Research Report

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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Contact

For information on research and analysis

Rohit Kulkarni
Managing Director
Private Investment Research Group
(650) 273-7905Email

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Spotify

Spotify

Sector: Music
Founded: 2006
Last Round Estimated Valuation: $8.5B
FULL COMPANY PROFILE

PLEASE READ THESE IMPORTANT LEGAL NOTICES AND DISCLOSURES

CONFLICTS: This report is being published by SharesPost Research LLC, and 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. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. 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 advisability 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

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that such company has endorsed, supports, or otherwise participates with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers that are discussed in the report at any given point in time. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

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

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are 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 and involves a high degree of risk. It should only be considered as a long-term investment.

You must 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 you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other 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.

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Copyright © SharesPost, Inc. 2017. All rights reserved.

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