Saturday 18 November 2017

Deezer plans music streaming IPO in bid to take on Spotify, Apple

Three of Taylor Swift's MTV EMA nominations are for her hit single Bad Blood
Three of Taylor Swift's MTV EMA nominations are for her hit single Bad Blood

Music streaming service Deezer plans a flotation on the Paris stock exchange by the end of the year, it said on Tuesday, as it bids to keep up with larger, deeper-pocketed rivals such as Apple Inc and Sweden's Spotify.

The company, founded in 2007 in Paris, counts 6.3 million subscribers who can listen to a catalog of 35 million songs for a monthly fee of 9.99 euros ($11.18).

Deezer, which analysts expect to achieve a stock market valuation of about 1 billion euros ($1 billion), and its rivals represent a shift in the music industry, away from buying and downloading tracks to listening online to tracks and channels stored remotely.

Yet such services are so far unprofitable, since they have high costs for licensing music and face challenges persuading people to pay, and have been criticized by artists such as pop star Taylor Swift for not paying them enough.

Present in 180 countries but with the bulk of clients in France, some 4.8 million of Deezer's paying customers get access because the service is bundled with their mobile service from telecom operator and 11 percent shareholder Orange.

Spotify has 15 million paying customers and raised about $500 million in a funding round in June, valuing it at $8.5 billion, according to media reports.

Deezer said its revenue grew 53 percent last year to 142 million euros. It aims for positive monthly core earnings (EBITDA) and cash flow by the end of 2018, as well as sales of 750 million.

The initial public offering (IPO) will allow Deezer to improve its product and content, Chief Executive Hans-Holger Albrecht said, without giving any details of the pricing of the issue, how many shares would be sold or how much money would be raised.

The company also hopes to develop its partnerships with telecom providers, as well as with makers of phones and wireless speakers, through which it sells its service.

Deezer decided to go public and not undertake another fundraising round in part because it wanted to tap markets before Spotify, Albrecht added.

Deezer's largest shareholder with 27 percent is tycoon Len Blavatnik's Access Industries. Three music labels, Warner Music, Sony Music and Universal Music, part of Vivendi, together own about 15 percent of the shares.

Albrecht said none of the current shareholders would sell their stakes in the IPO, in which new shares would be issued.


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