Spotify Q1 2025 earnings name: Daniel Ek talks progress, pricing, superfan merchandise, and a future the place the platform might attain 1bn subscribers

Spotify delivered one other quarter of working revenue and subscriber enlargement in Q1, whilst broader financial turbulence continues to create uncertainty throughout world markets.

On Tuesday (April 29), the streaming large reported a document quarterly working revenue of €509 million ($535.6m) for first three months of the 12 months, which was – regardless of lacking its personal goal €548 million –  its highest quarterly working revenue thus far.

SPOT additionally beat its personal subscriber steering by 3 million customers, reaching 268 million premium subscribers.

Spotify’s Q1 outcomes included whole quarterly income (together with Premium and ad-supported) of €4.190 billion ($4.4bn), which was up 15% YoY at fixed forex.

On Spotify’s earnings name, CEO Daniel Ek struck a realistic tone in regards to the macroeconomic setting. “There’s lots of uncertainty on this planet. And when volatility rises, it’s pure to ask who could be affected and the way. And from the place I sit, Spotify is faring higher than most,” Ek advised analysts.

“The underlying information for the time being may be very wholesome,” Ek emphasised. “Engagement stays excessive, retention is powerful, and due to our freemium mannequin, folks have the pliability to stick with us even when issues really feel extra unsure.

“So sure, the quick time period might deliver some noise, however we stay assured within the long-term story, and the path we’re heading in feels clearer than ever.”

Ek was joined on the decision by Chief Enterprise Officer & Co-President Alex Norström, CFO Christian Luiga, and Gustav Söderström, Spotify’s Co-President, Chief Product & Expertise Officer

Listed below are six extra issues we discovered from SPOT’s management workforce on the decision…

1. Spotify remains to be engaged on a Tremendous premium tier — but it surely “want[s] companions to come back to the desk”

Spotify’s management workforce was requested in regards to the platform’s much-anticipated “superfan product”.

Bloomberg reported earlier this 12 months that Spotify is getting ready to launch a “Music Professional” tier as quickly as this 12 months, doubtlessly priced at a further $5.99 per 30 days on high of a Premium subscription.

This higher-priced tier is predicted to incorporate perks like early entry to live performance tickets, AI-powered remix options, and higher-fidelity audio.

The response from Daniel Ek and Alex Norström (Chief Enterprise Officer & Co-President) appeared to verify Spotify’s dedication to launching pricier tiers round “new choices”, however emphasised the necessity for cooperation from business companions to make that occur.

“With reference to larger tiers, we see nice potential in them as we’ve talked about earlier than,” stated Norström. “So creating larger tiers round new choices is one thing we’re working in the direction of”.

He added, nevertheless, that “we’d like alignment and help from our business companions to supply these varieties of latest experiences to our customers. And I feel it’s additionally price noting that we are going to proceed to search for new methods to put money into our premium providing as we’ve executed all alongside.”

“We want alignment and help from our business companions to supply these varieties of latest experiences to our customers.”

Alex Norström

Daniel Ek echoed Norstrom’s feedback, explaining that “for the very, very long run, it’s an upside alternative for Spotify”.

He added: “For the close to time period, the way in which to consider it for Spotify is, we’re not depending on [the new tier] for progress, however we need to make it occur.

“So that is actually one the place I might put, once more, the emphasis is for the superfan, we do want the companions to come back to the desk and be a part of this journey.”

It’s vital to spotlight right here that they didn’t verify which companions they had been referring to precisely.

They might properly have been referring to rightsholders, however labels aren’t the one entities Spotify wants to barter with earlier than it will possibly launch its Music Professional tier – particularly if it needs live performance tickets within the combine.

We all know, for instance, that live performance large Reside Nation has held ticketing talks with Spotify, Apple, and Amazon round presale entry for super-premium tier subscribers.

Discussing these talks with buyers on Reside Nation’s earnings name in February, CEO Michael Rapino stated: “So far as the newest spherical with Spotify and Apple and Amazon, they’ve approached us all. We’ve talked to all of them about concepts on in the event that they wished stock.

“There’s a value to that, and we’d entertain and have a look at that possibility if it made sense for us compared to different choices we have now for that presale, which is a really useful asset.”

In the meantime, on Tuesday, in the course of the Q1 earnings name of one in every of Spotify’s greatest companions, Common Music Group, the corporate’s management workforce was additionally requested in regards to the timeline for the introduction of super-premium subscription tiers at DSPs like Spotify.

Michael Nash, UMGs EVP and Chief Digital Officer, stated: “We’re deeply engaged with all of our key companions, together with Spotify on this class of alternative, and we’re very inspired by the path of all these conversations.

He added that “We hope to have the ability to publicly elaborate on the collaborative plans that we’re creating later this 12 months” and that UMG is “very inspired to listen to [Spotify] executives verify on [their own Q1 earnings call] that with regard to larger tiers, they see nice potential in them… and we had been additionally inspired to listen to them reaffirm that creating larger tiers round new choices is one thing that we’re working in the direction of.”

2. Spotify’s Business Relations Are “Higher Than Ever”

Spotify’s management workforce was requested in regards to the present state of the corporate’s “relationship with the broader business”.

Daniel Ek’s evaluation of the corporate’s business partnerships was optimistic. “I’ve a simple reply to that,” he stated.

“We at the moment are in a state of affairs the place the connection between us and our business companions is best than it’s ever been in our historical past,” he added.

“We at the moment are in a state of affairs the place the connection between us and our business companions is best than it’s ever been in our historical past.”

He continued: “That actually implies that we’re actually aligned on the incentives, the place all of us [are] attempting to develop the music business. And as such, we’re actually in fixed dialog with one another to consider all this stuff.

“I foresee this to proceed to be the case, and there’s going to be much more enhancements within the years forward.”

Spotify just lately renewed its offers with main music firms Warner Music Group and Common Music Group (each in Q1).

When requested if SPOT’s Q1 outcomes mirrored these new offers with Common and Warner Music, and if the “direct publishing relationships” included as a part of these offers “impacted [Spotify’s] prices,” CFO Christian Luiga stated: “The whole lot that we have now signed and contracted is mirrored on our monetary numbers in the way in which we have now agreed with and in the way in which we have now entered the contract.”

3. Daniel Ek doesn’t assume it’s ‘unattainable to get to 1 billion subscribers’ sooner or later

When requested about balancing progress investments with rising margins, Daniel Ek shared his imaginative and prescient for Spotify’s future.

“Basically, we consider this enterprise to be a lot larger than most different folks consider it to be,” Ek stated.

“I don’t see it [as] unattainable to get to 1 billion subscribers.”

daniel Ek

To elucidate, he shared a narrative from Spotify’s earlier years: “I bear in mind again within the day after we hit 1 million subscribers, and I stated the objective was to get to 100 million subscribers. And I feel most of them thought I used to be fully nuts.”

Now at 268 million premium customers, Ek sees even larger potential.

“In the event you ask me what’s the North Star objective right here, on what number of paying prospects we might get, I don’t know, however I don’t see it [as] unattainable to get to 1 billion subscribers.”

This explains why progress stays a high precedence for Spotify. As Ek summarized elsewhere on the decision: “No.1, 2 and three on our agenda is to prioritize progress initiatives.”

4. AI Is Reworking Product Improvement and Inside Operations at Spotify

Gustav Söderström addressed a query about AI’s function in driving productiveness on the platform, revealing that Spotify has lengthy seen AI as central to its mission.

“Again in 2018, we stated internally that machine studying, as AI was known as again then, was the product,” Söderström defined. “What we’re essentially attempting to do as an organization is to grasp you as a person.”

Söderström additionally highlighted how AI is now enabling new person experiences: “AI is actually the subsequent step and evolution of that, the place machine studying allowed personalization, AI additionally permits for real-time interactivity and reasoning on high of your information,” he famous, pointing to SPOT’s AI playlists having just lately rolled out in beta to over 40 markets.

“I haven’t discovered the necessity to truly pressure our group to undertake new instruments or AI in any respect. Our employees is often very enthusiastic about all new know-how, they usually’re often manner forward of the curve.”

