Europe’s smallest service projects growth through B2B partnerships
In an expected move, European music streaming company Deezer yesterday announced plans to go public through a French SPAC.
The deal values the company at a pre-money equity valuation of €1.05 billion and at €1.08 billion in enterprise value. Notably, these prices are similar to those at which Deezer last known to raise external capital, a €160m seed round in 2018 at a €1.0bn valuation on a post-money basis. .
Naturally, with Spotify battling Apple Music for global music streaming dominance and rivals Amazon, YouTube and other competitors for market share, you might have forgotten about Deezer, especially if you’re not located in Europe. Still, the case is ongoing, and that means we’ve received a wad of company information.
The Exchange obtained the company’s press release and the presentation to investors. Let’s analyze the data and see what the economics of a small music streaming business look like today.
Inside the Deezer SPAC
Starting with some high-profile numbers, Deezer had 9.6 million subscribers at the end of 2021, leading it to call itself the “#2 independent music platform in the world.” Fair enough; That’s more subscribers than I expected. The company generated 400 million euros in turnover in 2021.
Here are the main financial data of the company, via a press release:
A few things stand out at once, including slow revenue growth in 2021 and historic negative growth in 2020. The company has also posted declining gross margin results — and declining gross margins — in recent years. These declines contrast with rising sales and marketing costs, leaving the company with large and growing deficits.
Even though we allow Deezer to significantly alter its earnings numbers through the Adjusted EBITDA moniker – more here — the results are still a bit bland:
Looking ahead, Deezer said in a statement that it has “the ambition to reach €1 billion in revenue by 2025”. Again, fair enough. So really, how well did the company manage to hit those numbers in the stated time frame?
How will Deezer grow?
As with all SPAC decks, the Deezer presentation is a hoot. Look at the following slide excerpt: