14 DAY TRIAL // Spotify, for all its troubles, is doing quite alright. In fact, it's now raising new funding at a huge valuation, in the range of $3.5 billion, €2.64 billion. That's a big number for a company that still isn't making any huge amounts of money and may not be profitable yet. Granted, Twitter is worth twice as much and makes a lot less money.
The latest valuation figure for Spotify was $1 billion, €755 million last year, so the new number is quite a stretch. Of course, in the meantime, Spotify has pretty much locked in the US market and has started expanding in Europe again.
That's not to say Spotify will be able to raise the money, though you shouldn't be surprised if it does. But many investors are reluctant to pour big amounts of money into a company that is entirely dependent on licenses.
There are several big problems with this. For one, it may lose those licenses, as unlikely as that may be, leaving it completely useless to its users. What's more, most licensing deals are non-transferable, so if someone buys Spotify they have to negotiate new, expensive deals with the music labels.
This would explain why MOG, a Spotify competitor which, despite being available in the US long before Spotify, hasn't managed to gain as many users as the European competitor, is said to be selling for a lot less.
MOG is in the process of being acquired by HTC via Beats Electronics, though the deal isn't done yet. MOG will only go for a few tens of millions of dollars - there are some indications that it may even be less than that. MOG has raised $25 million, €18.9 million from investors so far.
MOG has some 500,000 users, but maybe less, and only some of those are paying. But it's not the users that Beats is buying. And it's not the licenses with the music labels either. Beats is only buying the platform, the technology, explaining the low price.