Spotify’s value has nearly doubled in six months. The streaming service is nearing a deal to raise $400 million from another round of funding, taking its value to $8.4 billion, according to reports.
Spotify was valued at more than $5 billion last September according to filings by the company that owns the shares. Forecasts show that this is up to 6.5 times its revenue, which analysts said was around $1.3 billion in 2014.
If the deal with investors including Goldman Sachs and Abu Dhabi’s sovereign wealth fund goes through, Spotify will become one of the highest valued private tech companies in the world, despite the fact that it is still struggling to make money.
Spotify pays 70 per cent of its revenue to rights holders as royalties and not all users pay to stream. Only 15 million users pay $9.99 to get unlimited ad-free streaming, compared to 45 million that use the service for free but get hit with adverts, according to the Wall Street Journal.
Big record labels Sony, Warner and Universal own under 15 per cent of Spotify. They have reportedly put pressure on for Spotify to increase its proportion of fee-paying customers, believing adverts alone will not generate enough revenue to make up for lower sales of CDs and downloads.
With the launch of Jay Z’s Tidal, Spotify has another competitor in a marketplace that already hosts Pandora, whose market capitalisation is less than half Spotify’s at $3.5 billion. If Apple and Google go ahead with new streaming launches, competition could get fiercer – which could mean a better deal for consumers.Reuse content