Deezer CEO Axel Dauchez wants to capture five percent of global music revenue by 2016 — without yet setting foot in the world’s biggest market.
The French unlimited-access service has confirmed a €100 million ($130 million) new investment round from Access Industries to fund an accelerated global rollout.
“It will change our world,” Dauchez told me. But he added: “We believe we should go everywhere outside of the US. We will be in the US when the market is mature, and when we have an edge not to be a me-too service.”
Last December, Dauchez signalled Deezer’s intention to launch in over 200 countries by this June. So far, it is live in around 100, however, and is due to announce further rollouts in a press conference at Abbey Road on Wednesday.
“It was necessary to speed up,” Dauchez says. “Up to now, the total amount of money invested in Deezer was just €15 million.” The company expects to have 200 staff by year’s end, around 150 of which are in France.
Deezer’s choice of new backer may raise an eyebrow since, in a world where major labels own collective equity in rival Spotify, Access Industries – operated by industrialist Len Blavatnik – is the owner of just one label, Warner Music Group.
But Dauchez denies the shared ownership could disrupt renegotiation with Warner’s peers: “There is a huge Chinese wall between the two investments. There is no intention in Warner being too close to us,” he said.
“When Access decided to acquire Warner, it was proof they believe in the turnaround of the music business — this is the next step for them. We saw all the top private equity firms and late-stage investors in the world — no one had the spirit of Access Industries.”
To seize a growth opportunity in which Dauchez is targeting $1 billion in revenue, he will need not just to be available in many countries but to be relevant in them, too. The CEO says acquiring local music catalog is critical.
“What we learned in the past year is that not only is taste different — so is the marketing context. In homes in parts of Asia like Indonesia, mobile is the main screen for entertainment in the home; you have a very strong market if you come through mobile. By contrast, Russia is a big PC market.”
Today, Deezer has carriage deals with telcos Orange, T-Mobile, Everything Everywhere, Belgacom, Telenor and Millicom for France, the U.K., Poland, Ivory Coast, Mauritius, Romania, Netherlands, Austria, Belgium, Luxembourg, Hungary, Montenegro, Thailand and Honduras. But those different market conditions may require distinct deals elsewhere.
What’s more, it must be said that the majority of Deezer’s subscribers are the result of its favorable domestic carriage through its earlier investor Orange, which remains aboard. Now it is present pretty much everywhere Orange is, Deezer will have to strike out without its compatriot’s assistance.
In the US, Spotify – and, to a lesser extent, Rhapsody and Rdio – already have significant gravitational pull on new subscription consumers. Deezer claims two million subscribers out of 26 million users (7.6 percent conversion), versus Spotify’s four million subscribers out of 15 million active users (26.6 percent conversion).
Dauchez explains: “We are not so much a competitor of Spotify. We obviously have a different geographical strategy, a different product strategy. When we get a new subscriber, we don’t take it from Spotify, and they don’t take it from us – we both take it from piracy.
“We are each facing virgin markets – expect Sweden and France, all the markets are virgin markets.”