February 16, 2016 12:09 pm

Spotify within earshot of 30m paying subscribers

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Spotify on an iphone6.

Spotify is closing in on 30m paying subscribers, having hit 28m at the end of 2015, say people familiar with the matter.

The music streaming service’s growth rate suggests that demand for music streaming is increasing and that Spotify has not been hit by last June’s launch of Apple Music.

Spotify’s most recent subscriber numbers were released last June when it said it had 75m active users, of which 20m were paying subscribers. It added 8m paying users by the end of 2015 and is on course to hit 30m in the next three months.

The Swedish group last month embarked on a round of debt financing with the aim of borrowing $500m from investors. The move comes just eight months after it raised the same amount by selling equity at a valuation of $8.5bn.

It is unclear what Spotify — the world’s biggest music streaming service — plans to do with the money, although people familiar with the matter said the funds could be spent on strategic investments to drive growth including potential acquisitions.

The digital music market is fragmented and few players have scale, but a consolidation round could take out costs and improve bargaining power with music labels, one person familiar with the situation said.

Losses point to bleak future for music streaming services

LOS ANGELES, CA - MARCH 29: Singer Rihanna performs onstage during the 2015 iHeartRadio Music Awards which broadcasted live on NBC from The Shrine Auditorium on March 29, 2015 in Los Angeles, California. (Photo by Kevin Winter/Getty Images for iHeartMedia)

Smaller music companies find it hard in face of offerings from big technology groups

One possible Spotify target could be Pandora. A report in The New York Times last week suggested that the internet radio service was looking for a buyer, but Brian McAndrews, chief executive, tried to quell the speculation on an analyst call. “It’s just not something we are focused on,” he said. “We are focused on working as an independent company and driving our business.”

Like Spotify, Apple Music is also growing rapidly. It recently passed 10m subscribers in only six months, having launched the service in 100 countries last June.

Streaming is becoming the dominant form of digital music consumption and is growing as download sales decline. In the US, growth in revenues from streaming services offset declines in digital downloads in the first half of 2015, according to figures from the Recording Industry Association of America. Total retail sales of music slipped 0.5 per cent to $3.2bn.

Revenues from music streaming services exceeded $1bn for the first time, increasing 23 per cent in the first half of 2015 to $1.03bn. The total includes revenues from subscription services such as Spotify, internet radio stations and on-demand streaming services, such as YouTube and Vevo.

Spotify and Apple have a clear lead over the competition in paid music subscription. Deezer, the France-based streaming service, has more than 6.3m users and last October scrapped a €300m initial public offering that would have valued it at €1bn. Tidal, the artist-owned service led by hip hop artist Jay Z, reportedly hit 1m subscribers in the same month.

Daniel Ek, Spotify’s co-founder and chief executive, was among the investors who recently backed Student.com, an online housing marketplace co-founded by a former executive at the Swedish music streaming service.

It is the first start-up investment made by Mr Ek and Martin Lorentzon, Spotify’s other co-founder.

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