Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth
Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth

Music subscription service Spotify is raising money at a $4 billion valuation, according to a report Thursday at the New York Times. The report says Goldman Sachs is set to invest $100 million and the round -- which will not close for "many weeks" -- could fetch as much as $220 million.

Reports that Spotify is raising money at a $4 billion valuation first surfaced in the Financial Times in late March (Business Insider put the valuation at $3.5 billion). The Financial Times quotes one source as saying the company wanted to build up cash reserves of "hundreds of millions of dollars" in preparation for future licensing negotiations with rights owners.

Business Matters: Spotify's Reported $4 Billion Valuation in Perspective

Although Spotify could generate upwards of $889 million in revenue in 2012, a figure offered by CEO Daniel Ek in an interview in April, it is unlikely to soon turn a profit. Instead, the company appears to be more focused on three other goals: growth, growth and growth.

Daniel Ek Talks Spotify's Growth at Entertainment Law Luncheon

A $4 billion valuation would put Spotify in the upper echelon of music companies - although a firm market value would not exist until it is acquired or has a public stock offering. The whole of Warner Music Group was acquired for $3.3 billion by Access Industries in 2011. EMI's recorded music division was acquired by Universal Music Group in November for $1.9 billion. A Sony-led investment group brought EMI's publishing division for $2.2 billion. Pandora, traded on the New York Stock Exchange, currently has a market value of $1.71 billion. Live Nation, also traded on the New York Stock Exchange, has a market value of $1.76 billion (it has $1.71 billion of debt, bringing its enterprise value to nearly $3.5 billion).