By Aditya Kalra and Munsif Vengattil
NEW DELHI (Reuters) -Tencent-backed Indian music streaming app Gaana has switched to a paid subscription model to avoid closing down after failing to secure fresh funds or find a buyer, according to an email sent to some music partners seen by Reuters.
Gaana, also backed by India's Times Internet, said in the email that talks with a potential acquirer had "fallen through," without naming the other party.
Two sources with direct knowledge of the matter told Reuters the talks were with Indian telecom giant Bharti Airtel. Airtel did not immediately respond to an emailed request for comment.
Gaana competes with the likes of Spotify, Apple Music and Airtel's Wynk music app in an Indian streaming market estimated by data firm Statista to be worth $700 million this year.
In the email sent this week, Gaana's head of content and partnerships, Sachin Kamble, said the company had not been able to "bring in fresh investments" and sought support for a new paid model of the service.
"Now we are at (a) crossroads - wind down/find a way to continue ... we have decided to give this another try. Hence, we have closed streaming for free users today and (are) moving to paid only model," Kamble wrote in the email.
"We will need your support on this, else we will have to shut down completely."
Gaana CEO Sandeep Lodha told Reuters in a text message: "We are not shutting down". Kamble declined to comment.
Asked about the email, a Gaana spokesperson said in a statement the message was sent to music partners "in the course of private negotiations" to close agreements.
"These statements are being read out of context. Gaana is a strong business that is increasing its focus on subscription business with an intent to be a lasting company for years to come," it added.
Tencent and Times Internet did not immediately respond to requests for comment.
As of Friday, Gaana's music app was not allowing free streaming for users, offering monthly plans starting at 99 Indian rupees ($1.24). The app has more than 100 million users.
In 2020, the company was valued at more than $500 million, according to Indian tech news website Entracker.
One of the sources said Gaana had struggled to raise money from investors, including China's Tencent. Since 2020, India has increased scrutiny of investments from countries with which it shares a land border - including China - to deter opportunistic takeovers during the COVID-19 pandemic.
The crackdown deepened after a border clash between India and China later that year, which has since held up billions of dollars of capital inflows to the auto and technology sectors among others.
(Reporting by Aditya Kalra and Munsif Vengattil in New Delhi Editing by Sanjeev Miglani and Mark Potter)