Although not as widely-known in the U.S., Deezer counts as many as 6 million users across 180 countries. The French music-streaming startup originally began as a side project, when founder Daniel Marhely wanted better access to bands and independent artists. He had launched the idea from his bedroom in Paris back in 2007.
Now, more than nine years later, Deezer is fresh on the heels of a January funding round, where it raised nearly $110 million (€100 million) from Access Industries, along with the existing investor Orange, a French telecom company. Following that success, it's making a bid to enter the saturated U.S. streaming market. (Access, it's worth noting, also owns Warner Music Group, and has invested in many music-related ventures, such as Songkick, a concert-going app, and Beats Music.)
Having brought in $163 million (€142 million) in 2014 revenues, Deezer is up against strong competition. Swedish streaming service Spotify now counts about 30 million subscribers--up from 20 million in June of last year. The company recently raised $1 billion in debt financing, and is reportedly valued at $8.5 billion. Apple Music, the streaming arm of the U.S. tech giant, says it already has around 11 million subscribers, after launching just last summer.
Still, CEO Hans-Holger Albrecht says he isn't too concerned, insofar as each of the three services offers something unique. "Deezer has always been much more focused on being the local champion," he explains of his platform. "We are the challenger to the established big guys."
Can Deezer's strategy to success overseas translate to the U.S.?
The company's catalog of 40 million licensed tracks, many of which are unique to local markets, and not including its 30,000 radio stations, makes it the largest of these players-- for now, that is.
Deezer offers a suite of products aimed to "entertain" the listener, such as Flow, an algorithm-based tool that generates an endless playlist of songs the listener might enjoy based on his or her current or previous preferences.
The company also provides access to audio books, live recording sessions, football (soccer) games, and even comedy gigs, as part of its strategy to get a firm foothold in individual European and emerging markets. In Colombia, for instance, Albrecht notes that as much as 80 percent of the listening is local music, of which 50 percent is religious, so the company has adapted to offer primarily reverential songs. Similarly, a "close up" feature, which is a series of intimate Q&As with artists, aims to give users a deeper understanding of the musicians they follow.
"More than 50 percent of the listening is a lean-back approach from the consumer. They come and they want to be entertained by us, so it's not only creating a playlist and downloading music. It goes beyond that," Albrecht explains.
In addition to Latin America and Europe, Deezer is gaining traction across Asia and Africa, including in South Africa, Tanzania, Ghana and Senegal, as it prepares for the U.S. market to ripen.
Going deep to go broad
Less than two years after dipping a toe stateside through Deezer Elite, its premium service available through Sonos speakers, and through Premium Plus, now available through Bose speakers, the company has "a couple hundreds of thousands" of paid U.S. subscribers, according to Albrecht, though he says his growth plan is a slow, calculated one.
"We always saw that if we want to go into the U.S., we want to do it on a model like we have done in all the markets: Find a partner on the telecom mobile side, and then once we have a partner, start investing. And the mobile carriers in the U.S. have not been very open to music streaming services like [they have been] in other places," Albrecht adds.
To his point, Deezer relies heavily on partnerships with telecom companies around the world, including Orange in France, and Vodafone in Germany, through which it takes a substantial chunk of its revenues; these companies bundle access to Deezer with their data packages and mobile phone subscriptions. The company's other major source of revenue is individual subscriptions, which cost roughly $5 to $6 per user on a global basis (generally 9.90 in whatever the local currency might be.) Then, a very small portion of sales -- about four percent -- comes in through advertising on unpaid listening.
In the U.S., Deezer has inked its first partnership with Cricket, which is AT&T's pre-paid mobile service making a push for more Hispanic customers. But Albrecht still characterizes the U.S. as a "young" market, one in which he'll wait patiently for a major telecom deal to become feasible.
Challenges of the music streaming industry
Despite the early success of companies like Apple Music and Spotify, the music streaming industry faces a number of challenges, including the wavering support of traditional music labels (and a few high-profile artists).
"The biggest challenge is to take everyone with us on this journey when it comes to streaming," says Albrecht. "The opportunity is big, but if people like Adele keep their music out of streaming, it may help her a lot financially for sure, but for the average artist it's a disaster because you need to support the distribution you have."
This issue has evolved into a global debate as competition in the music industry continues to grow; Pandora shares fell by 35 percent last October, when the company announced its $90 million settlement with record labels for its unpaid use of music recorded prior to 1972. Elsewhere in streaming, Netflix shares had fallen by more than 10 percent, when the entertainment service reported disappointing third-quarter earnings.
Such was the climate in which Deezer, having planned to go public on the Paris Stock Exchange by the end of the 2015, ultimately delayed its IPO. The company aimed to sell a roughly 30 percent stake, at a value of at least $342 million (€300 million), for an implied valuation of between $1 billion and $1.25 billion (€900 million and €1.1 billion).
"Our decision was really based on the fact that the market was getting really tough at the time, and the stock markets have continued to do so since then, and if we didn't see the value coming, we said we'd rather do another private funding round," Albrecht said of the move. "If you're private, and if you have good backing from your main shareholders, you can go long-term as well as be more risk-taking, and faster and forward-leaning than public companies are," he added.
Still, as a seasoned executive who put in time at large companies -- including Millicom and Modern Times Group -- Albrecht nods to the benefits of being a public player: "At the same time, to be on the stock market is disciplining, because it disciplines people to look at the numbers every quarter and deliver them," he says. An IPO, he adds, is still a possibility in the future.
Swimming upstream, slow and steady
With its new funding, Deezer plans to build out its presence in the most promising markets, namely France, Germany, and the U.K., while continuing to provide more "entertainment" features beyond streaming. Just last month, the company announced its integration with the Apple Watch, where users can now access the Deezer app.
Yet in many ways, says Albrecht, speaking from his sun-splashed offices on the Rue d'Athènes, running the company feels like running a startup.
"Everything you do is new territory. Nothing is proven. You have data, but to a certain extent, you have to trust your gut," he says. "In that respect, it's very entrepreneurial."