Extracting the economics of music streaming through the lens of Deezer’s SPAC – Marketingwithanoy

The growth of smaller European service projects thanks to B2B partnerships

In an expected move, European music streaming company Deezer announced plans yesterday to go public via a French SPAC.

The deal values ​​the company at a pre-money equity valuation of $1.05 billion and at $1.08 billion in terms of enterprise value. These prices are notably similar to those at which Deezer last raised external capital, a round of €160 million in 2018 with a valuation of €1.0 billion on a post-money basis.

Of course, with Spotify competing against Apple Music for global music streaming dominance, and rivals Amazon, YouTube and others competing for market share, you may have forgotten about Deezer, especially if you’re not based in Europe. Still, the deal is here, and that means we got a ton of information about the company.

The Exchange has purchased the company’s release and presentation to investors. Let’s analyze the data and see what the economy of a smaller music streaming company looks like today.

Inside the Deezer SPAC

Starting with some top tracks, Deezer had 9.6 million subscribers by the end of 2021, calling itself the “#2 independent music platform worldwide”. Fair enough; that’s more subscribers than I guessed. The company generated a turnover of 400 million euros in 2021.

Here are the company’s key financials, via release:

Image Credits: Deezer release

A few things immediately stand out, including sluggish revenue growth in 2021 and negative historic growth in 2020. The company has also seen declining gross profit results — and declining gross margins — in recent years. Those declines contrast with rising sales and marketing costs, leaving the company with solid — and growing — deficits.

Even if we allow Deezer to drastically adjust its earnings figures through the adjusted EBITDA name — more here — the results are still a bit blah:

Image Credits: Deezer release

Looking ahead, Deezer said in a release that it has “ambition to reach €1 billion in revenue by 2025.” Again, fair enough. So, really, how well does the company stand a chance of growing in those numbers within the stated time frame?

How will Deezer grow?

As with all SPAC decks, the Deezer presentation is a hoot. Watch the following slide excerpt:

Leave a comment