Spotify Is Now Asking Investors for More Cash, Swedish Paper Reports…

There’s a simple reason why this is happening, of course: Spotify is burning a ton of cash at an extremely aggressive and probably unsustainable rate.  According to recently-released financial statements, the company has burned through than $206 million since 2008 alone, which doesn’t even count 2013.  Total financing, since inception, is ‘just’ $288 million, according to Crunchbase.   

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Which means Spotify’s running out of money, and needs a lot more to keep this bonfire raging.  According to a report from Swedish newspaper Dagens Industi, Spotify is seeking a massive investment that would value the company at more than $5.3 billion.  

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That would represent a 75 percent jump in the company’s valuation in just 10 months, and puts an acquisition out of the reach of almost every company on this planet.  It also means that a $100 million investment would give the investor a mere 1.9 percent share in the company.

So who would make that bet?  Even more interesting, Dagens also reports that this may come in the form of a straight loan – ie, the kind you have to pay back with interest – instead of equity financing (with ownership shares).  Spotify declined to offer any comment to Digital Music News on the matter.  “Spotify’s two founders, CEO Daniel Ek and Martin Lorenzon,  don’t want their holdings diluted,” the Dagens report continued.

“Instead, they are inclined to borrow money in order to continue to grow at a rapid pace.”

19 Responses

  1. bubble

    This is what a bubble looks like before it bursts, and when it does, it will leave several healthy competitors in it’s wake like rdio and rhapsody and Google, Microsoft and Apple will step it up and maybe even Amazon gets into the streaming business.

    • Tune Hunter

      Colosal bubble and do not count that big boy will fill the void when it bursts! There is just not enough cash in this “proven business model”.

      In the meantime Shazam is good for 5.3 billion IPO tomorrow – if we switch to mandatory discovery moment “aquisition”.

  2. Corey Tate -

    Or will it? It looks like they’re copying Amazon’s playbook, and Bezos has been riding that train for a long time.

    • bubble

      Maybe, but Amazon started in another catagory which lent easy to music and DVD. Music verticals don’t succeed unless it is part of company willing to use it as a loss-leader (Best Buy, Apple iTunes). Amazon made smart aquisitions into technology that helped it understand consumer behavior and recommedations and built a physical inventory infrastructure. Spotify is merely building an advertising business that will sell it’s users data. That is going to get old for peeople just looking for the free-PC use ride.

  3. Yves Villeneuve

    Spotify likely has a set of BS it tells the public and another set of BS it tells investors.

    Important question to ask is a graph showing annual subscribers total and comparing to annual streams total. The latter hardly growing as fast due to telecom bundle strategy. Another graph to ask is total streams per subscription tier and bundle as well as total revenues per tier and bundle. The former is the best indicator of active subscribers. A third question is to ask for total registered users.

    Music subscriptions bundled with telecom services only equate to 10%, 30% if you believe Spotify, in active music subscribers, a waste of telecom investor money which could precipitate the end of these so-called free Premium subscriptions that artificially inflate music subscriptions and revenues.

    Beware music streaming investor. If reading, you likely have been adequately warned of potential fraud.

    • Yves Villeneuve

      Missed one. A fourth question is annual total subscribers per tier/bundle.

  4. Tune Hunter

    Spoofy is like a snowmobillie on the water!

    Minor engine problem or shortage of fuel and Spoofy will become an ancor …I hope, we need better and brighter future for music and musicians.

  5. Tone Loc

    They all are ripping off the artists and the labels.

    (Unfortunately the labels don’t have a clue and thus have done these deals that end up screwing themselves and their partners/content providers/the bands).

    Free is not the right model and “Free’s” days are numbered.

    Goodbye piracy – a new model is right around the corner.

    Stay tuned…

  6. Saumon Sauvage

    In this business model, everyone loses money — except the few execs who’ve pulled out a good deal of cash already. Certainly, few of their vendors (labels, artists) will keep their product in their inventory if it doesn’t pay eventually. It is destined to fail.

    What I do not understand is the basis upon which Spotify can provide downloaded playlists. What is the legal fiction that permits “temporary” copying of files from a server onto a device without infringing? Why has there been so little made of this issue?

  7. Stephen Aristei - Creative Tal

    OK, here we are….after thousands of songwriters, recording artists, record producers and music publishers have been forced to accept litterally “half pennies on the dollar”, to provide these new “internet ventures”, all capitalized with hundreds of millions of dollars, and being told the “mantra” by all media and record labels “don’t worry, this is the beginining and you will be properly compensated in the future”…..It now turns out that the “model” is not the future….but a ruse to steal the liveihoods of tens of thousands of our creative community…And for What?…..So that a bunch of non creative blood sucking beaurocrats can have an “internet music business” that simply continues to errode the core of the industry further……? So when are we (the creative community) going to stand up and demand that our product “not be used” in these “fly by night” business models that only exist by not properly compensiating the creators for their works ? When are we going to demand that our publishers and record labels stop agreeing to license our music/recording/creations to these companies that simply aid to the errodsion of the intrinsic values we have worked so hard to create and develop ! When ? How about Right Now !

    • Tune Hunter

      Talk to Mr. Francis Keeling.

      He controls (I am sorry has under management) around 60% of tunes and unfortunately to all creators he loves streaming and probably drinks Champagne with Mr. Ek.

      Musicians, as the song goes, it is time to “knock on the labels door”

      • Jeri Mandering

        True. Spotify hasn’t made artist’s much from streaming, but they have paid the labels a shit ton of their VC infused money.

        If they raise more, that’s where it’s going, so somebody, somewhere is getting paid.

        Mr. Keeling definitely knows where the safe is.

        • Tune Hunter

          Top brass makes millions a year (some more than $10 million) and they just shrink and shrink and shrink. Suprised? I am not.

          Politics of big business are almost identical to our Federal Government. A lot of comotion and zero results.

          I am quiter form 3M – on of the best employers on earth.

  8. Frank B

    Somebody correct me if I am wrong, but don’t the record labels have a significant OWNERSHIP stake in Spotify? Are they not able to see a path to making money off a cut of the ADVERTISING revenue, make money off the platform? Does anyone see it as a conflict of interest when they license their catologs to Spotify for fractions of pennies on what they used to get, and only pay the artists based on “sales” or “royalties” generated by the use of the artists music? Have they not created an environment where the LABEL can make money even when their artists do not? Hello…..

    • Tune Hunter

      Obviously they do not see it.

      Shrinking business drives them to desperation.

      Inablitity to notice and activate better oportunities drives curent streaming fata morgana.