Would you pay $10 billion for Spotify?
Earlier this week, sources pointed to efforts – by major labels – to sell Spotify for as much as $10 billion, with a 20% cumulative equity interest motivating the effort. Now, according to more sources talking to Digital Music News, Microsoft, Google and ‘possibly Amazon’ are all entertaining the idea of buying Spotify, though $10 billion could be considered an aggressive ask.
‘We’re just f*&king’
Telecommunications companies were initially tipped as prospective buyers, though they may not be the marrying type. Initial sources pointed us to acquisition interest from major telecommunications and mobile giants, though additional sources have since poked serious holes in that intel. One reason is that major mobile companies already have music applications on their decks, which makes a purchase a bit superfluous. That said, alliances between mobile companies and music services continue to commence, with AT&T+Beats and Sprint+Spotify just two examples in the US alone, with plenty of other alliances sprinkled across Europe, Asia, South America, and Australasia, and beyond. That suggests that the best strategy for telecommunications companies might be ‘casual dating,’ especially given the inflexibility and limited upside that comes with a multi-billion purchase. Additionally, technologies and delivery methods can change dramatically in just a few years, making ownership a dicey bet. Against that backdrop, one source pointed to Verizon as a company actively seeking an alliance with a major music service, especially in the wake of Sprint+Spotify. That raises the possibility of a deal with any number of smaller but highly-competent services, including Rhapsody, Deezer, and Rdio, with Deezer a particularly attractive target given its extensive experience linking with telecommunications companies (Orange, Tigo, etc.)
The Lumbering Elephants: Microsoft, Google, Amazon
‘Funny, I thought you just said $10 Billion.’
That said, the usual elephantine suspects have been balking at a double-digit billion price tag, according to our sources, and Spotify may lack the leverage to pull it off. “A big problem is the IPO [initial public offering] market,” one source relayed. “Everyone thinks that Spotify can’t go public successfully, so that limits their options and price.” “This isn’t WhatsApp,” one source relayed after seeing the $10 billion target. “The price would be more like $5 billion.”
That puts some strategic pressure on Spotify, whose investors and stakeholders are apparently growing antsy to sell. That includes the major labels, who feel the time is now to dump this thing, and make multi-billions in the process. “They negotiated big shares in exchange for licensing because there’s more money in that,” a separate source told DMN earlier this week. “But they have to sell it.”
There’s another dangling piece in this puzzle: Songza, the playlist-happy service apparently being looked at by Google. Earlier, rumors pointed to a possible purchase by Google, though sources to Digital Music News are calling that chatter ‘mostly bulls*!t’ and conjecture. Songza has nearly $7 million in capital invested by an all-star cast, with Amazon a key equity owner. More as it develops… Pictured: 10 billion dinar note from the former Yugoslavia (public domain). Written while listening to Laidback Luke.