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Music streaming service Deezer makes a bet on Mexican market

TV Azteca will take a minority stake in the French company, which sees big potential in Mexico

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Deezer, the music streaming service backed by billionaire Len Blavatnik, is making a big bet on the fast-growing Mexican market through a partnership with media mogul Ricardo Salinas, which values the Spotify rival at €1.3 billion (US $1.46 billion).

Grupo Salinas’ TV Azteca will take a minority stake whose size has not been disclosed in Paris-based Deezer, one of whose biggest shareholders is Blavatnik’s Access Industries.

The Mexican conglomerate will promote Deezer through its television businesses and Grupo Elektra retail stores, in exchange for an undisclosed share of revenues. The value of the advertising it will provide for the streamer over several years is worth $40 million.

The deal values Deezer at a hefty 30% premium to the company’s valuation during its last funding round in 2018, the streaming service said in a statement.

Deezer’s other shareholders include telecoms group Orange, investment fund LBO France, Saudi conglomerate Kingdom Holding and Rotana, a Middle East entertainment group.

“Mexico is one of the fastest growing music markets in the world,” said Hans-Holger Albrecht, Deezer chief executive.

“We see huge growth potential in countries like Mexico, Colombia and Argentina and are investing in marketing and subscriber growth. Our experience and No. 2 position in Brazil will help us become the main challenger in the region,” he added.

Spotify, which dwarfs Deezer with more than 280 million active monthly users, branded Mexico City “the world’s music streaming mecca” in 2018. The audio streaming market in Mexico, Latin America’s second-biggest economy, is expected to be worth more than $700 million by 2024 — double its 2019 size.

Mexico has just over 15 million users of music streaming services. Spotify commands a nearly 85% share of the market with other large players including Apple Music and Google Play, according to the Competitive Intelligence Unit, a consultancy. Deezer has 16 million monthly users worldwide.

Grupo Salinas was founded by Ricardo Salinas, Mexico’s second-wealthiest man, who is its chairman. His business assets span banking, retail and media and he is an influential business adviser to President López Obrador.

Moshe Arel, director of innovation at Grupo Salinas, hailed the alliance as “one of the most … disruptive partnerships in the market” and one that would help Deezer grow in the region while boosting TV Azteca’s content offering.

As part of the deal, Deezer will also take over a weekly show on TV Azteca called Mugo Live, watched by 2 million viewers every episode, and use it to showcase new and emerging local talent. It is also buying the Mugo social app. “We are proud to be the glue that connects our strategic partners, TV Azteca and Grupo Salinas, with Deezer,” said Ori Segal, Mugo chief executive.

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