A U.S digital music service backed by the founder of Skype has acquired floundering music streaming service Dhingana, in a move that signals the entry of deep-pocketed player into the Indian online music market.

Dhingana, which raised $7 million and was backed by Lightspeed Venture Partners among other investors, recently stopped its service after its biggest partner, T-Series, refused to renew their licensing agreements.

In what industry observers are calling a distress sale, San Francisco-based Rdio has now agreed to acquire Dhingana and build on its reach to launch in India. The financial details of the agreement were not disclosed, industry observers placed the value of the deal at slightly below what the company has picked up in funding.

As part of the agreement, Dhingana’s team in India will join Rdio, and Dhinagana’s founders, Snehal Shinde and Swapnil Shinde, will join the company’s executive team where they will continue Rdio’s expansion efforts in India. Rdio is now expected to launch soon in India. India’s digital music market has been unprofitable and troublesome for the last few years with music labels often insisting on exorbitant fees for exclusive licences. The current players in the market are Tiger Global-backed Saavn and T-Series favourite Hungama.

“We believe we are one of the very few global companies that can provide a great experience to an expanding international audience. It is our objective to bring that experience to India and to non-resident Indians and fans around the world,” said Anthony Bay, Rdio’s Chief Executive Officer, in a statement.

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