Media

Spotify’s valuation soars over $4B after raising a fresh $250M

Image Credit: Spotify
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Spotify just raised a lot of money — $250 million to be precise, according to a Wall Street Journal report citing multiple anonymous sources familiar with the matter.

That means it’s nearly doubled the total amount of its previous funding to a whopping $533 million. We’ve reached out to Spotify for confirmation about the new funding and will update this post with any new information.

Now, you may be wondering if possibly the most popular streaming music service in the world really needs another quarter billion dollars. The answer isn’t entirely clear, but Spotify may need more capital for a few reasons.

One of the two largest expenditures for Spotify is likely expanding its music service into more international markets. Spotify is available in 28 markets across the globe, with the latest expansions happening in Hong Kong, Malaysia, Singapore, and Mexico. The WSJ reports that the company would like to move into Japan as well as some other markets in the near future.

Spotify may also need the new funding to pay for hefty music licensing fees. For perspective, the company spent 70 percent of its total revenue in 2012 on content. That’s to be expected considering that Spotify currently has 24 million active monthly listeners and 6 million paying subscribers.

The larger question is, is Spotify depending on the new funding to help pay off these licensing fees, or is it just waiting on revenue to increase from its continued growth and wants more cash to make sure that happens. The company has lost money over the last few years, too — with the total loss increasing the last three years. It still may be another 18 months or longer before we really know if Spotify’s long-term business strategy is working.

And while Spotify is firmly focused on growth and maintaining a large, varied library of songs, the company has also been adding new features to the service, building its advertising model for the free ad-supported version of the service and cultivating its own application platform that enables developers build music services on top of Spotify.

The new funding round was led by Technology Crossover Ventures. The funding also bumps Spotify’s estimated valuation to “north” of $4 billion, according to WSJ’s sources. Previous reports placed the company’s valuation closer to $5 billion.

More about the companies and people from this article:

Spotify is a Swedish DRM-based music streaming service offering streaming of selected music from a range of major and independent record labels, including Sony, EMI, Warner Music Group, and Universal.[ Launched in October 2008 by Swedi... read more »

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