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

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

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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.
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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?

2 Responses

  1. Avatar
    Michel

    Do the 6M premium include the free premium accounts given to most of Orange subscribers? If yes then the number will drown in 2 years because the partnership ended and the accounts will become regular non-premium accounts after a grace period of 24 months.

  2. Avatar
    Kenneth Stein

    Spotify focused on recruiting music labels owning large music libraries. The terms of the agreements between Spotify and each label are subject to non-disclosure agreements. If the executives at Spotify had deeply appreciated how the music business functioned, they could have effected positive change for the artists, publishers, writers, and labels. Instead, they handed authority to the recording labels, justifying the action as prudently expeditious, when in reality it was short sighted, and evidenced a lack of willpower and intellect. Enjoy the stratospheric market cap while it lasts, Spotify execs. You’ll soon discover you missed your chance to lead. Enjoy your retirement.

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