Breaking: Google Acquiring Spotify In $4.1 Billion Deal…

Google is now planning to acquire Spotify in a deal valued at roughly $4.1 billion in cash and equity, with a formal announcement slated for this week.  The acquisition, first reported by the Wall Street Journal early this morning, would create a clear frontrunner in the music subscription space and give Google a massive edge over competitors like Apple.

It may also play a critical role in the upcoming launch of ‘YouTube Music,’ a forthcoming, subscription-focused update from Google.  Other Google music-related properties are struggling, while Spotify is already established in the space.  The news comes just as Spotify is reaching its seven millionth paying subscriber.

The deal, expected to be finalized today (April 1st) with customary closing details coming later, would also validate the very massive and risky investments made on Spotify, particularly by Goldman SachsKleiner Perkins Caufield & ByersNorthzone Ventures, and billionaires like Sean Parker and Li Ka-shing.  That group is estimated to have bet north of $200 million on Spotify, with a resulting valuation of about $3 billion.  All for a company that lacked any profit and carried questionable financials, but now seems to make perfect sense.

Spotify CEO Daniel Ek is now likely to be praised as one of tech’s most important entrepreneurs and visionaries.  “I’m thrilled by this acquisition and the belief that Google has placed in us,” Ek offered in a statement.  “While we’ve operated as healthy competitors to this point, I think we always considered joining together to help build the future of music consumption and a place for artists to grow.”

Board member and investor Sean Parker, one of the original creators behind Napster, expressed a sense of relief and validation.  “Napster was really an experiment that gave me a glimpse of what music would be in the future,” Parker said.  “Now, fifteen years later, Google is helping us fulfill that vision in the best, most powerful way possible.”

Also gaining big are the major labels, who each own a piece of Spotify and stand to gain enormously from the acquisition.  But one insider noted that Goldman Sachs was unhappy with the arrangement, simply because a far larger amount of money could have been earned through a Wall Street initial public offering (IPO).  “They’re only making a fraction of what they could have off of an IPO,” the source relayed.

And what happens next?  According to dealmakers on the Google side, it remains unclear exactly what happens to Spotify after the acquisition is complete.  One source pointed to “an expensive acqui-hire,” while noting that Google may be more interested in the underlying technology, not the consumer-facing app.  As noted above, Google is busily transforming its massive music platform, YouTube, into a smoother experience for fans.  That contains far more content than Spotify, though that content is far less organized, far less portable, and generally more difficult to access.

We’ll update as more aspects of the deal emerge.

31 Responses

  1. Anonymous

    So YouTube’s attempt to censor DMN wasn’t today’s joke then?

  2. John R.

    Oh! Oh!
    I bit first!!

    「(゚ペ)  (*′ノ0`)

  3. Dr.X

    cool made up story, how about focusing on RIAA 2013 numbers that were reported 10 days back?

    For a news site with “digital” in the title, it’s strangely quiet about RIAA 2013 #


    Streaming Revenue: $1.0328 billion USD (up 59%)
    Singles Download Revenue: $1.623.6 billion USD (up 6.7%)
    Album Download Revenue: $1.205 billion USD
    CD (physical): $2.4856 billion USD


    Streaming Revenue: $1.439 billion USD (up 39.3%)
    Singles Download Revenue: $1.569 billion USD (down 3.4%)
    Album Download Revenue: $1.234 billion USD (up 2.4%)
    CD (physical): $2.1235 (down 14.6%)

    Streaming revenue 2011: $650 mil
    Streaming Revenue 2012: $1.0328 billion USD (up 59%)
    Streaming Revenue 2013: $1.439 billion USD (up 39.3%)

  4. note

    only $4.1 billion?

    that make this April Fool stuff less believable.

  5. Realist

    Nice one. Although it does make perfect business sense.

  6. Sam

    This is even worse than Lefsetz’s attempt at an April Fool.

  7. Michel Melchor

    Wasn’t this same article posted on April Fool’s Day LAST year…?

    • Willis

      I also recognized it as a recycled one. Good for the digital environment?

  8. Paul Resnikoff

    Also, readers, I should probably also tell you at this time that Google will be acquiring Digital Music News as well. It will be sold for $4,100, which will also include my salary and performance-related payouts over the next 8 years. I will also be receiving a parking space for my bicycle and access to snacks.

    • Vladamir Ziskovik

      Is that $4,100 in cash or equity, Paul?

      • Paul Resnikoff

        Equity, non-preferred shares. They can only be cashed after 5 years.

  9. zog

    This isn’t April fools Lefsetz’s is a fool , rambler his comments on Taylor Swifts career?

  10. Trouble InRiverCity

    This isn’t in the WSJ. It’s an April Fool’s Day joke.

  11. stefan hajek

    now Mr Zuckerberg must buy Deezer before somebody else….
    oops, check the link to the wall street journal ;-))

  12. arnold

    I swear if this was real…
    Google is bad enough as it is. Just like apple, they keep sucking in startups that could be great but then they have to ruin it with their Googleish stuff and advertisements and connecting to Google Plus and stuff. I am glad this is fake.:)