Microsoft is to discontinue its Groove Music Pass subscription service, allowing its existing customers to move their playlists and music collections to Spotify.
The Groove Music app will no longer offer the option to stream, purchase, and download music after Dec. 31, the company said in a blog post.
Microsoft introduced the service in October 2012 as Xbox Music, offering music streaming through subscription or purchase through the Windows Store.
Private trades in Spotify shares are valuing the music streaming company at about $16 billion, according to people familiar with the deals, raising the prospect of a bumper flotation next year.
However, the company said it would continue to update the Groove Music app on all Windows devices to support playback and management of owned music.
‘With the continued advancement of music streaming today, all the world’s music has become easily accessible across a variety of devices, unlocking new ways to discover and experience music,’ Microsoft said.
‘As we continue to listen to what our customers want in their music experience we know that access to the best streaming service, the largest catalog of music, and a variety of subscriptions is top of the list.
‘Which is why we’re excited to announce that we’re expanding our partnership with Spotify to bring the world’s largest music streaming service to our Groove Music Pass customers.’
It comes as private trades in Spotify shares are valuing the music streaming company at about $16 billion, according to people familiar with the deals, raising the prospect of a bumper flotation next year.
That is around $3 billion higher than in similar trades up until June, the people said, adding strong demand for the shares and rising subscription numbers at the Swedish business meant it could be worth at least $20 billion when it goes public.
Spotify declined to comment.
The market for shares prior to their public listing allows employees and founders of big name private companies such as Spotify, Airbnb and Uber to cash in on some of their paper wealth, while letting other investors get a head start on the listing.
Early investors tired of waiting for a payout are selling shares too.
While this secondary market was hit by Facebook’s chaotic listing in 2012, it has recently made a comeback.
A $13 billion price tag would value Spotify, the world’s biggest music streaming company with more than 140 million active users, at around four times its 2016 sales.
But investors and sector bankers not involved with the company said Netflix’s valuation of seven times expected 2017 sales was a more appropriate benchmark, supporting speculation of a price tag of at least $20 billion around listing.
Spotify is aiming to file its intention to float with U.S. regulators towards the end of this year in order to list in the first or second quarter next year, one of the sources said.
‘It’s hard to speculate on Spotify´s valuation since we only have historic results prior to the most recent renegotiation with the music majors,’ said Louis Citroen, an analyst at Arete Research.
‘But a $20 billion valuation sounds punchy as it implies both that Spotify can continue growing customers at a fast pace, and that it might achieve a double-digit margin.
‘We can believe in the customer growth, but are less sure about profitability given high royalty costs and limited differentiation with rivals on content, price or technology’.
Worldwide, music streaming revenue leapt 60.4 percent in 2016, lifting recorded music sales for the second consecutive year after 15 years of decline during which revenue dropped by nearly 40 percent, according to data compiled by the International Federation of the Phonographic Industry.