Spotify delivered another quarter of operating profit and subscriber expansion in Q1, even as broader economic turbulence continues to create uncertainty across global markets.

On Tuesday (April 29), the streaming giant reported a record quarterly operating profit of €509 million ($535.6m) for first three months of the year, which was – despite missing its own target €548 million –  its highest quarterly operating profit to date.

SPOT also beat its own subscriber guidance by 3 million users, reaching 268 million premium subscribers.

On Spotify’s earnings call, CEO Daniel Ek struck a pragmatic tone about the macroeconomic environment. “There’s a lot of uncertainty in the world. And when volatility rises, it’s natural to ask who might be affected and how. And from where I sit, Spotify is faring better than most,” Ek told analysts.

Spotify’s Q1 results include total quarterly revenue (including Premium and ad-supported) of €4.190 billion ($4.4bn), which was up 15% YoY at constant currency.

“The underlying data at the moment is very healthy,” Ek emphasized. “Engagement remains high, retention is strong, and thanks to our freemium model, people have the flexibility to stay with us even when things feel more uncertain.

“So yes, the short term may bring some noise, but we remain confident in the long-term story, and the direction we’re heading in feels clearer than ever.”

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

Here are six more things we learned from SPOT’s leadership team on the call…

1. Spotify is still working on a Super premium tier — but it “need[s] partners to come to the table”

Spotify’s leadership team was asked about the platform’s much-anticipated “superfan product”.

Bloomberg reported earlier this year that Spotify is preparing to launch a “Music Pro” tier as soon as this year, potentially priced at an additional $5.99 per month on top of a Premium subscription.

This higher-priced tier is expected to include perks like early access to concert tickets, AI-powered remix features, and higher-fidelity audio.

The response from Daniel Ek and Alex Norström (Chief Business Officer & Co-President) appeared to confirm Spotify’s commitment to launching pricier tiers around “new offerings”, but emphasized the need for cooperation from industry partners to make that happen.

“With regards to higher tiers, we see great potential in them as we’ve mentioned before,” said Norström. “So creating higher tiers around new offerings is something we are working towards”.

He added, however, that “we need alignment and support from our industry partners to offer these kinds of new experiences to our users. And I think it’s also worth noting that we will continue to look for new ways to invest in our premium offering as we’ve done all along.”

“We need alignment and support from our industry partners to offer these kinds of new experiences to our users.”

Alex Norström

Daniel Ek echoed Norstrom’s comments, explaining that “for the very, very long term, it is an upside opportunity for Spotify”.

He added: “For the near term, the way to think about it for Spotify is, we’re not dependent on [the new tier] for growth, but we want to make it happen.

“So this is really one where I would put, again, the emphasis is for the superfan, we do need the partners to come to the table and be part of this journey.”

It’s important to highlight here that they didn’t confirm which partners they were referring to exactly.

They could well have been referring to rightsholders, but labels aren’t the only entities Spotify needs to negotiate with before it can launch its Music Pro tiers – especially if it wants concert tickets in the mix.

We know, for example, that concert giant Live Nation has held ticketing talks with Spotify, Apple, and Amazon around presale access for super-premium tier subscribers.

Discussing those talks with investors on Live Nation’s earnings call in February, CEO Michael Rapino said: “As far as the latest round with Spotify and Apple and Amazon, they’ve approached us all. We’ve talked to them all about ideas on if they wanted inventory.

“There’s a cost to that, and we would entertain and look at that option if it made sense for us in comparison to other options we have for that presale, which is a very valuable asset.”

Meanwhile, on Tuesday, during the Q1 earnings call of one of Spotify’s biggest partners, Universal Music Group, the company’s leadership team was also asked about the timeline for the introduction of super-premium subscription tiers at DSPs like Spotify.

Michael Nash, UMGs EVP and Chief Digital Officer, said: “We’re deeply engaged with all of our key partners, including Spotify on this category of opportunity, and we’re very encouraged by the direction of all those conversations.

He added that “We hope to be able to publicly elaborate on the collaborative plans that we’re developing later this year” and that UMG is “very encouraged to hear [Spotify] executives confirm on [their own Q1 earnings call] that with regard to higher tiers, they see great potential in them… and we were also encouraged to hear them reaffirm that creating higher tiers around new offerings is something that we’re working towards.”

2. Spotify’s Industry Relations Are “Better Than Ever”

Spotify’s leadership team was asked about the current state of the company’s “relationship with the broader industry”.

Daniel Ek’s assessment of the company’s industry partnerships was positive. “I have an easy answer to that,” he said. “We are now in a situation where the relationship between us and our industry partners is better than it’s ever been in our history,” he added.

“We are now in a situation where the relationship between us and our industry partners is better than it’s ever been in our history.”

He continued: “That really means that we’re really aligned on the incentives, where all of us [are] trying to grow the music industry. And as such, we’re really in constant conversation with each other to think about all these things.

“I foresee this to continue to be the case, and there’s going to be even more improvements in the years ahead.”

Spotify recently renewed its deals with major music companies Warner Music Group and Universal Music Group arrived in Q1.

When asked if SPOT’s Q1 results reflected these new deals with Universal and Warner Music, and if the “direct publishing relationships” included as part of those deals “impacted [Spotify’s] costs,” CFO Christian Luiga said: “Everything that we have signed and contracted is reflected on our financial numbers in the way we have agreed with and in the way we have entered the contract.”

