Music Service Spotify To Secure $200m US Deal

Spotify, the fast-growing digital music-streaming service, is in talks with one of the most prominent technology investors in the US about a new funding round expected to raise more than £100m.

Sky News can reveal that Spotify is in advanced negotiations with Technology Crossover Ventures (TCV), a California-based firm which includes Facebook (NasdaqGS: FB - news) and Groupon (NasdaqGS: GRPN - news) among its investments, over a deal that would see it become a significant shareholder in the music venture.

The talks between TCV and Spotify have not yet been finalised, although the two sides are understood to be close to reaching an agreement about an investment.

One insider said the new fundraising was likely to total in the region of $200m (£125m).

It was unclear on Thursday exactly how big the stake being acquired by TCV in Spotify would be or at what price the transaction would value the music service.

Spotify, which reported in March that it had 6 million subscribers and 24 million active users, has expanded significantly since then but continues to make losses as it searches for a more robust commercial model that will move it into sustainable profitability.

The company has launched a string of new services and joint ventures as it seeks to broaden its consumer appeal and applications.

In September it launched Spotify Connect, which links mobile devices to home audio equipment, and during the last 18 months it has Germany, Australia, New Zealand and Ireland (Other OTC: IRLD - news) , taking the total number of countries in which it has a presence to more than 30.

Spotify's existing shareholders include a host of prominent names from Wall Street and Silicon Valley, including Goldman Sachs (NYSE: GS-PB - news) , DST, Accel Partners and Kleiner Perkins.

The Coca-Cola Company (NYSE: KO - news) became a minor shareholder in Spotify earlier this year, underlining the growing trend for major consumer brands to acquire shareholdings in digital ventures.

Last year, Starbucks (Berlin: SRB.BE - news) invested $25m (£16m) in Square, the mobile payments company set up by Jack Dorsey, co-founder of Twitter, which makes its debut on the New York Stock Exchange on Thursday.

Square is also reported to be considering a stock market listing in the coming months.

The rapid expansion of Spotify, which offers users on-demand access to more than 20 million songs for set monthly fees, has spawned a host of competitors, with Microsoft (Berlin: MSF.BE - news) and Google (NasdaqGS: GOOG - news) -owned YouTube among those planning to establish competing platforms.

Spotify's latest financial statements revealed that its sales surged from €190m (£159m) in 2011 to €435m (£365m) in 2012, while its net losses widened to €59m (£49.5m), compared with €45m (£37.8m) in 2011.

It has also encountered tensions with some major artists over royalty payments despite Daniel Ek, Spotify's founder, recently saying that more than $500m (£310m) would be paid to rights-holders this year alone.

A Spotify spokeswoman declined to comment on the proposed investment, while TCV, which has also invested in Go Daddy and Expedia (NasdaqGS: EXPE - news) , could not be reached for comment.