2018-06-04

Amazon, Apple, Facebook, Google - Fifth Horseman Spotify $SPOT?

Scott Galloway 2018's Fifth Horseman Prediction

L2inc.com video above published on May 24, 2018: Amazon, Apple, Facebook, and Google have a combined market value greater than the GDP of France. What company has the potential to join them?

Editor's note: Last year Scott Galloway (speaker in the video) was touting Netflix, this year Spotify. Color me "skeptical," although a company can be very successful without becoming a "Fifth Horseman." If you are looking for a global "Fifth Horseman" consider the largely still untapped digital online streaming media potential of Disney $DIS (market cap $148.10B), or look at the potential beyond China for Tencent (WeChat) (market cap US$498.37B) already the world's fifth-largest internet company by revenue, or Alibaba $BABA (market cap $523.35B).

NYSE: SPOT (market cap 1 Jun 2018: $28.36B):
Spotify Technology
Principal domain: spotify.com
Headquarters: Stockholm, Sweden CEO: Daniel Ek (2006–) Founded: 2006, Stockholm, Sweden Subsidiaries: Spotify AB, Spotify USA, The Echo Nest, Tunigo AB, Spotify USA Inc, Spotify Singapore PTE. Ltd., Loudr, CrowdAlbum, Inc. Founders: Martin Lorentzon, Daniel Ek

Video sources:
(0:09) Yahoo Finance, May 2018. (0:09) “France GDP,” Trading Economics, 2016. https://bit.ly/2IJgqw2 (1:35) Yahoo Finance. (1:45) “4 in 10 Spotify Users Pay for Premium,” Statista, May 2018. https://bit.ly/2LrGYiU (1:53) “Spotify Misses On Revenue In First Earnings Report With 170M Users,” TechCrunch, May 2018. https://tcrn.ch/2xaG8E7 (1:59) “Apple Music Hits 48M Subscribers; Should Spotify Worry?” NASDAQ, April 2018. https://bit.ly/2GLt5Zz (2:25) Yahoo Finance, May 2018. (3:00) “Apple Music on Track to Overtake Spotify in U.S. Subscribers,” The Wall Street Journal, February 2018. https://on.wsj.com/2EEd5sV (3:18) “Spotify’s Losses Widen as Royalty Costs Pile Up,” Statista, March 2018. https://bit.ly/2jAKTjx (see below) (3:24:) L2 Analysis of CNBC, NASDAQ, Yahoo Finance Data.


Transcript (auto-generated, unedited)
00:00 [Music]
00:01 the four Amazon Apple Facebook and
00:04 Google have aggregated market
00:05 capitalization greater than the GDP of
00:07 France the accretion of stakeholder
00:10 value for consumers investors and
00:12 employees that these companies is
00:14 staggering five traits that identify a
00:17 company that can become a
00:18 trillion-dollar market capitalisation
00:20 company or as we refer to it the t
00:22 algorithm one their global an offer a
00:25 product that permeates cultural
00:27 boundaries to they apply machine
00:29 learning or AI or whatever you want to
00:31 call it agility network effects that
00:33 basically leverage behavioral data that
00:35 senses your tastes and tailors the
00:37 product to you they employ a Benjamin
00:39 Button effect unlike a car rolling out
00:42 the assembly line or a toothpaste tube
00:44 that has the cap twisted off they don't
00:46 decline in value they actually get more
00:48 valuable with you similar to Google the
00:51 search algorithm sees everything
00:53 everyone else is seeing or the algorithm
00:55 sees and every time you search the
00:57 algorithm gets one three billions better
00:59 for the next user they are likable as
01:01 companies we personify them and we
01:04 perceive them as friendly and is doing
01:06 good in the world a lot of debate around
01:07 how important likability is these days
01:09 lastly they're viewed as a career
01:11 accelerant the team of the best players
01:13 wins and you have to be seen as an
01:14 organization that abandons traditional
01:16 hierarchies and can give a twenty
01:18 five-year-old the responsibilities role
01:20 and compensation of a 35 year old in
01:22 2017 we posited Netflix would be the
01:26 fifth Horseman the firm had become the
01:27 operating system for the second most
01:29 valuable screen in our lives television
01:31 since we labeled Netflix the next 300
01:34 billion dollar firm the stock has
01:35 trebled in value so who's our 2018
01:38 prediction for the fifth Horseman
01:40 Spotify a firm with a hundred and
01:42 seventy million users seventy five
01:44 million of whom are premium subscribers
01:46 the firm registered a billion in revenue
01:49 last quarter representing thirty eight
01:51 percent year-on-year growth that's a
01:52 billion euros which I think's about 1.1
01:55 billion u.s. and Spotify accounts for
01:58 36% of premium music subscribers
02:01 globally young people spend an eighth of
02:03 their waking hours listening to music
02:05 just as real estate identified the most
02:07 valuable companies in the 20th century
02:08 whether were Sears or Walmart real
02:11 estate identifies the most valuable
02:13 companies of the 21st century
02:15 specifically whatever apps are on your
02:17 home screen
02:17 are typically companies were somewhere
02:19 between 100 and 900 billion yet there is
02:22 one with the best real estate on your
02:24 phone and it's only worth 28 billion for
02:27 now Spotify among music streaming
02:29 services Spotify as the best technology
02:31 merchandising and brand pandora was
02:34 first but has no social aspect and is
02:36 only available in the US and is
02:37 seriously uncool what's better than a
02:39 prophylactic having ad-supported
02:41 Pandora's you are about to get down you
02:43 are not going to have sex
02:45 bling ad-supported Pandora Apple music
02:47 should be number one given their
02:49 distribution advantage but Spotify has
02:51 more credits young people and
02:54 influencers and is a better platform for
02:57 discovering and sharing music Apple
02:59 music actually grew faster than Spotify
03:01 in the US last quarter why because Apple
03:03 has monopoly power is abusing that power
03:05 and should be broken up but that's
03:07 another talk show like most ambitious
03:09 digital players Spotify is investing
03:12 which is Latin for hemorrhaging money
03:14 Spotify lost 380 million euros on 4
03:17 billion in sales in 2017
03:20 Spotify currently trades at a hundred
03:22 and fifty dollars a share or twenty
03:24 eight billion dollars in value or five
03:26 times revenues that's an Amazon like
03:28 multiple so as Spotify worth twenty
03:31 eight billion dollars in its current
03:33 state maybe but maybe the better
03:35 question is is it worth fifty to a
03:37 hundred billion dollars to one or more
03:38 of the four and the answer is yes it's
03:40 hard to see why Amazon or Netflix
03:42 wouldn't endure seven and twenty five
03:45 percent Aleutians respectively and pay
03:47 fifty billion dollars plus to submit
03:49 their leadership position and what may
03:51 be the last media battleground music our
03:54 prediction Spotify stock doubles in the
03:57 next 12 to 24 months the next horsemen
04:00 Spotify my Spotify playlist includes
04:04 Katy Perry Arielle Grande and Britney
04:06 Spears or as I like to call it I'm gonna
04:07 get that pregnant list is that a hate
04:10 crime
04:12 we'll see you next week they don't what
04:15 is what what they don't know what is
04:17 what they just struck swish
04:21 [Music]

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