3. Daniel Ek doesn’t think it’s ‘impossible to get to 1 billion subscribers’ in the future

When asked about balancing growth investments with increasing margins, Daniel Ek shared his vision for Spotify’s future.

“Fundamentally, we believe this business to be much bigger than most other people believe it to be,” Ek said.

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

daniel Ek

To explain, he shared a story from Spotify’s earlier years: “I remember back in the day when we hit 1 million subscribers, and I said the goal was to get to 100 million subscribers. And I think most of them thought I was completely nuts.”

Now at 268 million premium users, Ek sees even bigger potential.

“If you ask me what is the North Star goal here, on how many paying customers we could get, I don’t know, but I don’t see it [as] impossible to get to 1 billion subscribers.”

This explains why growth remains a top priority for Spotify. As Ek summarized elsewhere on the call: “No.1, 2 and 3 on our agenda is to prioritize growth initiatives.”

4. AI Is Transforming Product Development and Internal Operations at Spotify

Gustav Söderström addressed a question about AI’s role in driving productivity at the platform, revealing that Spotify has long viewed AI as central to its mission.

“Back in 2018, we said internally that machine learning, as AI was called back then, was the product,” Söderström explained. “What we’re fundamentally trying to do as a company is to understand you as a user.”

Söderström also highlighted how AI is now enabling new user experiences: “AI is really the next step and evolution of that, where machine learning allowed personalization, AI also allows for real-time interactivity and reasoning on top of your data,” he noted, pointing to SPOT’s AI playlists having recently rolled out in beta to over 40 markets.

“I haven’t found the need to actually force our organization to adopt new tools or AI at all. Our staff is usually very excited about all new technology, and they’re usually way ahead of the curve.”

Gustav Söderström

On the productivity front, Söderström highlighted how AI is speeding up work at the platform: “We’re also seeing AI being used in the rest of the product development cycle, specifically in prototyping of new experiences that move much more quickly and with higher fidelity and then less dependence on key engineering resources.”

He also explained that Spotify doesn’t struggle with AI adoption internally: “In general, I would say that as in previous technology shifts at Spotify, I haven’t found the need to actually force our organization to adopt new tools or AI at all,” he said.

“Our staff is usually very excited about all new technology, and they’re usually way ahead of the curve. So the real job for me, and us as managers, is to enable them to use AI by signing the right tools, removing legal blockers around data usage, exposing the right data sets etc for these tools to actually be useful and safe to use for our employees on top of proprietary company data.

“So that’s where we invested the last few years, and the adoption itself is not a challenge for us. I’m very excited about that.

5. Video Is Driving Significant Engagement Growth at Spotify

Daniel Ek was asked whether a free ad-supported streaming TV offering could work on Spotify, prompting insights into how video is expanding the platform’s utility.

“I think structurally, there’s obviously no reason why it wouldn’t work,” Ek said, explaining that “the most important reason why we have added video is because creators are asking us for it.”

He added: “While I’m sure at some point, there will be an opportunity for us to add entirely new creators onto the platform, the real goal that we’ve been going after is that we realized so many of our existing creators wanted to express themselves in different ways.

“And you’ve seen us over the past few years now add that with everything from music creators now being able to have full-length music videos onto the platform.

“The best things at Spotify has started like that, where people are literally telling us why aren’t you doing this?”

Elsewhere on the call, Söderström shared evidence of video’s growth on the platform: “We’ve seen a 44% year-over-year growth in time spent with video content. Specifically Gen Z are leading this growth, spending 81% more time with video on Spotify year-over-year.”

6. Daniel Ek reiterated there will be more segmentation of the streamer’s offering, and that pricing will be a “big” opportunity for the platform in the coming years

Daniel Ek was asked on the call about how big of an opportunity “pricing” i.e price rises will be over the next several years.

Analyst Rich Greenfield noted that “when we think about the pricing, the cost of Spotify has only risen $2 from $10 to $12 since you launched”.

The company announced in July 2023 that the price of its flagship individual subscription tier would be increasing for the first time in the US, from $9.99 per month to $10.99, following widespread calls to do so from multiple music industry leaders.

SPOT raised the price for its Premium tier in the United States again in June 2024, to $11.99.

Spotify is also preparing price increases across several global markets in Europe and Latin America starting this summer.

Daniel Ek explained: “It’s really important to understand that there’s various levers you can pull at various stages.

“At the very first inning, we didn’t even bother all that much about conversion [from free to paid] because the key goal was just getting people in the door.  Then over time, we kind of added one more [leg] to the stool where we got a lot better at converting people from free to paid. We did so by adding things like the Family plan and Student plans and so on.

“The story I’m really here trying to paint is that in the very early innings, the primary way to grow is to keep that value at an insanely good deal. And that’s where we started with Spotify. It was just an insanely good deal. It was just too good to be true, and that’s what led to much of the early growth.”

Ek argued that “when you’re still growing super fast, raising prices is not a smart strategy,” but that “as growth then sort of modulates as you get larger and larger into the market, pricing becomes another leg to the stool, another lever to pull”.

“We’re just in the early innings. I still believe there will be more segmentation. But yes, I think the opportunity [in pricing] is big.”

 Music Business Worldwide