Spotify raises $1bn in debt

Spotify has raised $1bn in convertible debt according to reports as competition in the online music streaming sector heats up.

The Wall Street Journal yesterday (29 March) reported that the online music-streaming service raised the funding round from investors including private equity firm TPG, hedge fund Dragoneer, plus Goldman Sachs clients, citing sources close to the deal.

Spotify has since confirmed the deal, with the financial services title additionally reporting the terms of the financing round mean that investors will be able to convert the debt into equity at a 20 per cent discount should the Sweden-based company make an initial public offering (IPO).

The move has prompted speculation that a Spotify IPO will come sooner rather than later, and comes nine months after it raised $526m funding round from a host of investors, including Swedish telecoms operator Teliasonera, which valued the company at just over $8bn.

This comes as competition in the online music streaming sector heats up, with rival service Pandora announcing its co-founder Tim Westergreen as its new CEO following the exit of its earlier chief Brian McAndrews, amid a wider management restructure earlier this week.

Spotify, which offers both ad-funded and premium offerings, finds itself in an arms race with iPhone manufacturer Apple, which itself has a music streaming service Apple Music as both seek to sign up new subscribers.

In the last year it made serious inroads to the digital advertising space, firstly with the appointment of Jana Jakovljevic, as its head of programmatic solutions, who is helping to judge The Drum’s first Digital Trading Awards in the USA.

Since then Spotify has opened up its inventory to programmatic media-buyers with a private marketplace (PMP) offering, and has since promised advertisers 100 per cent viewable ads.

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