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Spotify Could Hit Half a Billion Monthly Users in 5 Years, Analyst Says

Spotify’s monthly average user total could reach half a billion by 2023, said Macquarie analyst Amy Yong in a research note to investors after markets closed Thursday. Yong gave Spotify an outperform rating citing sustained subscription growth, operating leverage, including content negotiation, and advertising. Yong called Spotify “the dominant global streaming player with continued sub growth and eventual operating leverage.” The streaming music service is set to renew label agreements and expand to India, Russia and Africa, Yong noted, predicting monthly average users will reach 246 million and 294 million by the end of 2019 and 2020. The 21 and 20 percent growth rates would be a “modest deceleration” from 28 and 30 percent in 2017 and 2018, said the analyst. Label renewals are imminent and offer an opportunity for long-term margin expansion, said Yong. Direct relationships with artists “could complicate negotiations,” she said, but they likely will help Spotify gain leverage and boost margins despite the potential of disrupting relationships with labels. The service’s advertising business is poised for “meaningful growth,” and a 25 percent slice of the advertising pie could equate to $3 billion-$5 billion in revenue, she said.