In France, it is the biggest startup funding round ever. Warner Music Group’s owner Access Industries and previous investor Idinvest are investing €100 million ($130 Million) into music streaming startup Deezer. €25 million ($32.6 million) will be used to buy out previous shares. Orange previously had 11 percent of the company and toyed with the idea of an acquisition. As it is not reinvesting, this plan seems to have ended.
Back in February, the company was already looking for a potential investor to stay relevant in the music streaming space. Even though the company is doing well in its country of origin, it is still at the very beginning of its international expansions.
Yet, Access Industries is clearly not the best candidate for the job. Major music companies have a small stake in Spotify, but it is really tiny compared to Deezer as the investment occurred in the early days of Spotify. Since then, their shares have been diluted. Moreover, Spotify’s royalties represent an indispensable source of revenue contrarily to Deezer’s royalties.
The investment first reported by Le Figaro represents a major shift for the French company. Even though Orange previously hinted at a potential exit, the telecom company has recently rethought its plans when it comes to content. Many subscribers come from bundles with mobile plans. So far, Orange is still offering that possibility.
Music companies, and especially Warner Music Group, will have a major influence on Deezer’s future. It is not unusual but it represents a double-edged sword. Streaming companies are very dependent from their deals with the music industry.
Having a major stake in the company can make the negotiating process one-sided when the contract is up for renewal. It remains to be seen whether multiple streaming companies can survive in that capital intensive industry.
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