Paris-based Deezer, a music streaming platform, announced on Monday that it is going public on Euronext Paris via a SPAC deal, valuing the company at just over €1B. The Spotify competitor will merge with the “blank-check” company I2PO headed by former WarnerMedia executive Iris Knobloch. The deal is expected to close around July, 2022.
After the merger, the combined company will benefit from the cash held by I2PO in its IPO escrow account and from the cash raised through private investment in public equity (PIPE). The total amount secured to date through PIPE is €135M.
The PIPE will be subscribed by the existing shareholders of Deezer, including Access Industries, UMG, Warner Music, Orange, Kingdom Holdings, Eurazeo, and Xavier Niel, as well as a select group of long term French and international investors, including Groupe Artémis, Bpifrance, and Media Participations.
Jeronimo Folgueira, CEO of Deezer, says, “Today marks an important milestone in Deezer’s history as we embark on a journey to become a publicly-traded company on Euronext Paris. I am thrilled to partner with I2PO who will provide us with the expertise, the global network and the capital we need to execute our strategic plan.”
A global streaming service
Founded in 2007 by Daniel Marhely, Deezer is a global provider of music streaming services with a catalogue of more than 90 million tracks. It provides millions of subscribers with access to music, as well as live radio, podcasts, and audiobooks. The company’s users, in more than 180 countries, can stream audio content on various devices.
Besides, Deezer claims to have become one of the earliest French unicorns and the second largest independent music streaming platform globally.
As per the Wall Street Journal, Deezer is currently unprofitable, but it hopes to be profitable by 2025 as per the current deal. With 9.6 million subscribers and €400M revenue for the year ended December 31, 2021, the company has continued its growth in the music streaming market. The company estimates that it will generate a revenue of approx €455M for the financial year ending December 31, 2022, representing a 14 per cent revenue growth.
According to Deezer, subscribers are expected to grow at a 10 per cent CAGR between 2020 and 2027 with the market size reaching $41.6B. The estimate is on the back of music streaming subscriber penetration increasing from 8 per cent of the worldwide population in 2020 to 14 per cent in 2027.
The company’s biggest markets are France, Brazil, and Germany, and it wants to expand in the US and the UK. Deezer intends to grow its efforts toward large attractive markets through its partnership-first strategy and to focus on product innovation and brand differentiation by being the “Home of Music” connecting fans and artists around the world.
Deezer’s growth strategy
The company’s growth strategy is based on the four strategic pillars:
- Focus on large markets: Focus on selected, large music and audio streaming markets with consumers showing a willingness to pay for music streaming services and attractive economics in terms of acquisition costs, churn, and average revenue per user
- Partnership-led growth: Implementation of partnership-first strategy in music streaming markets to replicate its successes in France and Brazil, illustrated by a recent signing of RTL partnership in Germany. Key attractive markets include the US, the UK, Canada, Italy, and Spain, totalling a market opportunity of $20.1B in revenue in 2027. This strategy provides a cost-efficient entry into new markets to quickly gain market shares and build brand equity
- Differentiation: Be the “Home of Music” for fans and artists by focusing on product innovation and brand differentiation around music
- Operational Excellence: Data-driven and ROI-based decision making with a focus on pricing and marketing efficiency and cross-selling into new verticals to expand the value and streamlined operations to support the company’s strategic focus
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