Call it the Pandora effect? The problems of the streaming music model? The crush of competition from Apple Music? Whatever the root cause, Deezer has had to face the music on its plans for an IPO: Paris-based music streaming company has announced that it will postponing its public listing indefinitely “due to market conditions”.
Deezer had planned to raise $343 million (€300 million) in a public offering on the French stock exchange at the end of this month to expand its customer base through marketing, promotions of its free service, and strategic partnerships. Now the short statement issued by the company says it plans to review its fundraising options.
The company also noted that it’s not against the wall financially: “Deezer is well funded and well positioned as it continues to pursue its growth strategy,” the company added in its statement.
Deezer had originally planned to create 8,241,758 new shares at a value between €36.40 and €49.24 per share. Its valuation after the new capital raise would have been between €884 million and €1.088 billion ($1 billion to $1.24 billion).The company was offering its shares for domestic and international investors that closed at the end of the day on October 26 today for domestic, and October 27 for for international investors, with a plan to list on October 30 on Euronext in Paris. It appears that perhaps interest in those initial shares hit a bum note.
Pandora’s loss of nearly $86 million in Q3 could not have helped Deezer’s case much with investors. The U.S. company’s shortfall was viewed as a consequence of the difficulty of competing against a new wave of music services, from privately-held, large companies like Spotify, as well as new efforts from Apple in the form of Apple Music’s radio offering and Google’s YouTube-based product. The chairman also told the WSJ that Netflix’s disappointing Q3 performance also did not help matters.
But there may be enough issues at Deezer itself to give pause. Some highlight the essentially challenging economics of streaming products: the bigger you grow the worse your margins because of licensing payouts to large labels.
Deezer itself made €142 million ($163 million) in revenue in 2014, with a loss of €27 million ($31 million) in the same period.
Deezer, founded in 2007 in Paris, says it has 6.3 million customers across 180 countries, but only 1.5 million are paying customers with the remaining 4.8 million “bundle subscribers” who pay a blended fee to partners such as carriers, giving Deezer a much smaller cut in return.
Deezer has so far not been subject to the same kind of public scrutiny as Pandora, and perhaps the company now sees that it would have been hard-pressed if it were.
Deezer to date has raised nearly $150 million in private backing — a fraction of the $1 billion+ raised by its rival Spotify. Deezer’s investors include Warner Music owner Access Industries.