Monday, November 25, 2013

Spotify Raises $250 Million, Valuing It at $4 Billion

The investment comes from Technology Crossover Ventures, a firm whose media and technology investments have included Netflix, Facebook and Groupon, according to this person, who spoke on the condition of anonymity. In its last financing round, a year ago, Spotify raised $100 million from Goldman Sachs, Coca-Cola and others, valuing the service at about $3 billion.

Spotify, which makes millions of songs available for streaming, by subscription or free with advertising, is eager to expand around the world, as the download market cools and competition for streaming music intensifies. Spotify, which started in Sweden in 2008, is now available in more than 30 countries. Its competitors in many of those places include other on-demand services like Deezer, Rhapsody, Rdio and Sony’s Music Unlimited; in the United States, it competes with Pandora and iTunes Radio in offering radiolike playlists.

Spotify has not updated its user numbers since the spring, when it said it had 24 million users, six million of whom pay a monthly subscription. Last year, the company had about $578 million in revenue — up 128 percent from the year before — but lost $78 million, according to filings.

The company’s latest financing round was first reported on Thursday by The Wall Street Journal. Neither Spotify nor Technology Crossover Ventures have commented on the deal.

Also on Thursday, Pandora reported $180.4 million in revenue for its fiscal third quarter, which ended in October, up 50 percent from the same period last year. Its revenue from mobile advertising, a number closely watched by investors, surpassed $100 million for the first time, according to an announcement from the company. Despite the higher sales, Pandora lost $1.7 million, or 1 cent a share, for the quarter, in contrast to a profit of $2.1 million last year.

Pandora has been only mildly affected by the introduction of iTunes Radio in mid-September. In August and September, Pandora was used by more than 72 million people, and in October — the first full month of competition from iTunes Radio — that number fell to 70.9 million. But during October, the amount of music listened to increased to 1.47 billion hours, from 1.36 billion in September and 1.35 billion in August.

In another positive sign for Pandora, its music royalty costs, which have been a drag on its profitability for years, declined in the third quarter. The company reported that it paid $87 million, or 48.2 percent of its total revenue, in “content acquisition costs,” which includes music licensing expenses; in previous quarters that expense has tended to be between 50 and 60 percent of revenue.

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