Months after Deezer abandoned plans for its IPO, the music-streaming service has announced a Series E funding round of €100m ($109.3m).

Two existing investors are involved: Warner Music Group owner Access Industries led the new round, while longtime Deezer partner Orange also participated.

“It’s very good news: it gives us the flexibility now to proceed on all our growth strategies,” Deezer chief executive Hans-Holger Albrecht told Music Ally ahead of the announcement.

It shows the confidence of big investors like Orange and Access in the streaming model, and in the company. And it gives us the flexibility to continue the business in the next 2-3 years.”

Access and Orange already had significant stakes in Deezer, holding 26.9% and 10.66% of its fully-diluted capital respectively even before this funding round, according to the company’s IPO filing last year.

Albrecht said that the new €100m funding round has turned out to be a more attractive option than an IPO, after “the market turned very tough” last autumn when Deezer was about to go public – meaning that “the valuations we were looking for were not coming through”.

He told Music Ally that Deezer decided that in its search for cash to fund the next stage of its growth, it was “better to go private, instead of going for a fire-sale now”.

The funding round enhances Access Industries’ position as one of the heaviest investors in music. The company, which was founded by Len Blavatnik, led a previous €100m funding round for Deezer in 2012 (although in the IPO filing this was listed as a €70m investment).

Access had previously paid $3.3bn for label group WMG in 2011, and went on to lead a $60m funding round for Beats Music in 2013 – the streaming service later acquired with its parent company Beats Electronics by Apple to form the guts of its Apple Music service.

In 2015, Access also launched a joint venture with music management company Turn First Artists, then invested $10m in live-music technology company Songkick.

“They are really innovative: they are really trying to find new ways and new investments,” said Albrecht. “They are very entrepreneurial – they trust management – but they are also long-term in their thinking. When you have that entrepreneurial vision combined with patience, it’s very good.”

Orange’s involvement in the new funding round is also notable, given the companies’ long partnership, but also the speculation about how it might develop in the future.

Deezer’s IPO filing revealed that its deal to bundle subscriptions with Orange’s mobile contracts in France generated 56% of the streaming service’s revenues in 2012, although this fell to 38% in 2013, 28% in 2014 and 24% in the first half of 2015.

The document also revealed that Orange France’s strategy of bundling Deezer for new customers ended at the close of 2014, with minimum guaranteed payments from the telco to Deezer due to end in July 2016, when their mutual-exclusivity partnership also expires.

The fact that Orange is part of the funding shows the partnership is better than ever, and you see the value for them of being engaged in music,” said Albrecht. “The partnership is long-term for sure.”

Telco partnerships – and bundling deals in particular – have been a key element in Deezer’s growth so far. However, the IPO filing raised questions about the strategy: it revealed that of Deezer’s 6.34 million subscribers at the end of June 2015, 3.34 million (53%) were “monthly inactive bundle subscribers” – people who had Deezer bundled in to their mobile contracts, but were not using it.

Albrecht said telcos remain important for Deezer, but that the company is moving away from “lifetime” bundle deals.

“Telcos are still the best way to penetrate markets in a very efficient way, particularly when you go to the emerging markets, where it is the only way: you need them as a partner on the billing side there too,” he said.

“The only thing that is changing is that we don’t want to do what we did in the early days, which is to bundle the product in for lifetime. We would rather use the telco as a sales tool or sales support.”

Deezer is currently the third largest music subscription service in the world, behind Spotify (which had 20 million subscribers in June 2015, but is thought to have grown to 25 million since then) and Apple Music (which recently passed the 10 million subscribers milestone).

At the end of June 2015, Deezer had 1.54 million standalone subscribers and 1.46 million monthly-active bundle subscribers, giving it three million active subscribers overall, plus another 796k of inactive bundle subscribers who were still generating revenue for the company.

Albrecht said that the €100m funding round will help Deezer compete against well-resourced rivals, from flush-with-VC-cash Spotify to those owned by wealthy tech giants like Apple Music, Google Play and YouTube Red.

“You need to have a certain scale in the market. We are number three in the world in terms of the number of subscribers, and that is what you need,” he said. “If you are sub-scale – the Rdio case for example – it is tough to compete. You are seeing the consolidation.”

A growing number of industry experts are wondering whether the streaming market will ultimately come down to Apple, Google and Amazon, with even the largest pureplays like Spotify and Pandora swallowed up by one of the bigger tech fish.

Albrecht, understandably, thinks the pureplays have a future. “We have been around for seven or eight years now, and we have been living with this competition for seven or eight years too. Google was there with YouTube,” he said.

“I think Spotify and Deezer have the strength that you need to carry you through. And you can’t just buy market share. Even Apple: 10 million subscribers is a great number, but if you consider they have 700 million credit-card details [for iTunes and iOS users] perhaps it should be more. It’s not only a question of money.”

Deezer says it will use its new funding round to up its customer-acquisition efforts and continue developing new features for its service, including building “more programmed experiences for music fans and audio enthusiasts”.

That’s a direct reference to Deezer’s expansion into spoken-word content: it has doubled its non-music content to more than 40k radio shows, audiobooks and podcasts in recent months, while also adding sports content including live football commentary to its service.

“Traditional linear radio and on-demand listening are coming together, and consumers want both things in one product,” said Albrecht, who said that even Deezer’s music data shows this trend in action.

On average, the consumer spends more than half an hour a day with us listening to music, and more than half of this time is the radio-like function where he pushes one of the dedicated playlists to be entertained,” he added.

“This is one of the big opportunities I see on the streaming side, but you need to have the active part and the entertainment part in one place. We are at the beginning of a very exciting time.”

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