Spotify highly valuated in move to American market

According to the Guardian, Spotify is currently bidding for significant investments in order to make a move across the Atlantic. Rumour has it that the company reckons with a value of one billion dollars.

Potential investors are Digital Sky Technologies, that earlier acquired a share in Facebook and the Californian venture capitalist Kleiner Perkins, that holds shares in Zynga, the maker of FarmVille, and Twitter.

It is a good sign that Spotify is valued so highly. That underlines confidence in the future of digital music services. At the same time, a second internet bubble could be emerging. Over the last few months, Facebook, Groupon and Twitter were valued at 50 billion, 15 billion and 10 billion respectively.

Spotify reaches a significant chunk of the European market. Over 10 million people tune in to the free version of the online megajukebox. The number of people with a paid for subscription has not yet broken the limit of one million. In 2009, Spotify posted a significant loss, while artists do not always agree with the level of their fees they receive.

It will be interesting to follow Spotify’s entrance to the American market. In many European countries, Spotify was the first service of its kind. In the States, streaming music services are far from rare. Services like Pandora, Rhapsody and Lala have been active for years. However, Spotify does bring a new model, with its freemium service. Users may opt for free, ad supported listening or for paid subscriptions without the ads and with more control over the tracks, like downloading them of playing them on mobile devices.

The four big studios are still sceptical about the feasibility and the profitability of the freemium model. Negotiations have been going on for months. Last week, EMI and Sony shook hands with Spotify on the deal. Warner and Universal are still in two minds.

Source: The Guardian