Spotify reportedly raised $526 million in its latest round of fundraising, giving the company a valuation of over $8 billion.
The effort to accrue additional funding comes as Spotify faces a growing set of competitors that includes Apple Music (AAPL), a newly unveiled $10 per month streaming music service.
Yahoo Columnist Rick Newman notes that while Apple's streaming music service is a threat to Spotify, investors are not too concerned.
“This tells you that investors clearly think Spotify is in the game for the long run," he says. "Let's remember that Spotify along with Pandora (P) were really first to market...they created the business. Apple is the 800 pound gorilla, but it's getting in late. Just because Apple enters a business doesn't mean that it suddenly dominates and crushes all of its competition.”
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The fundraising attracted an investment from Swedish phone operator TeliaSonera AB, which paid $115 million for a 1.4% stake in the company. TeliaSonera announced that it plans to work with Spotify in a partnership focused on media distribution, data analytics and advertising.
Spotify may use some of the newly raised funding to expand its push into video and podcasts. Newman thinks Spotify's move into new media forms is critical for its growth.
"One of the ways you make yourself vulnerable is you come up with some terrific innovation, and then you just try to milk that one innovation for way too long," he says. "I think you can say Pandora might be in that position because Pandora is still doing the same thing it was doing when it first came on the scene. It's absolutely crucial to keep coming up with new ways to reach consumers with new types of content."
Spotify's valuation is currently more than double Pandora's $3.5 billion market capitalization, and almost twice its $4 billion value in late 2013.
"Music services are sort of like messaging services," says Newman. "The number of people they can reach is only limited by the number of smartphones out there. So the [valuation] might seem crazy today, but a year from now it might seem quite rational."
