Spotify appears to be the victim of it's own success. The more people listen, the more that they have to pay to the labels. And for a freemium on demand music service, like Spotify, making those payments can become increasingly difficult. That is why, according to multiple sources, Spotify is chasing a major new round of funding.
Spotify has already raised $100 million at a $ billion valuation. Now they are going back to the investor well, reportedly asking for a similar sum based on a $3.5 billion valuation. TCV and Andreessen Horowitz have already passed on the deal, according to Business Insider.
In addition to the $3.5 billion valuation, there other reasons that investors are wary of Spotfy "With most other businesses, if a supplier makes unreasonable demands, a retailer can turn to other providers, says serial music tech entrepreneur Michael Robertson. "Since copyright law gives record labels and publishers a government-granted monopoly, no such option is possible with music. Digital vendors have only two options: Accept the terms or not include those songs in their offering."
Too Big To FailIn the end, will Spotify be able to raise tens of millions more to keep going?
I wouldn't bet against them. Spotify is still a sexy investment and CEO EK & Co. are smart operators. They've grown impressive market share quickly; and that has value.
Additionally, in parts of Europe Spotify is already the second largest source of label income after iTunes. For those labels, some of who are part-owners of the music streamer, that makes Spotify too big to fail.
