$Spotify(SPOT)$ - $40 bn market cap as world’s leading online music

- Advantage from scale, content, technology, encryption

- 35mm tracks delivered to 70m subs, 90mm ad users

- 2x amount of next competition, Apple music

- 65% of revenues going to labels/publishers

- Drivers: market at +22% CAGR next five years, SPOT = 40% market share

- 200mm subscribers by 2022 due to demographics

- Gross music streaming $12.5bn

- Ad music business $28bn

- Concerts $30bn

- Total $70bn in published music

- Premium ARPU down – new family plans, growth in ARPU region

- Lables have high royalty rate – but as streaming music genres platforms get leverage over royalty

- SPOT to grow sales of 28% CAGR profit to grow 39% over same period

- Will have lower margin ceiling

- 87% music from Warner, Universal, Sony = Big 3

- Founders Daneil Ek and Matrtin Loneyer

- 31% of listening hours done through company-generated, personalized/created playlist

- Eventually can move into video

- 30% revenue growth, 30% GM, 12% R&D

- Having investment R&D and sales oto improve user experience

- ARPU $4.50

- 50% to read labels, 12% to publishers – so need to see how royalty plans renegotiate

- Negotiate cash conversion cycle – collects revenues upfront but delay payment to label and publishers

- Free cash flow about 3% of sales