The deal would place Spotify in the upper ranks of the world’s most highly valued private tech companies. Goldman Sachs Group Inc. and an Abu Dhabi sovereign-wealth fund have agreed to invest in the round, and Spotify has held talks with a range of asset managers and venture-capital firms around the globe.
The terms have been set and the funding round is expected to close in the coming weeks, one of the people said. Nine-year-old Spotify, which previously raised more than $500 million in equity funding, hasn’t established any timeline for a possible IPO.
The money-losing company needs the cash to support its costly business model of paying nearly 70% of its revenue to rights holders as royalties. Spotify said in January it had about 45 million free users and 15 million who pay $9.99 a month for an ad-free version.
The major record companies—Vivendi SA’s Universal Music Group, Sony Corp.’s Sony Music Entertainment and Access Industries’ Warner Music Group—together own under 15% of Spotify and have pushed the company to convert more of its users to paying customers. They believe that ad-based streaming services aren’t able to generate enough revenue to make up for declining sales of CDs and digital downloads.
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