Spotify Said to Seek Credit Facility in Step Toward IPO

Spotify Ltd., the Stockholm-based music-streaming company backed by billionaire Li Ka-Shing, is speaking with banks about raising a credit facility, a move that could presage an initial public offering in the U.S., people with knowledge of the matter said.

The digital music service with more than 6 million paying subscribers is working with Goldman Sachs Group Inc., which is also an investor in the company, to arrange the facility, said two of the people, asking not to be identified because the information is private. Banks often pitch loans to early-stage technology companies with an eye toward an underwriting role on an IPO down the road, the people said.

Twitter Inc. obtained a $1 billion credit facility last October, a month before going public, joining several social media companies in accessing the debt market as they approached an IPO. Both Facebook Inc. and Zynga Inc. received financing packages before their initial offerings in 2012 and 2011.

Graham James, a spokesman for Spotify in New York, and Michael Duvally, a spokesman for Goldman Sachs, declined to comment on the fundraising plans.

Spotify, the biggest music-subscription service, enables users to share music on social-networking platforms, including Facebook and Twitter Inc., the microblogging service whose shares have more than doubled since its November IPO. Pandora Media Inc., the biggest U.S. online radio service and a Spotify rival, went public in June 2011 and through yesterday had surged 146 percent since its debut.

Ad Spending

Spotify acquired EchoNest, a company that analyzes listening behavior and makes music recommendations, the company announced today, without providing financial terms.

Spotify offers a free ad-supported service on computers and a $9.99 monthly ad-free plan on mobile and other devices.

Music streaming is growing thanks to the proliferation of smartphones and tablets connected to cheaper mobile broadband Internet plans. The industry had about 29 million subscribers worldwide at the end of 2013, according to ABI Research. That’s forecast to jump to 191 million by 2018.

In the U.S., digital radio ad spending is projected to rise 23 percent to $2.04 billion this year, EMarketer Inc. said in a report this week. More than 176 million people will listen to radio on the Internet each month by 2016, 33 percent more than 2012 levels, the researcher estimated in a report last year.

Last year, Spotify raised $250 million in a round of financing led by Technology Crossover Ventures to back expansion into new territories including Japan, a person familiar with the matter said in November. In addition to Li and Goldman Sachs, Kleiner Perkins Caufield & Byers, and Coca-Cola Co. are also backers.

(Updates with streaming forecast in eighth paragraph, updated digital-radio ad forecast in ninth paragraph.)
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