SPOTIFY: $55 BILLION BY 2020 5 EXPLOSIVE Subscriber Growth During 2017 streaming overtook sales for the first time as the leading driver of revenue for the US recorded music industry. In fact, streaming grew so much last year, that it now accounts for more revenue than downloads, CDs and vinyl combined in the US market. Spotify is one of the dominant players driving this development and will have an instrumental impact on the industry going forward. 60 30% 40 20% 20 10% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 0% Spotify Premium Subscribers Share of Global Music Revenue (%) Spotify announced in July that it had grown to 60 million premium subscribers – effectively adding 10 million premium subscribers in less than four months. In comparison it took Spotify five months to grow from 40 million to 50 million premium subscribers. Growth has been explosive to say the least. In our previous investment reports published back in 2015 and 2016 we estimated that Spotify in a blue sky scenario would reach 100m premium subscribers by 2020. At the time of the analysis these forecasts were seen as quite aggressive, but we whole heartedly believed that it would be possible given the right overall circumstances. Spotify has truly thrived since our last report and delivered well above even our expectations. With the current market dynamics and growth rates Spotify is trending towards 100m premium subscribers by mid-2018. This would imply Spotify reaching our previous best case scenario more than two years earlier than we previously estimated in our research report published in September 2016. Overall there is still significant growth potential going forward as there are several markets with a large addressable user base but with low levels of penetration, such as Thailand, Japan and Indonesia.