Analysis

Deezer claims $1.4bn valuation with TV Azteca partnership in Mexico


Tags:

Deezer is doubling down on Latin America courtesy of a partnership with Mexican broadcaster TV Azteca that it says values the music streaming service at €1.3bn ($1.4bn).

That’s based on a $40m investment in Deezer over “a multi-year period”, and would mean that Deezer has not just maintained its ‘unicorn’ status – the term used for companies worth more than $1bn – but has grown in value by 30% since its $185m funding round in August 2018.

The deal isn’t just about investment. TV Azteca will be promoting Deezer across its television networks in Mexico, with more marketing through other subsidiaries of its parent group Grupo Salinas – for example retail chain Grupo Elektra.

On the TV side, Deezer is taking over a weekly show called Mugo Live on Mexican TV channel Azteca Uno, which has two million viewers, and renaming it ‘Deezer Live’. Deezer will also acquire social music app Mugo, although it is shutting it down and offering users a free Deezer Premium trial, rather than keeping it running.

This is part of Deezer’s wider focus on Latin America, a continent where it says it has been punching above its (global market) weight – including being the second largest music streaming service in Brazil.

“Mexico is one of the fastest growing music markets in the world. We are excited to bring Grupo Salinas on board as a strategic partner and welcome them as a new investor in Deezer,” said CEO Hans-Holger Albrecht in a statement.

“We see huge growth potential in countries like Mexico, Colombia and Argentina and are investing in marketing and subscriber growth. Our experience and number two position in Brazil will help us become the main challenger in the region.”

According to global music industry body the IFPI, Latin America was the region with the highest recorded-music growth rate in 2019: revenues grew by 18.9%, with digital now accounting for nearly three quarters of the market.

The region is still only 3.9% of the global market, according to the IFPI, but that has more than doubled from 1.8% in 2010, with countries like Brazil and Mexico becoming exciting (and influential, in terms of helping Latin artists break globally) streaming territories.

Mexico specifically was the 16th biggest recorded-music market in the world in 2019, growing by 17.1% year-on-year, while for streaming it was the 12th biggest market.

Deezer will be hoping that the TV Azteca partnership can fuel its popularity there. The company currently has 16 million monthly active users globally, but its growth in recent years has been much slower than bigger rivals including Spotify, Apple Music and Amazon Music.

Deezer first bulletin story

Through covering Deezer since its launch in 2007 (see above: our bulletin story was… slightly flippant) Music Ally has a lengthy email archive of the company’s press releases, including its ‘About Deezer’ boilerplate texts giving user numbers.

Back in October 2012, Deezer said it had 26 million users globally, but a year later the figure was revised to 10 million active users – a difference in definitions between ‘users’ and ‘active users’ rather than 16 million people ditching the service.

By September 2014 Deezer was claiming 16 million monthly active users, but this dropped again to 10 million in December 2016; grew to 12 million in May 2017; 14 million in February 2018; and most recently 16 million in February 2020.

As for paid subscribers, Deezer’s official figure in November 2013 was five million, which was updated to six million in December 2014.

In the company’s filing to go public in September 2015 – that IPO would later be abandoned – Deezer said that it had nearly 6.4 million subscribers, but that more than 3.3 million of them were inactive. They had Deezer bundled into their mobile contracts, but weren’t using the service.

Early last year, Albrecht told Music Ally that the company ended 2018 with seven million subscribers, having considerably reduced its reliance on telco bundle deals.

And now? Deezer doesn’t list a subscribers figure in its press releases at the moment, but Midia Research recently estimated that at the end of March 2020, Deezer had a 2% share of the 400 million global music subscribers. Because its blog post rounded the percentages, this could cover a range between six and 10 million (i.e. 1.51% to 2.49%). Music Ally’s sense is that it’s closer to the upper end of that range.

Midia boss Mark Mulligan also noted in that piece that “Deezer is enjoying success in emerging markets – Brazil especially – with pre-pay mobile bundles” as a key differentiation to some of those bigger rivals.

That’s the key to Deezer’s announcement today with TV Azteca and Grupo Salinas: an intent to cement its status as the ‘challenger’ service in Latin America. Bear in mind, too, that Deezer is majority-owned by Access Industries, the investment group that also owns a controlling stake in Warner Music Group.

That gives the company financial muscle belying the size of its user base, while investment-slash-marketing-partnerships with the likes of Grupo Salinas (and in the Middle East and North Africa (MENA), with Kingdom Holding Company and Rotana Group) also give it a fighting chance in these developing markets specifically.

2020 has also seen a flurry of activity from Deezer, including: a telco-billing deal in the MENA region; the launch of live concerts (pre-pandemic) based on some of its big playlists; a series of exclusive DJ mixes; a price cut for its Deezer HiFi high-res music tier; launching in Turkey; and a deal with Chinese tech firm Huawei to be promoted in its smartphone app store.

Deezer has also been the only global streaming service so far to throw its weight behind the concept of ‘user-centric‘ streaming payments, where the royalties for each subscriber only go to the music they listen to, rather than into a service-wide pool to be divided by overall streaming share.

In September 2019, Deezer announced its hopes of launching a trial of user-centric in France, for recorded music only, with more than 40 labels signed up. However, the major labels were not on board then, and nine months later, the trial has yet to launch.

Stuart Dredge

Read More: Analysis News
Leave a Reply

(All fields required)