Has European music startup Spotify finally figured out the online music business? Some big investors seem to think so. Rumors surfaced today that the company is raising a new round of financing of $50 million or so, at valuation of $250 million. We’ve confirmed those rumors from a source close to the company, and have uncovered lots more information about the secretive startup.
First, we’ve confirmed that Asian investor Li Ka-Shing, who invested in Facebook in 2007, will invest in this round, as will a yet to be finalized venture firm. Also, data on previous financings was not completely accurate. Last October there were rumors that the company had raised €15.3 million from Northzone Ventures and Creandum at a €71.6 million pre-money valuation.
In fact, that round was closer to €20 million, and included investments from the big music labels – Universal Music Group, Sony BMG, EMI Music, Warner Music Group. All of the labels, says our source, paid the same price for the stock that the venture capitalists did, other than one label that got in very early. That deal valued the company at €100 million, and secured (as much as possible) the long term support of the big music labels.
The new financing will bring in new “strategic” investors, which include rights holders in other geographic locations, according to our source. And while new investors are balking at the $250 million valuation, strong demand from venture capitalists is supposedly driving this deal to a close.
The company has yet to launch in the U.S., but boasts 2 million UK users, its biggest market. They are also launched in Germany and Sweden. Users can listen to music for free on a downloaded application with advertising, or pay a premium fee to remove the ads. Some labels are supposedly making more money now from Spotify than iTunes in the markets the service is available.
Keep an eye on this company. And let’s hope it launches in the U.S. soon.
Bullish about Spotify, especially its mobile plans.
Me too. I met with the company a couple of weeks ago and have been playing with its service. I wonder if its iPhone app has any chance in hell of getting approved by Apple?
They better not reject the Iphone Application or gimp it so that it won’t work on the 3g or 2g network, only Wifi.
If Iphone approves, I bet Spotify would kill ITune.
Did Spotify just hand over listening data to the RIAA?
More buzz around Spotify this week with news that they are working with We Are Hunted for new music discovery with a dedicated Spotify Music Chart.
Spotify are really getting some momentum!
It would be a mistake if Apple wouldn’t approve the app. Stream on Spotify, buy at iTunes. If you still want to “own” the music, you’ll go to iTunes. In fact, iTunes should team up with them and include “buy on iTunes” links. Apple maybe also is Spotify’s exit.
Yes, but the Spotify app caches the music you listen to, so when you have no Internet access you can still enjoy your music collection previously streamed.
Who would need to download music from iTunes when Spotify does this?
I’ve been using Spotify for a while and to be honest, once I can get it on my phone, I’ll never buy music again.
Yeah, I reckon that spotify will be an awesome app.
Although, playing the devils advocate, iTunes could easily come up with some insane competition to Spotify … How?
Welcome to the iTunes Subscription Service.
It will get approved if Khalid Shaikh writes it.
even if apple does not approve them, they will have a unique advantage if android phones ever get popular. – who knows, they might even release their own player
Well you are plainly wrong
Android already has a spotify client working perfectly well
Just you wait americans, this service is truly unique, from the day I downloaded it until now I still haven’t closed spotify.
Say hello to the music world of tomorrow.
I was using Spotify regularly, and still do occasionally – But they are just channeling to much adds through on the free version.
Yes they want more people to pay 9.99 a month, however I’m not paying £120 of music that I can’t even store on my computer… They need to think of some other plans, or lower that 9.99 a month!
I pay €9.99 a month and I do so because I have access to almost every track ever recorded (with a few annoying and notable exceptions). It’s the cost of half a CD where I live.
They better not reject the Iphone Application or gimp it so that it won’t work on the 3g or 2g network, only Wifi.
So excited about their imminent launch in Germany. Though it seems only few beta accounts have been rolled out last week.
Wellington also participated in the round, they already mention Spotify in their portfolio:
http://www.well...rt_spotify.html
when I open spotify.com I am getting “Not available in your country yet” even though article above claims that it has launched in Germany – it has not launched in Germany! Feel free to correct the article.
Interestingly they have headquarters in UK, R&D in Sweden and sales in Spain and France, but nothing in Germany – the biggest country in EU!
It’s in private beta and by invitation only. They have a guy dealing with Germany from Sweden at this point.
