Deezer’s investors have had a rough time of things since the company went public on the Euronext Paris stock exchange via a SPAC merger last year.
Since debuting on the market at EUR €8.50 per share in July 2022, Deezer’s stock price has fallen by more than 75% (with a good part of that decline taking place on its first day of trading).
As of the close of trading on Wednesday (September 6), according to Euronext data, Deezer’s share price was trading at EUR €2.15.
That gives the France-headquartered music streaming service a market cap of €251.66 million, a quarter of the size of the €1.05 billion valuation it had at the time of its SPAC merger.
This tumble in Deezer’s value is no doubt driven by investor uncertainty about the outlook for an independent music streaming service competing against a much-larger rival (Spotify) as well as DSPs backed by deep-pocketed US technology companies (Apple Music, YouTube Music).
Deezer’s less-than-stellar performance since the IPO hasn’t helped, either.
Subscriber growth has stalled, with Deezer’s latest earnings report showing a decline in total subscribers of 100,000 YoY – to 9.3 million from 9.4 million – at the close of June 2023.
One saving grace in those numbers: Deezer continued to see some growth in ‘direct’ subscribers in its home and largest market, France, with an increase of 300,000 YoY.
As recently as April, Deezer was telling investors it expected double-digit revenue growth in 2023; just four months later, in August, Deezer had revised that downwards to 7%-10% revenue growth.
At the time of its public listing in 2022, Deezer was aiming for €1 billion in annual revenue by 2025.
With revenue in H1 2023 coming at just €233.2 million (up 6.5% YoY at constant currency) that billion-Euro goal seems increasingly out of reach.
Deezer described itself last year as “the second largest independent music streaming platform in the world”.
But in truth it is miles behind Spotify, which recorded 220 million paying subscribers, and a total of 551 million monthly active users (MAUs) as of Q2 2023.
The careful placement of the word “independent” in Deezer’s statement encourages us to overlook all the non-independent (i.e. non-‘pureplay’) DSPs that have popped up in the years since Deezer began operating back in 2007 – such as Apple Music, Amazon Music, Tencent Music Entertainment’s various services, YouTube Music, and most recently, TikTok Music.
According to BusinessOfApps, when taking all the other music DSPs into account, Deezer was in 10th place worldwide as of last year, by number of users.
The overall lack of growth in its subscriber base may explain why investors have punished its stock price over the past year.
But who, exactly, are Deezer’s largest investors?
MBW looked into it, and it turns out that Deezer has some major music and entertainment industry heavyweights behind it – as well as a number of France’s most prominent entrepreneurs.
According to financial services company Cofisem, whose data is integrated into the Euronext database, Deezer’s single largest investor is Access Industries, with a 36.79% share of the company as of July 31.
To those who follow the music industry, the name Access Industries may ring a bell: it’s the company controlled by Len Blavatnik, through which the business magnate and philanthropist acquired Warner Music Group (WMG) back in 2011.
As of the start of 2023, Blavatnik controlled 73.03% of WMG’s outstanding shares.
As of last count, Blavatnik’s net worth is estimated at USD $39.6 billion, making him the 32nd wealthiest person on the Bloomberg Billionaires Index.
(Deezer’s ownership has another link to WMG, too: 3.05% of the streaming company’s shares are owned by WEA International, a part of WMG that was formed in 1982 to handle distribution of Warner Bros., Elektra and Atlantic Records releases outside the US.)
Next in the rankings of Deezer shareholders (see above) is the “other” category – meaning various different stock owners who buy and sell Deezer’s shares on the stock exchange. These companies jointly own 33.70% of Deezer’s shares, and their ranks could well include a major player in the music business, namely Universal Music Group.
The “other” category includes investors who were part of a PIPE (private investment into public equity) at the time of Deezer’s IPO, an effort that raised €135 million for Deezer ahead of its stock market debut.
According to a press release at the time, the PIPE included most of the company’s existing shareholders at the time, including UMG and Warner Music Group, as well as French investment company Eurazeo, French telecom and tech entrepreneur Xavier Niel, France-based investment bank Bpifrance and French/Belgian media conglomerate Média-Participations.
What’s not clear is how much of Deezer these PIPE investors still own today. The PIPE involved Deezer issuing 15 million new shares of the company, which were then floated on the Euronext exchange, meaning these investors could have sold their shares at any time since the IPO, or held on to them.
Deezer’s second-largest single stakeholder is Saudi Prince Al Waleed Bin Talal Al Saud, who’s invested in the company in two different ways: via a subsidiary of Kingdom Holding Company, of which Al Waleed is Chairman, CEO and 95% owner, and through Rotana Audio Holding Ltd., a Cayman Islands-registered subsidiary of Rotana Group, a Saudi Arabia-based entertainment company owned entirely by Al Waleed.
Kingdom Holdings owns 5.23% of Deezer’s shares, while Rotana Audio Holding has 5.15%.
Rotana and Kingdom Holding were investors in Deezer well before the company went public in 2022, participating in a 2018 funding round that raised €160 million for the company.
At that time, Rotana became the exclusive digital distributor of Deezer’s music and video content in the Middle East and North Africa.
More than a quarter of Deezer’s revenue comes from what it calls “partnership” subscriptions, that is, customers who’ve subscribed via bundle deals with a service provider, typically a telco.
One of the most important partnerships for Deezer has been with wireless provider Orange, so it may be little surprise to find that a subsidiary of the France-based company – Orange Participations SA – holds a 7.86% share of Deezer.
Another major investor is Francois Pinault, the prominent French billionaire businessman who founded Kering, the luxury goods company known for brands such as Gucci, Yves Saint Laurent and Balenciaga.
Through his family holding company, Groupe Artemis, Pinault controls 4.35% of Deezer’s shares, according to Cofisem.
The Bloomberg Billionaires Index estimates Pinault’s net worth at $40.8 billion, placing him 30th on the ranking.
Notably, Pinault’s son, Francois-Henri Pinault, was Co-Founder and member of the board of directors of I2P0, the SPAC with which Deezer merged to go public last year. The younger Pinault has served as Chairman and CEO of Kering since 2005.
(News recently broke that Francois-Henri Pinault is nearing a $7-billion deal to buy a majority stake in Los Angeles-headquartered talent and sports agency Creative Artists Agency, aka CAA.)
I2P0’s CEO and Board Chair was Iris Knobloch, who spent nearly 15 years as President of Operations for the French division of WarnerMedia (not to be confused with Warner Music Group, which was spun off from what was then Time Warner in 2004).
Knobloch currently serves as President of the Cannes Film Festival, and her company SaCh27 SAS owns 1.88% of Deezer’s shares.
Another Deezer investor who came to the company by way of I2P0 is Matthieu Pigasse, the French investment banker and media mogul, who was among the investors who initially formed I2P0 in 2021. Among many other things, Pigasse is co-owner of Le Monde, arguably France’s most prominent newspaper.
Pigasse’s holding company, Combat Holding SAS, owns 1.88% of Deezer shares, per Soficem.
What can we conclude from this?
While many of Deezer’s major shareholders are a tightly-knit bunch of prominent French entrepreneurs, the company has also attracted serious money from international investors who’ve proven they know what they’re doing – Blavatnik and Al Waleed being the two prime examples.
On the strength of that alone we can conclude that, although the company is struggling today with a declining share price and a stagnant subscriber base, it would be unwise to count Deezer out of the game just yet.Music Business Worldwide