Deezer Challenges Spotify With ProSiebenSat.1, Vodafone Deal

Deezer, the main global rival of music-streaming service Spotify Ltd., struck a deal with German broadcaster ProSiebenSat.1 Media AG that gives it users and marketing clout as it tries to catch up with its larger peer.

ProSiebenSat.1 acquired a minority stake in Deezer in exchange for backing the service with its TV and online advertising efforts, the companies said today. Customers of ProSiebenSat.1’s streaming service Ampya will be transferred to Deezer as part of the agreement, as will a deal to cater for Vodafone Group Plc’s 32 million wireless customers in Germany.

The alliance is the largest ever for Deezer and its first major partnership with a TV company, according to an external spokeswoman for the Paris-based music service, who asked not to be named citing company policy.

The deal puts Deezer, whose 16 million active monthly users trails Spotify’s 40 million, on an even footing with its competitor in Germany, the world’s third-biggest music market. Spotify has had a partnership with Vodafone’s rival Deutsche Telekom AG since 2012, allowing customers to stream unlimited amounts of music.

“With Deezer as a strong partner we’ll get within striking distance of Spotify” services offered by Deutsche Telekom, Vodafone spokesman Thorsten Hoepken said. Ampya users will be transferred to Deezer starting this summer and the operator plans to publish subscriber numbers later this year, he said.

Carrier Clout

On-demand providers are becoming more popular as music downloads decline. Deals with phone companies help streaming services reach a bigger audience faster, at the expense of some lost income through revenue sharing. Deezer has agreements with carriers including Orange SA in France and EE in the U.K.

French company Odyssey Music Group is Deezer’s controlling shareholder. A $130 million investment by billionaire Len Blavatnik in 2012 helped fuel a push into markets including Brazil, Africa and the Middle East. The company has said it’s also preparing to enter the U.S. market.

The deal with ProSiebenSat.1 was orchestrated by Gerrit Schumann, Deezer’s head of European operations outside of France, who joined last year from German peer Simfy AG. Deezer’s Chief Executive Officer Axel Dauchez is set to leave in September to become the head of Publicis Groupe SA’s French operations.

Pandora Media Inc., which had 77 million active listeners last month, doesn’t offer services outside of the U.S., Australia, and New Zealand because of music-rights limitations. Beats Electronics, the music-gear maker being bought by Apple Inc., started a music-streaming service in January.

ProSiebenSat.1 shares rose 0.6 percent to 34.46 euros as of the 5:30 p.m. market close in Frankfurt today. Deutsche Telekom increased 0.2 percent to 12.71 euros, and Vodafone closed 0.4 percent higher at 208.85 pence in London.

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