Spotify is awesome. I use it pretty much all day every day. It is suoerfast and easy to use – light years ahead of iTunes, which I pretty much never boot up any more (apart from for tortuous iPhone updates). It will be huge in the US when it launches there.
Hey Techcrunch, please install Echo. Static comments in which a refresh is needed every few minutes SUCKS.
We’re trying it out. Patience.
http://www.tech...-on-techcrunch/
Thanks, sir.
Sounds like employee speak…
I felt that Echo took away from the reading experience. So, please, keep it out of TC.
We deliver you nothing but the best @ http://www.thessayist.com Check it out for yourself @ http://bit.ly/n6HuE You have to admit it is a revolutionary service.
Go away
come on, plz stop spamming
Leave music startups alone, after the labels jux you for $25,000,000 (initial catalogue license) + $0.02 per play stream, eventually the money dries up and the advertising is not robust enough to cover costs.
As Mark Cuban once said: If you sit down to the negotiation table and can’t spot out the sucker, then the sucker is you”.
If this model was so promising, the RIAA would conform a budget from all the labels and build an application themselves.
Another sucker will bite the dust.
Spotify, please diversify your interest into other investments outside of music.
Or at least to stay in a successful position, keep this app away from the U.S. based labels because the RIAA are the ones who are destroying these startups with sky high initial costs.
youve changed your tune..so how do you avoid these initial start up costs before you hqave even built a business model..go illegal first then hope to attract VC..how about if you have a business model but not the initial 25 million to license the cataloguess?
hows your site going?
Simply stay away from music related businesses, they don’t make money and a huge headache for nothing.
I think they can make money just not in their current state. I have an idea im trying to pursue in regards to music streaming, but it wont be primarily ad- funded and will allow a certain amount of streams but not unlimited. This will limit users as its not all free but it should be profitable even with the 0.01 fees.
What would be your advice, its really the initial up front fee thats the bugger!
Sites like ilike make a profit and I guess with web radio you dont deal with the labels!
I agree that spotify does not really stand a chance of being profitable. For ad funded to work I think we need a new ad model cos CPC is not effective enough!
This is very easy:
These music apps just need to follow the real radio model.
Give music access for free, but cut in playback of 5 songs with about 5 radio style ads. This works for terrestrial radio, why not streaming web apps?
All one need to do is run OpenX and code it to accept audio spots. Allow public advertising access similar to AdSense and there you go…
I would even say allow independent acts to PAY for PLAY which would insert their song in the mix of a major artist album.. if the user don’t want to listen to it then they just skip past it on to the next song of the major artist album, but the indie pays for the chance at a listen…
The service then keeps a log of what songs are playing in well across genres and regions, the indie songs doing well are followed by a billboard style chart and the labels get first pick at the new talent that deserves backing by the major engine.
Fixing the music business is easy, it’s just the players in it are too fucking dumb to see the solution when its not coming from Apple.
So I say let them die…
With 3000 songs available for offline play on the smartphones (including Ipod Touch) i don´t think Spotify will have any problems getting a lot of Premium subscriptions at 10 euros per month. The demand for the smartphone apps, even with everyone knowing they´ll have to pay 10 euros, has been enormous. I´d say have stand a good chance of being profitalbe within a few months and will definetly make a lot of money over the next coming years.
um no…the only reason they are getiing any investment is because they are being subsidised by the labels who have an equity share…they have an interest in making spotify commerically attractive to nvestors as if spotify get IPO’d they get a big payday themselves.
Its in their interest to not treat them like they usually do and sue the hell out of them.
This analysis sums it up http://www.ther...tify_exclusive/
Where are the figures for this ‘enormouus’ demand. People have shown they are not willing to pay for subscription what makes spotify different?
Do you seriously believe if the labels started charging spotify what they charge everyone else they could survive?
William I agree with that model…self serving audio ads would be great…even greater to open it up to any business but to target it properly it probabl needs to be a social network to get user data or some sort of facebook connect thingy mijig!
But william, with web radio you do not need to deal with the labels and upfront fee demands so whats holding you back?
I prefer to work with the future of video entertainment.
SJ:
I´ve read that Register piece before and its just very sloppy writing and research (average spotify user is 40 years old.. yeah right).
If you want figures for comparing the demand for Spotify to other services you should read this: http://musicind....wordpress.com/ (not my blog by the way)
The Youtube clip demonstrating Iphone app got 140 000 views in one week.The demonstration for Android currently has 110 000 views. If you follow Spotify on Twitter or on the blogs you will see that everyone is talking about the mobile apps. Too put it simply;there is a demand, even when it costs money.
But that aside, I think they will make a lot of money on the ads as well once they figure out how to target them a little better (which takes time). (In the beginning Spotify was intentet to be a completely adfunded free service but the labels pushed for a premium version).
Spotify will reach 10 million users in a few months. With the help of mobile apps the service most likely have around 10% (if not more) using the premium version. Thats about 10 million dollars a month revenue which is not bad for a company that went public less than year ago. So the real draw for investors lies in the revenue projections, not the IPO:.
Not sure that’s a Mark Cuban original….
Cuban quoting Rounders quoting ???
10 milllion in revenue per year from 10 million subscribers is not enough to pay penny stream rates.
It would need to make over 500 million to cover penny stream rates. Thats if we estimate the average user spends 1hr per day streaming songs for the year.
But this is all if the music streaming market was competitive and every music start up had the same contracts..not how it is now wre the labels subsidise those start ups that give them large free equity like spotify and are thus able to determine the direction of the company to suit their ends to the detriment of the rest of the music industry.
Well, I estimated 10 million dollars per month revenue (1 million premium users paying 10 euors per month when mobile apps are release) but I kind of see your point.
Its true that paying a fee per stream stifle many music-startups, including Spotify I think. They may have some sort of exclusive deal on streaming rates but they have also
kept their growth very much under control through use of the invite-system (for technical reasons but no doubt for economical reasons too). The only country where you can start using free service straight away is in the UK. All other countries require an invite, including Sweden where Spotify been in open beta for almost a year. Despite all this they still get 50 000 new users a day. I wonder what the numbers would be if more modest streaming rates allowed them the to release the service completely in all of Europe (not just four or five countries). I hope they will be able to grow faster in the US though.
Regarding calculations I think the current streaming rate for Imeem is $0.004 per song. In Europe I think the streaming rate for Spotify is closer to 0.001 (or slightly lower) dollar per song. Hopefully their streaming rate will be somewhere in between when they enter the US market.
But I agree that record companies hasn´t made it easy for entrepreneurs to to innovate and create new services that makes the users happy as well as help the music industry in the long run..
I’m curious what is it exactly.
Is it a Media Player like iTunes, or is it a cloud service?
It’s all in the cloud. But it has no buffering delays
.
they do text adverts or audio?
both
Both. Combining text and audio has supposedly yielded quite nice CTRs.
Spoitify is going to become Europe’s YouTube.
Youtube is about video… this is about streaming music legally…
Without hyperbole, Spotify is the best music app you’re likely to find for the moment. The ads aren’t intrusive and only really make a difference if they land in the middle of a live track. The Day Pass option (no ads for a day) is great for planning party playlists.
Wish they’d make this more available everywhere. It looks cooler than iTunes. http://AppUseful.com
Been using Spotify on and off now for a week or so (woot! we UK users are actually in on the act before our Merkin cousins for a change! How’d you like that??!).
Anyway, it streams like a dream. I haven’t found the ads too intrusive and the catalogue is pretty broad, although missing some major bands (which they acknowledge).
SImple user interface, but a bit too basic. Search is too simplistic and Help is limited -that available on their website certainly needs substantial work at the moment as there is too much assumed knowledge/experience. Many of my not-very-IT-literate friends would soon be lost I think.
Having said all that, these are pretty minor criticisms and the service is pretty damned good. The only reason I don’t have Spotify on the whole time is that I tend to prefer talk radio (especially while we’re trying to kick Aussies in the Ashes!).
I’m not convinced that the UK user base number is accurate.
A good portion of those “UK residents” are probably US users with proxies!!
spotify seems like a great service…for the computer. i have a feeling Apple won’t approve their app & they will miss out on an enormous market opportunity in the mobile space.
question: do people believe their share of the music streaming space will be new users or converts from Pandora, YouTube, Slacker, etc.?
It´s absolutely better than Youtube. No dude.
They choose the right road: ask first the big four and then, go on with the project.
They are selling the songs through 7Digital.com.
as soon as their app is approved i’ll go premium. (and if it’s approved as they introduced it)
using the desktop version is also great !
too bad they do propose different levels of premium…
Spotify is a great service. Definitely one of the handful of gems of the few years
Issue is their conversion to paid accounts is apparently very low.
Their free version is so bountiful, (save for short audio ads every 30 mins) the £9.99 upgrade (to remove them) does not offer sufficient value.
They need to re-jig their free/paid functionality before hiting the US market.
You also get 320 kb/s streaming with Premium and some exclusive/early content. Additionally, Premium will be required for the iPhone version (if approved).
Hi,
Spotify is also available in France but there is a strong competitor : Deezer. Spotify, as an app you have to install with audio ads has some qualities (fluidity, audio quality) but has a big flaw I think. You can’t read your own mp3 on it : so you have to launch two software for music !
Deezer.com is quite good : no installation, no audio ads (for now), new Spotify look&feel (which is a iTunes looks&feel…) and good portfolio. And they are already on the App Store !
But you cannot choose what you want to listen too wth Deezer + some of Deezer’s stuff are not legit + there is no delay/loading time with Spotify…
Spotify is a great product !
So sad, there’s no AC/DC, Led Zeppelin and Pink Floyd on Spotify.
AC/DC does not allow to stream their music online… exception of music that are in compilations…
I tried spotify recently and it’s amazing the ability to stream millions of tracks for free. The software seems pretty basic though in terms of exploring and discovering music to listen to, which is really what I wanted to do when I first loaded spotify.
I was surprised there was not a area where you could explore some of the playlists people have created and other social/community features like this. In the top lists section you cannot even show to tracks filtered by genre.
Spotify wisely decided to keep all social features out of the software. Instead there are plenty of dedicated playlist sites and blogs, and a lot of sharing going on through Facebook and Twitter. This means Spotify is still a highly social app.
I’d also like to add that Spotify free is currently not available in Germany.
Thanks, I will have to check out some of these playlist sites.
Tree companies are struggling for iPhone access for the French market: Deezer, Jiwa and Spotify.
No doubt Spotify has the best chance to bailout their competitors.
the iphone app is awesome, great interface, quick response times and offline playlists (which synch both ways from pc to mobile and vice versa)
wifi only for streaming with search on 3G – very well made
lets just hope Apple approve it! i would expect a lot of “anti-competitve” PR if not
i agree with comments that £9.99 is too expensive, i think spotify can do real damage sub – five pounds per month…
check it out here: http://www.yout...h?v=QNCb1IdmJ_0
With those labels support this company should be kept in mind. I spotted it long ago, and its steady growth is not a surprise for me.
one of model contestants in Supermodelme.tv just tweeted this today – a true coincidence – she spends time in the UK so i guess that’s how she knows as we are in Singapore
@Christabel_SMM If you havent heard of Spotify, get out from under that rock the best thing since iTunes. 3 words: FREE. MUSIC. LEGAL
I don’t get why there is so much buzz about Spotify. (disclosure : I have absolutely no ties with any company here).
I tried Spotify last week and I was very disappointed :
I was expecting so much more recomendation features as people talk a lot about it.
The fact that socials features are absent from the app is nonsense to me also : if you have to wander trough internet to get these playlists, you loose a lot of ergonomy here.
And 10€/month seems to be very expensive for this service…
Hope they will add more features on the way !
How is this different than any other subscription music service? I don’t see any functionality that Musicmatch didn’t have in 2003. or Rhapsody today. Yahoo1 was selling this service for $5 a month in 06/07. A better UI? Thats not worth $250M.
Music subscriptions are great for heavy listeners (as long as the portability is figured out, and I wouldn’t call US 3G networks figured out). If we’ve learned anything in the last decade, its that the vast majority of consumers won’t pay a subscription fee for music.
Oh, and the labels are involved? RUN AWAY!
I´d say the difference with Spotify compared to other music streaming services is in the details. At first glance it all may seem the same but everything is just a little different. For example: The UI is exceptionally simple, like Itunes, Winamp or WIndows media player made a little more intuitive and slick. The search is googlefast an generates absolutely instant results. There is no buffertime and you can jump to any part of the song immieately. The quality of sound is slightly better than most competitors at 160kbs ogg vorbis for free users and 320kbs får premium users. Every song, artist or playlist can be dragged and dropped (transforms automatically into an URL) into Twitter, sn, facebook, or email and can thereby be instantly shared with othter spotify users. Add to that the fact that Spotify has licensed about 8 million songs, and you an idea why 50 000 new users sign up every day.
