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Deezer, 15 years old and still not a single euro earned

Appetizing oriental buffet, breathtaking view of Notre-Dame and mix provided by high-caliber DJs, Bob Sinclar in the lead… In mid-June, the French streaming platform Deezer gave a party on the pleasant terrace of the Arab World Institute. “There were a lot of artists, representatives of labels and the media, it was very successful, says one of the guests, a little surprised. It’s still surprising how this box has always managed to hold.”

In fact, for fifteen years Deezer has survived – even shines – without ever having earned a penny! In France, the site is the leader in online music and has one of the best catalogs with 75 million titles available. Valiant, it resists again and again the onslaught of foreign giants: the pure Swedish player Spotify and the trio Apple, Amazon and YouTube. Unfortunately, with barely 9 million subscribers worldwide and 400 million euros in turnover in 2021, the tricolor service peaks at only 2% of the international market and, above all, continues to lose the money. Since its creation in August 2007, the platform has accumulated a total deficit of 642 million euros.


To recover, the digital jukebox has just made an IPO in early July. The company merged with I2PO, an already listed structure (a Spac, in financial jargon) founded by Artémis (the holding company of the Pinault family), the investment banker Matthieu Pigasse and the German Iris Knobloch, former top manager by Warner. The timing was not ideal: while tech stocks are no longer on the rise, the stock lost 29% on the first day of trading.

Worse, this operation brought in half the money expected from current shareholders (including Orange and various record companies) and newcomers such as Bpifrance or the Saadé family of shipowners. But these funds will be used to bail out the company and help it better exploit the potential of streaming, which now has 520 million users worldwide. This is, at least, what Stéphane Rougeot, deputy general manager of Deezer, wants to believe. Even if he admits it himself, we will have to be patient: “We are aiming for balance by 2025.”

The platform had nevertheless taken the lead… Created by Daniel Marhely, a computer enthusiast, and Jonathan Benassaya, a young Essec graduate, it was the first legal music site put online with the consent Sacem, the company that manages authors’ rights. Helped by prestigious investors (Xaviel Niel in particular), they convinced the disc majors, reluctant at first, to make part of their catalog available against a payment of around 1.5 cents per piece played.


Revenue, users… Spotify is aiming high for the years to come

But now, if the site was quickly recognized for its quality offer, rich in playlists and recommendations for subscribers, the company never found a profitable model and had to increase fundraising to stay afloat. While Spotify became a multinational and the Gafa landed in force, our flagship gradually became a very small player in the market it had helped to create.

In the 2010s, Deezer clearly missed its internationalization. Instead of targeting a few flagship markets, the company has dispersed into a hundred small countries, in the Middle East, Africa or Latin America, areas that are not really profitable. “They did not dare to attack the United States, or even England, regions of the world where you have to be to succeed in music, points out Sophian Fanen, author of stream boulevard (Ed. Le Castor Astral).

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Spotify broke through because it bet on these markets, which convinced investors.” But did the French have the means? Not sure, and its shareholders were, in any case, not in agreement between them on the question. Orange, discreetly supported by the socialist government of the time, would thus have vetoed a move of the headquarters to London. Then the failure of an initial public offering in 2015, which could have financed a American adventure, closed the file.

Too small, Deezer is struggling today to balance an already fragile streaming economic model. Because, let’s be clear, if online listening has imposed itself at the expense of CDs and downloads, it is to the benefit of the record industry, which now earns 22 billion dollars from these services (85% of its income).


Deezer discreetly increases its prices and angers subscribers

For the platforms, the business is much less lucrative. “We have to pay around 70% of our turnover to labels and rights holders, then 10% to Apple or Google application stores, explains Stéphane Rougeot. This leaves us with a gross margin of 20%. Record companies benefit from a guaranteed minimum remuneration regardless of the effective listening of their songs by subscribers. Finally, they obtained a supplement paid in shares and thus hold 15% of the capital of Deezer.

This equation is particularly difficult for the Frenchie. Fifteen times bigger, Spotify manages to generate a gross margin of 27%, perhaps because its size allows it to be better treated by the majors. As for the Gafa, they use music as a loss leader and do not specifically seek to make this “little extra” profitable. Ready to lose money, they cut prices and complicate the game a little more. Thus, Apple now offers hi-fi sound at the price of the standard subscription (9.99 euros per month), to promote its headsets AirPods. This forces Deezer to increase its premium offer from 14.90 to 10.90 euros… and does not improve the accounts!

However, there is a surprisingly light atmosphere at the company’s Paris headquarters, where employees enjoy a rooftop with a breathtaking view of Montmartre. “We are convinced that the record companies do not want to depend on a handful of large distributors, certifies Ludovic Pouilly, in charge of relations with the labels. They will not let us go.”

Deezer also thinks it has found a wise way to gain subscribers without breaking the bank in marketing, by multiplying partnerships with telecom operators or content aggregators. Beyond its cooperation with Orange in France and TIM in Brazil, the company has just signed a deal with RTL, the leading German media group, which will include the offer on its multi-content platform from the start of the school year. Similar agreements are reportedly being negotiated in Spain, Italy and Canada.

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