Deezer takes fight to Spotify with Paris IPO
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Deezer, the French music-streaming service, is planning to float on the Paris stock exchange as it seeks to boost marketing and take the fight to larger rival Spotify.
The plans for an initial public offering, which is expected before the end of the year, come as investors are starting to eye music streaming with increasing interest.
Spotify, the world’s leading music-streaming company with 75m users and 20m paying subscribers, earlier this year raised more than $500m in a private placement.
Deezer did not disclose how much it hoped to raise in the listing, but speculation last month suggested that the French company was looking to raise capital — either through a private placement or an IPO — in a deal that could value the company at €1bn.
Hans-Holger Albrecht, chief executive, said that Deezer was expecting annual revenue to exceed €750m by 2018, and for the company to break even on a monthly basis.
Last year, the company had revenues of €142m, a figure that it expects will increase 35 per cent this year. “We can really see that streaming is picking up,” he said. “This is just the beginning of the curve.”
He added that the decision to undertake an IPO rather than seeking private funding “gives us more flexibility going forward and more access to financial markets”.
He also said that the company chose Paris because France was its biggest revenue stream. “From my experience, it makes sense to list in the market where you have the highest revenues,” he said.
In 2012, Deezer raised €100m from Len Blavatnik’s Access Industries and Idinvest Partners, according to its website. Other shareholders include Orange, the French mobile operator, and music groups Universal with 5.9 per cent, Sony has 3.8 per cent, Warner has 3.8 per cent and EMI owns 1.9 per cent. Xavier Niel, the French telecoms entrepreneur, has 3.7 per cent stake.
Yet the company, which claims to have more than 6m paying subscribers worldwide, is lagging Spotify. Both Deezer and Spotify provide unlimited access to tens of millions of songs for monthly fees of up to €9.99.
The French company also faces increasing competition from cash-rich technology groups such as Google and Apple, which are aggressively marketing their own music-streaming services to boost their market positions.
Running a music-streaming service is an expensive proposition, as companies must guarantee large royalty payments to rights holders such as Universal, Warner and Sony. Spotify last year reported a net loss of €162m on revenues of €1bn.
Deezer has acquired a large proportion of its users though deals with telecoms groups to bundle the music service into mobile internet packages. Analysts warn that Deezer may struggle to hold on to these users should the bundling deals with telecoms groups come to an end.
To differentiate its offering from rivals, Deezer last year purchased Stitcher, a US radio show and podcast app, seeking to supplement its music content with the spoken word. The company also offers a service called Deezer Elite, a higher-priced offering with CD-quality sound aimed at the niche market for audiophiles.
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