French music streaming service Deezer goes public through merger with SPAC.
SPAC is a special-purpose acquisition company, "a company specially created for the takeover". We wrote more about the principles of operation of such companies in a separate review.
Deezer to team up with I2PO, led by former WarnerMedia executive Iris Knobloch. The deal will bring the music service up to 425 million euros for investment in development. The deal is expected to close by the end of June 2022.. The capitalization of the company today is about 1.4 billion dollars.
The company has not yet made a profit, but aims to reach €1 billion in revenue by 2025 and be profitable by the same date. In 2021, the company earned a revenue of 400 million euros. Deezer's operating loss increased by 36% to 120.6 million euros, up from 88.3 million euros in 2020. In 2022, the company plans to receive about 455 million euros in revenue, which is 14% more, than last year.
Deezer said in a statement, that the majority of existing shareholders will remain investors in the company, including Saudi billionaire Prince Al-Waleed bin Talal's Kingdom Holding and Access Industries, billionaire Len Blavatnik's industrial conglomerate, which is controlled by music giant Warner Music. Other Deezer investors include: Universal Music, Sony and French carrier Orange.
Clash of the Titans
Deezer plans to snatch a growing share of the music streaming market from such giants, like Spotify, Apple и Amazon, which control about a third of the market.
Deezer currently has 9.6 million subscribers, 90 million songs in the service library, as well as podcasts and audiobooks. Its main markets are France and Brazil, where the service is 29% and 17% respectively.
For comparison: Spotify has 180 million paying subscribers and 406 million monthly active users, including free tier. But Deezer offers HiFi audio, while Spotify is still lagging behind in this regard. Deezer has also expressed interest in a more musician-friendly payment model., while Spotify is under fire from artists for low payouts.
Separation of the market for streaming music services by subscription
| Spotify | 31% |
| Apple Music | 15% |
| Amazon Music | 13% |
| Tencent Music | 13% |
| YouTube Music | 8% |
| NetEase | 6% |
| Deezer | 2% |
| Yandex | 2% |
| Other | 10% |
31%
Difficulties with accommodation
Founded in 2007, Deezer tried to IPO in 2015, but then reversed course and raised two rounds of investment in 2016 and 2018, which received over 150 million euros. In 2015, investors doubted the profitability of streaming, because of another music service, Pandora, at the same time lost nearly $86 million in one quarter.
