Deezer Is Losing Subscribers But Growing Revenue

Next Story

Deezer, A Rival To Spotify, Plans To Raise $343M In French IPO

After filing for an IPO on Euronext, music-streaming service Deezer released its IPO documents in preparation for its public listing. The company plans to raise at least $343 million (€300 million). And yet, it is currently losing subscribers.

The French company separates its user base into three categories:

  • Standalone subscribers who pay a monthly subscription (for instance €9.99 per month in Europe)
  • Active bundle subscribers who got a subscription with their mobile phone plans;
  • Inactive bundle subscribers who don’t use the service. You become an inactive subscriber if you haven’t streamed at least 30 seconds of music over the past month.

As of June 30, 2015, Deezer had 1.5 million standalone subscribers and 1.5 million active bundle subscribers. Overall, Deezer has 3 million active users. As for inactive bundle subscribers, 3.3 million people could be using Deezer without paying an additional subscription.

If you look a bit further back in time, Deezer’s user base has peaked at the end of 2014, with 1.3 million standalone subscriptions, 1.6 million active bundle subscriptions and a whooping 4 million inactive bundle subscriptions.

Overall, in December 2014, Deezer had 6.9 subscribers. In June 2015, there were 6.3 million.

Deezer Subscriber Base

And this is key to understanding how Deezer is different from Spotify or Apple Music. The majority of its user base got a subscription through a telecom company. In France, Orange heavily promoted the music streaming service a couple of years ago. But France isn’t the exception as the company has signed the same kind of deals in many countries. As of June 30, 2015, 40 telecom companies sold Deezer subscriptions around the world.

Yet, deals vary from country to country. For example, it looks like Orange isn’t paying Deezer anything for inactive bundle subscribers in France, but that isn’t the case everywhere. That’s why the average revenue per user is higher for standalone subscriptions. In fact, standalone subscribers are finally generating more revenue than bundle subscribers in total.

Screen Shot 2015-10-15 at 10.19.06

While the company reported a $31 million (€27 million) loss for 2014, its revenue is growing like crazy. Deezer reported $106.4 million in revenue for the first six months of 2015, an impressive 40.9 percent jump compared to the same period in 2014.

There are a few key takeaways from today’s numbers. Deezer’s future is in standalone subscribers. If the company fosters its standalone subscriber growth rate, it could drive Deezer’s bottom line. Bundle subscriptions were a great growth driver, but now that many people know what Deezer is in Europe and Latin America, it needs to attract standalone subscribers.

Deezer is also leaving a ton of money on the table. These inactive bundle subscribers are worrying. They could be using Deezer because their Internet service provider or phone carrier is basically giving Deezer subscriptions for free. But they are choosing not to switch to Deezer. The company couldn’t convince these potential users.

It shows that Deezer still has to work on its product to convince all these people that they should be using Deezer over Spotify, Apple Music, their iTunes libraries or even CDs.

  1. Screen Shot 2015-10-15 at 10.18.47

  2. Screen Shot 2015-10-15 at 10.18.59