PARIS French music and books retailer Fnac-Darty (FNAC.PA) and music streaming site Deezer (DZR.PA) on Tuesday unveiled a strategic alliance, which could see Fnac becoming a Deezer shareholder within three years.
The deal will help Deezer compete better both in France and abroad with bigger rivals such as Spotify and Apple Music (AAPL.O), while it will help Fnac-Darty, which competes with online retail giant Amazon (AMZN.O), to improve its offering of music and video streamed online.
A spokesman for Fnac-Darty said the partnership will be reviewed after three years, at which time the group will decide on whether or not it buys a stake in Deezer.
In January 2016, Deezer raised 100 million euros ($106 million) from shareholders such as French telecoms group Orange (ORAN.PA) and Access Industries, the holding company of billionaire businessman Len Blavatnik.
Fnac and Darty clients will get special Deezer offers from the second half of 2017, while Fnac and Deezer will also jointly promote festivals and showcase events. Deezer will also promote Fnac's concert ticket service.
Fnac's Jukebox streaming service will be shut before the end of the first half, and Deezer will take over its subscribers.
Deezer has 6.3 million subscribers who can listen to a catalog of 43 million songs for 9.99 euros a month, while the newly merged Fnac-Darty group had 664 stores worldwide, including 455 in France, and 2016 revenues of 7.4 billion euros.
Streaming services remain unprofitable for now, even though they are growing rapidly, as they have high costs for licensing music, and face challenges in persuading people to upgrade from free versions.
They have also been criticized by artists such as pop star Taylor Swift for not paying them enough.
(Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta)