We first reported last week that Spotify may be looking to raise some venture money. Now Times Online has picked up the scent, saying the music streamer “is trying to drum up a valuation of close to £200m as it seeks new investment of between £20 million and £30 million”; there’s no attribution for that.
CEO Daniel Ek last week said: “We might put it on the stock exchange at some point.” And, when asked about both options – IPO or VC – the company told paidContent:UK it’s “far too early to say” but “all options remain open”.
Spotify is only one exponent of the unlimited music access model, but it’s implementation is seductive. Ek and co-founder Martin Lorentzon say they have invested €8 million of their own money and taken venture capital from Northzone Ventures and Creandum (reported by Times Online to be €13 million). But as its popularity grows, it’s likely incurring heavy outgoings on royalties – the question is: can Spotify convert enough free users to paid, and can it profit from the advertising served to the majority, free users?
In fairness, royalties and the early development of its advertising business are not the only reasons Spotify may need extra cash. Currently available only in parts of western and northern Europe and Scandinavia, there’s significant room for international expansion now that users are showing love for the idea and once the ad model begins to bear fruit. The question of whether labels may stump up for a new fund raising – and whether they already have equity – still seems open.