102/264 reaching $4.6 billion, while physical sales and digital download revenues continued to decline at 8% and 21% respectively, according to management estimates and industry reports. • Streaming is Growing Globally. According to management estimates and industry reports, the return to growth in the recorded music industry was seen in every region measured, namely North America, Europe, Asia, and Latin America. By transforming user behavior, streaming has become the dominant global format in the music industry, fueling growth in key music markets worldwide. • The Streaming Market is Still in its Infancy. While streaming has changed the way many people access music, we believe there is an untapped global audience with significant growth potential. Other internet platforms have shown that they can achieve global scale, including Facebook with an estimated 2.0 billion users and YouTube with an estimated 1.5 billion users, according to industry reports. We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally, according to the International Telecom Union ICT Facts and Figures 2017 Report. • Increasing Penetration of Established Markets. There is opportunity for growth, even in more established markets. According to Nielsen, the average American listens to more than 32 hours of music each week, and we believe there is significant room to capture additional share of these content hours. Research from MIDiA indicates that listeners who pay for streaming subscription services tend to consume more content hours on average than ad­supported users. In addition, there are 30 million paid music subscribers in the U.S., according to RIAA, and 163 million users of paid subscription accounts globally, according to MIDiA. To put this in context, in the U.S. there are 115 million TV­enabled households according to Nielsen, and 51 million households viewing content over­the­top according to comScore. • Growth in Smartphone Penetration. In the 61 countries and territories where we are present, there were an estimated 1.2 billion payment­ enabled smartphone users in 2017. According to research from Ovum, the number of payment­enabled smartphone users in the countries where we are present is forecast to grow by 28% to approximately 1.6 billion by 2021. In a number of countries where we do not currently operate but may have the opportunity in which to expand in the future, we believe there will be an additional 1.4 billion payment­enabled smartphone users by 2021, excluding China. As a mobile­first platform, we believe we are well­positioned to benefit from the growth in global smartphone users. • Opportunity in the Ad­Supported Music Market. With our Ad­Supported Service, we believe there is a large opportunity to grow Users and gain market share from traditional terrestrial radio. In the United States alone, traditional terrestrial radio is a $14 billion market, according to BIA/Kelsey. The total global radio advertising market is approximately $28 billion in revenue, according to Magna Global. With a more robust offering, more on­demand capabilities, and access to personalized playlists, we believe Spotify offers Users a significantly better alternative to linear broadcasting. A migration away from radio broadcasting is likely and it will benefit both consumers and artists alike. Spotify is the Largest Global Music Streaming Subscription Service Spotify has transformed the way people access and enjoy music. Today, millions of people around the world have access to over 35 million tracks through Spotify whenever and wherever they want. We are transforming the music industry by allowing Users to move from a “transaction­based” experience of buying and owning music to an “access­based” model which allows Users to stream music on demand. In contrast, traditional radio relies on a linear distribution model in which stations and channels are programmed to deliver a limited song selection with little freedom of choice. We are the largest global music streaming subscription service with 159 million MAUs and 71 million Premium Subscribers as of December 31, 2017. Based on management estimates and industry reports, Spotify’s global streaming market share was approximately 42% in 2016 as determined by revenue, and we had market 95