Spotify buys music networking app as battle for listeners intensifies

Streaming service hopes to compete with rivals such as Deezer and Tidal

Spotify Ltd. is stepping up the competition against Apple Music and major European rivals Deezer and Tidal with a pair of acquisitions aimed at making it easier to discover and share music with friends.

The Swedish music-streaming service has acquired Dublin-based Soundwave, an app downloaded more than 1.5 million times, praised by Apple Inc. co-founder Steve Wozniak and British actor Stephen Fry and invested in by Marc Cuban.

It lets users explore music with private groups and see what music is trending nearby. The second purchase is Cord Project, a simple voice messaging service for phones, tablets and smartwatches. Financial details of the acquisitions were not disclosed. Deezer simultaneously announced last week that it has raised € 100 million ($153 million) from a group of investors led by billionaire Len Blavatnik.

The funds from Access Industries and French telecoms giant Orange will help pay for marketing in key European growth markets, CEO Hans-Holger Albrecht said. Deezer also hopes partnerships with wire- less phone carriers in emerging markets and the U.S. help drive its growth.

Deezer said in the fall that it had 6.3 million subscribers as of June, but only 3.8 million were generating revenue, and nearly 800,000 of those hadn’t used the service in the past month.

While the amount of new capital is less than the € 300 million the company was targeting in its IPO, Deezer says that hasn’t changed its goal to have positive cash flow from month to month by the end of 2018.

“Our markets in Europe — Germany, the U.K. and France — are showing very good growth,” Albrecht said.

Albrecht said he believes a shake- out among streaming music services will result in four or five big players globally. He said Internet radio giant Pandora Media Inc.’s $75-million (U.S.) purchase of the technology developed by music streaming service Rdio last year showed “the underlying value in the streaming model.”

Rdio had few subscribers and its service was shuttered.

Spotify, with more than 20 million subscribers and a valuation of about $8.2 billion (U.S.), is expanding its services to win over customers as rival Apple adds to its 10 million subscriber base. Both Apple and Spotify give users access to more than 30 million songs and charge identical monthly fees in many countries.

Streaming music is big business. Subscription and ad-supported streaming generated more than $2 billion in global sales in 2014, according to the International Federation of the Phonographic Industry, accounting for almost about a third of all digital music sales.

Even as artists such as Taylor Swift, Adele and more recently Coldplay have withheld new music from streaming sites, the services’ popularity has soared as consumers were attracted to the ease of use and instant access to millions of songs. Spotify, for instance, doubled its subscribers from May 2014 to June 2015, and has more than 75 million users worldwide.