for their songs.
More broadly, it is likely that Ek believes that Spotify’s specialism will help it beat Apple. In tech, companies that do one thing really well often win. Apple is a device company rather than a software company, and it has many different units and divisions. Its music staff — which includes the team acquired from Beats — is still new.
Here’s the full list of investors, via a report in Tech.eu:
- Abu Dhabi Investment Council
- Accel Partners
- Baillie Gifford
- D.E. Shaw
- Digital Sky Technologies
- Discovery Capital Management
- Fidelity Investments
- Founders Fund
- Goldman Sachs Group
- GSV Capital
- Halcyon Asset Management
- Kleiner Perkins Caufield and Byers
- Lansdowne Partners
- Li Ka Shing Foundation
- Northzone Ventures
- Rinkelberg Capital
- Senvest Capital
- Technology Crossover Ventures
- P.Schoenfeld Asset Management
- Wellington Partners
And here’s how Ek initially responded to the launch of Apple Music in a now-deleted tweet: