Spotify Raises More Cash
April 10, 2015 at 3:30 PM (PT)
SPOTIFY has secured new investments from GOLDMAN SACHS GROUP INC. and an ABU DHABI sovereign wealth fund to help close a deal that would raise $400 million in a round valuing the music-streaming service at $8.4 billion, sources told THE WALL STREET JOURNAL. The deal would make SPOTIFY one of the world’s most highly valued private-tech companies.
After holding talks with a range of asset managers and venture-capital firms around the globe, the terms have been set and the funding round is expected to close in the coming weeks. SPOTIFY has already raised more than $500 million in equity funding.
The music streaming service, which is still running in the red, needs the additional funding to support a business model that pays nearly 70% of its revenue to rights holders as royalties. SPOTIFY claims to have about 45 million free users and 15 million who pay $9.99 a month for an ad-free version, but the major label groups – UMG, SONY and WMG, who combined own less than 15% of SPOTIFY – has publicly pushed management to convert more of its free users to paying customers because ad-based streaming services haven’t been able to generate enough revenue to make up for declining sales of CDs and digital downloads.
Among those who have already invested in SPOTIFY include GOLDMAN, ACCEL PARTNERS, KLEINER PERKINS CAUFIELD & BYERS, COCA-COLA CO., FIDELITY INVESTMENTS and WELLINGTON PARTNERS, among others. Sources indicate that SPOTIFY hired GOLDMAN to raise the new funding, which could help it stay private for a longer period of time.