Summary:

What’s in the water in Scandinavia?

Just four months ago, Spotify was supposedly valued at $1 billion (€705 million), according to report…

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photo: Getty Images / Matt Cardy

What’s in the water in Scandinavia?

Just four months ago, Spotify was supposedly valued at $1 billion (€705 million), according to reports of its latest apparent VC funding.

Today, the Dagens Industri business paper in Spotify’s native Stockholm reckons that’s more like 15 billion Swedish crowns (€1.6 billion). Its logic – this week’s floatation of music peer Pandora (NYSE: P), which took it up to a $2.6 billion (€1.8 billion) public valuation.

The ArcticStartup blog, which covers companies in Sweden and the rest of Scandinavia, thinks that’s way under-par. “Looking at the current revenues of Spotify and comparing those to Pandora, Spotify in my opinion would easily be valued closer to €10 billion in an IPO situation just based on its earnings,” writes its Antti Vilppone.

“Being able to generate €200 million in revenues, if that figure indeed is true, in a few countries in Europe tells something about the potential. Add the U.S. market to that and revenues could easily triple.”

Message to Scandinavia – whilst Pandora is a decade-old company with a track record, Spotify is a startup still trying to manage significant royalty outgoings.

All the same, does Pandora’s IPO, as suggested, set a new valuation benchmark for Spotify?

Pandora made $137.8 million revenue (€97 million) in 2011. We can estimate Spotify’s one million paying customers give it about €100 million ($142 million) in annual revenue. So, on earnings, both companies are indeed on par in their respective markets.

Now, Spotify’s imminent launch in the U.S. – expected in the next couple of months – is likely to bring it sufficiently bigger scale at which to balance and boost its business.

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