Spotify closes in on high-profile funding

Digital music provider Spotify has snared some heavyweight investors in its efforts to secure funds for US expansion, including the foundation belonging to legendary Hong Kong investor Li Ka-Shing, reports the Financial Times. The service is free to use and means users can listen to music on the internet, without having to download a track. The company makes its money from advertising, but listeners can also buy a subscription which gives them ad-free listening.

Spotify is widely seen as the competitor with the best chance of denting the dominance of iTunes and is looking to expand in the US after gaining a strong foothold in Europe. It was founded by Swedes Daniel Ek and Martin Lorentzon in 2006 and has expanded rapidly, generating high levels of interest in the UK and Sweden. Its fund-raising involves up to $50m, valuing the company at $250m at this early stage, and will come from the Li Ka Shing Foundation - the magnate's charitable organisation and venture capital group Wellington Partners, as well as other current investors.

The company has two million users in Europe and offers a choice of over six million music tracks. However it faces difficulties stemming from its royalty payments and is thought to looking at a tie-up with a music group to cut costs. It has also developed an app for the iPhone which it hopes will be officially approved.

WHAT THEY ARE SAYINGRobert Andrews on Paidcontent.org

"Spotify's recent PR tightrope walk has paid off. We understand the streaming-music app has now closed the funding round it was looking for, and that’s it’s at least £20m (about $33m)."

Dana Oshiro on ReadWriteWeb.com

"Spotify's only real revenue at this time is its "premium" or ad-free subscription service. Critics may argue that this service will never earn the company enough to offset the cost of licensing music; however, the Daily Telegraph's Shane Richmond reports that Spotify's iPhone application will only be available to premium subscription users. And if you're questioning whether or not the subscription is worth it, you obviously haven't seen the demo." ·