Spotify 'worth a billion dollars'

More signs of a new dotcom boom emerged today after reports said music streaming website Spotify had secured a funding deal that valued it at one billion US dollars (£616 million).

The Anglo-Swedish service is understood to be seeking around 100 million US dollars (£61 million) from Facebook investor Digital Sky Technologies (DST) and Silicon Valley firm Kleiner Perkins for a combined 10% stake.

The price tag is the latest in a flurry of valuations for internet companies, which has sparked comparisons to the dotcom bubble a decade ago.

Social networking site Facebook was valued at 50 billion US dollars (£30 billion) last month, while Twitter was reported to be worth up to 10 billion US dollars (£6 billion).

The advertising-funded website, which offers 10 million tracks from a range of major and independent record labels free of charge, is said to be loss-making but is about to launch in the US.

Spotify, which has declined to comment, was founded by businessmen Daniel Ek and Martin Lorentzon in 2006 in Stockholm, Sweden, but now has its head office in London. It was launched for public access in 2008 and now has 10 million users in seven countries.

The website has more than 750,000 paying users, who are able to listen to music uninterrupted by adverts.

The most recent audited annual accounts for Spotify, for 2009, show it lost £16.6 million in the UK on revenues of £11.3 million, according to reports.

Its potential investors have a record of backing major online players.

DST has invested in daily-deals site Groupon as well as Facebook, while Kleiner Perkins owns a stake in Twitter and has led investment rounds for Amazon and Google.

Spotify's US launch has been held up by concerns over its business model and the probable returns for artists and labels but it is now starting to secure contracts with US labels.