Is Spotify’s $1 Billion Value A Bubble Bellwether?

Kleiner Perkins is tag-teaming the already-reported $100 million Spotify investment with DST Global, taking a five percent stake for its half of the cash for a $1 billion valuation, Sky News’ usually-right business editor Mark Klenman says.

There are two main things to say about this…

(1) It suggests investor confidence that Spotify will launch in the U.S. some time soon.

Kleiner Perkins likely wouldn’t be laying down cash were Spotify still facing what many had thought were insurmountable problems with those U.S. label negotiations.

Recent reports say Spotify has been licensed by both EMI and Sony (NYSE: SNE) Music Entertainment in the States. We would expect the other two majors, plus indies, to follow.

It’s likely something has clicked in the negotiations and Spotify now wants money to fund the royalty upfronts plus the go-ahead running of its U.S. business. If U.S. negotiations have gone well, that could also have provided the template for music licenses with those same labels in territories around the world.

(2) A $1 billion valuation? Really?

On the face of it, Bubble 2.0 has certainly pulled in to the station. Spotify made £11.32 million revenue in 2009, which it ended with 250,000 paying subs – £6.8 million from subscriptions, £4.51 million from advertising…

Now that Spotify has over 750,000 paid subs amongst over 10 million users, let’s guess that 2010 revenue, so far unfiled, would have approached £50 million. That still leaves a gap of many multiples until Spotify is a $1 billion business.

But that conclusion would ignore a couple more factors. First, this funding is clearly designed to take Spotify global – in the U.S., Russia, China, elsewhere. Assuming its fundamental tenets are sound, replicating at global scale could rocket Spotify. Second, CEO Daniel Ek has talked ambitiously about weening people off piracy with a simple proposition, yielding “a trillion transactions“. It’s worked well in Sweden.

Considering the market cap of Netflix (NSDQ: NFLX), which operates only in North America, is circa $12.5 billion, is a $1 billion music subscription vendor really off the scale? After all, people tend to consume more of and have a stronger connection with music than movies. And if AOL (NYSE: AOL) can splash $850 million on Bebo…

However, Spotify has proved unable to do the thing that could have already rocketed it in Europe – sign partnerships to bundle its client and billed service on more consumer electronics devices.

The new investment has not yet been confirmed by Spotify.