That the whole experience now is about to be transformed to all smartphones really is a good reason to be excited! The hype is true this time.
On further analysis..it seems that spotify is going to be the de-facto music service for everyone…the founders are pulling the wool over our eyes…this service will essentally be controlled by the major labels for their own ends…We get free music and the labels get sizable shares and returns when it IPO’s.
Providing it becomes the de-facto service the labels get to control music distribution again…beware of the wolf in sheeps clothing lads and ladettes….
Hate to be dramatic but does this remind anyone of one of those biblical scriptures lol .”According to Scripture a powerful charismatic dictator will soon appear in the arena of World Politics and convince the vast majority of mankind that he is “CHRIST”.
Countless millions of fine, hardworking, church going people, will number among those led astray by this spurious messiah”
That person is spotify….’puts tin hat on’ …
Yes the iPhone apps looks good.
It will be a hard decision for Apple.
Either they make a deal with them:
1- Allow the App,
2- Spotify provides a “Buy on Itunes” link,
3- Apple gets % of premium
The difference with iTunes is you don’t own any music, you keep streaming it and you depends on the device Spotify runs on.
You can’t burn a CD or Synch your songs with your computer.
If Apple does not make a deal, then they’ll have to provide a Subscription service.
Unlimitted music for $4.99 / month.
Apple could create an iPhone app so quickly and add this feature to iTunes, and Iphone and good bye Spotify.
It’s an interesting subject though. Either you want to listen to as much music as possible (for free) or you want to own some music so you can take it anywhere you want.
We shall see.
just based on the number of users/views in the UK, i’d say the numbers-crunched investments make for a good bet. i think this works in the UK because the subscription costs cover the royalty rates PRS requires. in the US though, when Spotify launches here may be a different story because people there are likely to want to stream for free like the they do of the YouTubes. maybe the investors are banking on advertising money to pull them through in the US.
No…the PRS just deals with publishers not the labels. If it were radio then yes they would only have to deal with the prs. As its on-demand streaming we arew talking about they should be paying the penny per stream rates….
Lets say theres 14 songs in 1 hr. The cost just for the labels would be $0.14. An hour a day for a month would be 0.14*30=$4.20. With these numbers spotify would need roughly 50% of members to subscribe which is unrealstic or make over £50 a year from advertising per unsubscribed user.
Let me in on the ad model that can yield $50 per year per user…10 times what myspace who are the king of advertising and spam gets…
No…the PRS just deals with publishers not the labels. If it were radio then yes they would only have to deal with the prs. As its on-demand streaming we arew talking about they should be paying the penny per stream rates….
Lets say theres 14 songs in 1 hr. The cost just for the labels would be $0.14. An hour a day for a month would be 0.14*30=$4.20. With these numbers spotify would need roughly 50% of members to subscribe which is unrealstic or make over £50 a year from advertising per unsubscribed user.
Let me in on the ad model that can yield $50 per year per user…10 times what myspace who are the king of advertising and spam gets…
I list to Spotify around 6 hours per working day (approx 2000 tracks per month) and I think it is great.
For me it has completely replaced music radio. I dont mind the ads. Even if there were more ads I would still listen because it free, and alot less hassle than downloading itunes etc. I doubt I will ever use my ipod again.
Spotify Just Rocked the spanish market, everybody here use spotify for home and parties, they have a deal for 99 cents € 24h premium pass, so awesome
Good work Spotifiers!
Spotify SUCKS for games, it uses 30+ peer 2 peer connections which results in latency and packet loss problems in online games.
There is no way in spotify to modify traffic.
Did you get lost somewhere in the way here? Spotify has nothing to do with games. So I guess you’re right in a way, it must really suck for you.
Great service and will follow a similar growth curve to Skype- Europe’s only other global leading internet biz.
I love Spotify and use the free service. I find the ads don’t interfere with the experience and you don’t have the guilt of Limewire.
Just you wait americans, this service is truly unique, from the day I downloaded it until now I still haven’t closed spotify.
I have had a chance to use this service, but from what I am reading, this is just HYPE.
ad-supported doesn’t always equal revenue. From the looks of it, users are not really going to pay much attention to the ads. When advertisers notice they are not getting a good return on their investment, guess what?…They are going to stop advertising with you.
You can hype this all you want, but the bottom line is. if they can’t make money, they are not going to last.