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Spotify braces for Apple with $526 million in new money

Spotify braces for Apple with $526 million in new money


Swedish company has raised more than $1 billion but still isn't profitable

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As Apple details its own streaming music service ahead of an imminent launch, incumbent industry leader Spotify is building its defenses against the oncoming onslaught, turning to international investors to strengthen its financial position. The Swedish streaming service yesterday closed a $526 million funding round, an influx of cash that The Wall Street Journal says brings Spotify to a valuation of $8.4 billion, up from $5 billion last September.

Spotify is now valued at $8.4 billion

Spotify began this latest funding round in early April, and was originally seeking $400 million to reach a valuation worth double that of competitor Pandora. The successful round means that Spotify has now pulled in more than $1 billion from investors, but even with that influx of money and 15 million paying subscribers, Spotify's future is not entirely secure. The company's business model means it still operates at a loss — the Swedish firm has to pay almost 70 percent of its revenue to label owners and musicians for rights and royalties.

The half-billion dollars taken during during this funding round show that the business world still believes in Spotify, but it will need to either renegotiate how it pays labels, or start convincing more of its 45 million free users to part with their money if it wants to stay on top in an increasingly crowded marketplace. The company is already attempting to diversify by adding videos and podcasts but its competition is growing too. Established competitors such as Rdio and Pandora are still fighting for users, while new entrants backed by big names, such as Jay Z's Tidal, enter the fray. Above them all looms Apple, whose entry into the market was met with a flippant tweet from Spotify CEO Daniel Ek.