Gustav Söderström

On the productiveness entrance, Söderström highlighted how AI is dashing up work on the platform: “We’re additionally seeing AI being utilized in the remainder of the product growth cycle, particularly in prototyping of latest experiences that transfer far more rapidly and with larger constancy after which much less dependence on key engineering assets.”

He additionally defined that Spotify doesn’t battle with AI adoption internally: “Typically, I might say that as in earlier know-how shifts at Spotify, I haven’t discovered the necessity to truly pressure our group to undertake new instruments or AI in any respect,” he stated.

“Our employees is often very enthusiastic about all new know-how, they usually’re often manner forward of the curve. So the actual job for me, and us as managers, is to allow them to make use of AI by signing the fitting instruments, eradicating authorized blockers round information utilization, exposing the fitting information units and so forth. for these instruments to truly be helpful and protected to make use of for our staff on high of proprietary firm information.

“In order that’s the place we invested the previous couple of years, and the adoption itself will not be a problem for us. I’m very enthusiastic about that.

5. Video Is Driving Important Engagement Development at Spotify

Daniel Ek was requested whether or not a free ad-supported streaming TV providing might work on Spotify, prompting insights into how video is increasing the platform’s utility.

“I feel structurally, there’s clearly no motive why it wouldn’t work,” Ek stated, explaining that “an important motive why we have now added video is as a result of creators are asking us for it.”

He added: “Whereas I’m certain in some unspecified time in the future, there will probably be a possibility for us so as to add totally new creators onto the platform, the actual objective that we’ve been going after is that we realized so a lot of our present creators wished to specific themselves in several methods.

“And also you’ve seen us over the previous few years now add that with the whole lot from music creators now with the ability to have full-length music movies onto the platform.

“The perfect issues at Spotify has began like that, the place individuals are actually telling us why aren’t you doing this?”

Elsewhere on the decision, Söderström shared proof of video’s progress on the platform: “We’ve seen a 44% year-over-year progress in time spent with video content material. Particularly Gen Z are main this progress, spending 81% extra time with video on Spotify year-over-year.”

6. Daniel Ek reiterated that there will probably be extra segmentation of the streamer’s providing, and that pricing will probably be a “large” alternative for the platform within the coming years

Daniel Ek was requested on the decision about how large of a possibility “pricing” i.e worth rises will probably be over the subsequent a number of years.

Analyst Wealthy Greenfield famous that “after we take into consideration the pricing, the price of Spotify has solely risen $2 from $10 to $12 because you launched”.

The corporate introduced in July 2023 that the worth of its flagship particular person subscription tier can be rising for the primary time within the US, from $9.99 per 30 days to $10.99, following widespread calls to take action from a number of music business leaders.

SPOT raised the worth for its Premium tier in the USA once more in June 2024, to $11.99.

Spotify can also be getting ready worth will increase throughout a number of world markets in Europe and Latin America beginning this summer time ( however not within the US).

Daniel Ek defined: “It’s actually vital to grasp that there’s varied levers you’ll be able to pull at varied phases.

“On the very first inning, we didn’t even hassle all that a lot about conversion [from free to paid] as a result of the important thing objective was simply getting folks within the door.  Then over time, we type of added yet another [leg] to the stool the place we acquired quite a bit higher at changing folks from free to paid. We did so by including issues just like the Household plan and Scholar plans and so forth.

“The story I’m actually right here attempting to color is that within the very early innings, the first method to develop is to maintain that worth at an insanely whole lot. And that’s the place we began with Spotify. It was simply an insanely whole lot. It was simply too good to be true, and that’s what led to a lot of the early progress.”

Ek argued that “once you’re nonetheless rising tremendous quick, elevating costs will not be a wise technique,” however that “as progress then form of modulates as you get bigger and bigger into the market, pricing turns into one other leg to the stool, one other lever to tug”.

“We’re simply within the early innings. I nonetheless consider there will probably be extra segmentation. However sure, I feel the chance [in pricing] is large.”Music Enterprise Worldwide