Don’t count them out yet: Deezer rumored to be raising at $1B valuation

Aug 18, 2015
Vote on Hacker News

Deezer_blog_visual

Better known as “the other Spotify,” Deezer’s been flying under the radar (or at least, under the shadow cast by Spotify) since its launch, despite being the (now distant) 2nd most popular Music streaming service around. Now, according to Bloomberg, Deezer is ready to  beef up operations, reportedly raising a round that would put them into Unicorn status, valuing the company at €1 Billion.

Deezer: a history.

Screenshot 2015-08-18 12.38.58

The latest report around Deezer gives us an opportunity to look at how Deezer has evolved since their last round of funding, a €100 Million round (€75 Million of new capital & €25 Million to buy out previous share-holders), which may have valued the company at as much as €500 Million at the time. Nearly three years later, the company has grown 200%, up to 6 Million Premium Subscribers from 2 Million back in 2012. If the valuation in 2012 was appropriate, a $1 Billion+ valuation for Deezer seems appropriate.

Screenshot 2015-08-18 12.39.16

Additionally, Deezer’s ratio of Premium Subscribers to Valuation lines up pretty well with Spotify’s, who is currently valued north of $8 Billion with 75 Million subscribers. It would seem that the Music Streaming premium subscriber value has standardized around to around a $160 ARPU for both players.

So, while Deezer has not grown as quickly as Spotify, they have maintained the same ARPU, and have secured a decent customer base with steady growth. Personally, I think that Spotify, Deezer et al. were not the revolution or the Napster 2.0 that everyone thought these services would be. The labels made their bets, and set up terms such that streaming services could do very little in terms of innovation beyond their business model. Deezer has leaned towards a recommendation engine called Flow that works quite well (I reviewed it back in 2013 when it was first released, and my opinion stays the same today), while Deezer flooded the US Market quickly and sits on a nice consumer experience focused on curated playlists and President Obama’s hat tip.

There is room for innovation in the music space: artists are still poor, and labels have held a tight grip on the revenue stream, despite the fact that their role is still shifting. Who will disrupts the Deezer’s & Spotify’s of the world?