Spotify financing raises valuation to $1 billion

Digital streaming music service Spotify has raised $100 million in new financing at a valuation of over $1 billion. Citing a source briefed on the matter, The New York Times reports venture firm Kleiner Perkins Caufield & Byers will invest $50 million in Spotify, claiming a 5 percent stake in the company--the round also includes contributions from DST Global, the Russian investor that has also acquired stakes in Facebook and Groupon. The source adds Spotify will target the new financing to fund its international expansion and introduce new consumer features.

Spotify's music streaming service now boasts over 10 million registered users across Europe. Sources indicate that in recent weeks, the startup has inked U.S. distribution agreements with Sony Music Entertainment and EMI Music, heralding a significant breakthrough in Spotify's attempts to extend its platform to the North American market. Conventional wisdom says that Spotify must secure at least three of the four major label catalogs to gain significant traction among American consumers; Warner Music Group and Universal Music Group remain the holdouts.

Insiders say major American record labels are pressuring the firm to jettison its current free content approach in favor of a guaranteed revenue model, citing the impasse as the culprit behind Spotify's absence from the U.S. market. While the vast majority of Spotify users in Western Europe tune in to a free, ad-supported version of the service, reports indicate that the major labels want Spotify to follow the lead of rivals like Rhapsody and eMusic by introducing premium monthly subscriptions to U.S. consumers, enabling the music industry to share in resulting revenues.

In January 2011, mobile music discovery solutions provider Shazam agreed to integrate the Spotify service, offering iOS and Android device users in Europe direct access to full-track versions of songs they've tagged and identified. The Shazam solution pinpoints music from any source, regardless of ambient noise--Shazam will include the new Play in Spotify feature in both its free and premium applications, enabling users to identify new music, hear the song in their entirety and add that track to their digital catalog.

For more:
- read this New York Times article

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