Spotify on course to hit 500m users and a $100bn valuation, says GP Bullhound


If you thought the now-infamous Goldman Sachs report on music streaming was optimistic, you ain’t seen nothing yet.

According to a new paper from investment bank GP Bullhound, Spotify could be valued at $20bn by the time it goes public later this year or early in 2018.

What’s more, say the firm’s analysts, Spotify’s subscriber base is set to grow from the 60m announced in July to 100m by summer next year.

From there, says GP Bullhound, the streaming platform’s user base could hit half a billion (500m) people by 2020 – with 200m of them paying subscribers.

And here’s music to Daniel Ek’s ears: Bullhound says Spotify now has a “long-term potential of being valued at $100bn”.

Yes, $100bn.

The quote in full: “Given that Spotify’s growth continues and that emerging market growth keeps average revenue per premium subscriber relatively in shape we envision that Spotify has a long term potential of being valued at $100 billion.”

Just think. That’s only a seventh of what Google is worth today.

Before we get into the detail, it’s probably worth mentioning that GP Bullhound, like Goldman Sachs before it, is an investor in Spotify.

Make of that information what you will. Now, back to the breathless fantasizing.

GP Bullhound says Spotify’s faster-than expected growth is likely to be driven by more favorable deals with labels, in addition to increased penetration in emerging markets.

“Given that Spotify’s growth continues and that emerging market growth keeps average revenue per premium subscriber relatively in shape we envision that Spotify has a long term potential of being valued at $100 billion.”

GP Bullhound

According to CNBC, there are also a couple of notes of caution in Bullhound’s report, however.

“Spotify have introduced family plans and student discounts and if we factor in that emerging markets have a much lower average revenue per premium subscriber we believe that Spotify will see a steady decline in revenue per premium subscriber moving towards 2020 compared to today’s value,” it reads.

“This is the reason why we have decreased our estimated average revenue per premium subscriber to $80 — compared to $88 in 2015 and $89 in 2016.”

Despite this average Spotify subscriber spend going down, the ad-funded element of the service could, according to the investment company, result in higher revenues from ‘free’ users than previously anticipated.

As for Spotify’s now-infamous operating losses, Bullhound doesn’t see them going away anytime soon.

Such deficits could “distract investors from the true value that is being created,” said the company.

It’s not wrong: Spotify’s operating loss last year was a pretty distracting figure: the best part of $390m.

Its net loss was even more distracting: $600m.

Bullhound says that for every dollar Spotify invests in a premium subscriber, it currently gets $3 back.

The company thinks this return could increase to $5 by 2020 as revenue per user stabilizes, churn decreases, and gross margins improve.

Although Bullhound doesn’t expect Apple Music to catch up with Spotify anytime soon, it did issue a couple of warning shots as to factors which could derail Spotify’s current course.

The company especially noted that Apple’s HomePod smart speaker could be a “threat”, while other voice-activated devices like Amazon’s Alexa could disadvantage Daniel Ek’s firm.


Spotify is expecting to launch a ‘direct listing’ on the New York Stock Exchange in the next six months.Music Business Worldwide

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  • stevenbennett

    200m paying subscribers? wow! who’d have thought it possible to monetise self-choosing radio. Personally, I wouldn’t pay a penny for that.


    Would be nice if they would pay the Artists !
    There is a lot of discussion regarding the fair payment of writers and performers of music
    that is being streamed – whether for a very small price per stream or for free.

    At Dynamic, where we have many, many recordings available on CD Baby, iTunes and Amazon,
    we feel that our income and our Artists’ incomes have been adversely affected by the policies
    in place right now. A look at our earnings demonstrates that through the first quarter of 2016,
    our revenues are only at 67% of the same quarter last year.
    2015 was down slightly from 2014, and I’m guessing that if we had not
    added additional titles during 2015, the difference
    may have been more significant. If this trend continues through
    2017, being down 33% in income is not good.

    And we’re only one company – if other musicians, record
    companies, independent performers, etc., are seeing the
    same trend, it’s a serious loss in income to people who are not being
    compensated properly for streamed music.

    We believe we should all unite with the others who have taken a
    stand to gain reasonable payment for artistic endeavors.

    Spotify payment to Dynamic Recording:
    Streams last 90 days 03/01/17
    Spotify – Streams – 18,115
    iTunes – TK downloads – 683
    Apple Music – Streams – 15,490
    Pennies from Spotify and apple:
    Feb 10, 2017 Spotify Sale $0.87 details
    Feb 10, 2017 Spotify Sale $0.49 details
    Feb 10, 2017 Spotify Sale $0.51 details

    Radio stations pay us 8.5 cents per play.
    CDBaby, iTunes, and Amazon all pay fairly.
    Music buyers love the free music and do not purchase or download selections.
    Many top Artists have pulled their music from streaming services because their sales
    and downloads have dried up. If we can’t get the streaming companies to pay
    a fair share, the music industry, especially for independent musicians, will be destroyed !


    Dave and Jackie Kaspersin
    Dynamic Recording Indie Label

  • Chris Park

    How does Spotify expect to be worth $100b when they can’t even get themselves out of the red? Come on…this whole thing is just another report to excited investors ahead of an IPO. We’ll see if Spotify even makes it to 2020 with the way they’re getting sued left and right…