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Spotify Reportedly Nearing Russia Launch

By Evan Niu, CFA – Jul 9, 2020 at 10:30AM

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The music streaming leader has made it clear that it's eyeing Russia and South Korea.

It's been a little over a year since music streaming leader Spotify (SPOT -0.62%) launched in India, one of the company's most significant geographical expansions in recent memory. CEO Daniel Ek has made it clear that Spotify wants to eventually be in "every market in the world." Spotify may even launch in nearby Russia within the next week.

Here's what investors need to know.

Daniel Ek on stage in front of the Spotify logo

CEO Daniel Ek. Image source: Spotify.

The Russian music market is booming

Music Business Worldwide reports that Spotify is planning to launch in Russia on July 15, citing anonymous industry sources. Spotify might partner with telecommunications provider Mobile TeleSystems (MBT), known as MTS, as part of the launch. MTS had 78.5 million mobile subscribers in Russia at the end of the first quarter.

With nearly 145 million people, Russia isn't as large as India in terms of population. Still, the country represents a meaningful avenue for incremental growth. Russia's music market is booming with revenue jumping over 50% in 2019, according to the report, citing data from the International Federation of the Phonographic Industry (IFPI). That growth is partially attributed to stronger copyright laws.

"For instance, countries such as China, Russia and South Korea have taken big strides to improve their copyright laws and that's helped us do more business in those markets," Warner Music's (WMG 0.35%) head of international commercial services Stu Bergen said. "This is great news for artists and fans as we've been able to grow our rosters and release more music."

Speaking of South Korea, Spotify is reportedly eyeing that country as the next market to expand into after Russia. That should come as little surprise, as Ek said in no uncertain terms in April that Spotify was interested in launching in both countries soon.

We've talked about both Russia and South Korea as being markets we want to be in, and nothing has changed there. All of the guidance and forecasts we give you always include our expectations of if and when we will launch in new markets.

So while we have nothing to announce at this point, you should know those are definitely two markets that we are focused on. And all the guidance that we've provided includes the timing of any new market launches, whether it be South Korea, Russia or anything else.

In terms of guidance, Spotify expects to finish 2020 with 328 million to 348 million monthly active users (MAUs) and 143 million to 153 million premium subscribers. At the end of the first quarter, the Swedish company had 286 million MAUs and 130 million premium subscribers.

Those are ambitious targets for the year, particularly amid ongoing global macroeconomic uncertainties due to the COVID-19 pandemic. Launching in Russia could be an instrumental part of getting there.

Evan Niu, CFA owns shares of Spotify Technology. The Motley Fool owns shares of and recommends Spotify Technology. The Motley Fool has a disclosure policy.

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