Spotify: The Global Leader in Streaming Music
December 11, 2017

Spotify: The Global Leader in Streaming Music

Executive Summary

Spotify was founded in 2006 by Daniel Ek and Martin Lorentzon in Stockholm, Sweden. The Spotify brand revolves around the phrase “the right music for every moment,” and its service meant to be easy, personal, and fun. Through Spotify, listeners can discover new music, personalize playlists, connect with friends, follow favorite artists, and more. The company offers custom radio stations and on-demand tracks as well as ad-free and offline listening for premium subscribers. It also features original tracks, dance series, and radio shows. Spotify can be accessed on various devices through the Spotify Connect network.

In terms of numbers, Spotify”s leadership position in the music-streaming industry is noteworthy:

  • Estimated more than 150 million monthly active users (MAUs)
  • Estimated more than 60 million paid subscribers
  • More than 40 million tracks in its music library, with more than 20,000 tracks added daily
  • 2 billion playlists, with more than 4 million playlists created daily

Spotify has key licensing partnerships with each of the “Big Three” record labels: Sony, Universal, and Warner Music. In 2015, Spotify branched out into video content, adding clips, news, and full episodes from partners like ESPN, MTV, Comedy Central, Adult Swim, VICE Media, the BBC, and Condé Nast.

Consumers can either opt for a $9.99 subscription service (available after a three-month $0.99 trial) or use the ad-supported free version. The free tier features both a mobile and a desktop version. On the desktop version, users can play any song from Spotify’s catalog but must view and listen to advertisements. On the mobile app, users can only play music in shuffle mode. The company uses the free, ad-supported service as a way to onboard paid subscribers.

Spotify faces a growing market opportunity and is arguably the single biggest driver of the recent growth in global music sales. The key issue for investors to monitor over the next 12–18 months is the effect of relationships and direct deals with music labels on Spotify’s gross margins.

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Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

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PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own financial advisors before making any investment decisions. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.