Spotify Technology NYSE: SPOT Co-CEO, Chief Product Officer and Chief Technology Officer Gustav Söderström outlined the company’s strategy for using artificial intelligence, expanding into additional media formats and monetizing highly engaged users during an investor conference appearance.
Söderström, who became co-CEO alongside Alex Norström in January after serving as Spotify’s chief product and technology officer, described AI as the next major technology shift for the company. He compared the opportunity with earlier shifts including broadband, smartphones and connected devices, which Spotify sought to use to expand its position.
“The job for me and Alex… is to be able to understand technology deeply, try to understand what it means for Spotify, for the business model, reposition the company to turn it into a tailwind, and then ride it,” Söderström said.
Building an Intelligent Media Service
Söderström said Spotify has been rebuilding its product to become what he called “the first truly intelligent media service.” He said consumers increasingly expect to interact conversationally with digital services, including asking questions about artists, songs, touring schedules and music credits without leaving the platform.
Spotify has added music videos and capabilities intended to answer questions about bands, producers, samples and live performances, he said. The company believes its access to licensed and proprietary information, combined with broader real-time information, can support a more interactive user experience.
The executive also said AI is changing the economics of software by introducing inference costs that rise with usage. Spotify’s existing experience managing per-stream content costs, particularly in its free tier, could help it manage that transition, according to Söderström.
He pointed to audiobooks as an example of Spotify’s approach. The company includes about 15 audiobook listening hours in Premium and offers additional listening hours as add-ons for heavier users. Söderström said the audiobook add-on business had reached €100 million in annual recurring revenue after about a year, exceeding the company’s expectations.
Spotify plans to apply a similar model to AI-powered features, he said: offering a baseline amount of functionality in free and paid tiers while allowing users with greater usage needs to pay for additional access.
- Free access is intended to broaden Spotify’s potential market.
- Premium subscriptions can bundle additional content and features.
- Add-ons are designed to monetize users with higher engagement and potentially higher average revenue per user.
Growth, Pricing and New Verticals
Söderström said Spotify sees opportunities to expand beyond music, podcasts and audiobooks into more verticals. He cited fitness as one example, arguing that Spotify is already used during activities such as running, gym sessions, commuting, studying and social gatherings.
He also emphasized the company’s focus on subscription retention rather than maximizing time spent on the platform. Söderström said a survey of Spotify users and non-users found that respondents regretted less than 10% of the time they spent on Spotify, while some other services had much higher levels of reported regret.
Because Spotify derives roughly 90% of its revenue from subscriptions, Söderström said the company is focused on providing valuable time rather than simply seeking the highest possible engagement. He said the company’s strategy is to become “the lowest regret or the most valuable time spent on the internet.”
On pricing, Söderström said Spotify held its standard price near €9.99 for an extended period while adding catalog depth and product features. The company has since raised prices and has not experienced the churn it expected from those increases, he said. Spotify is also priced above competitors in certain markets without seeing material churn, according to Söderström.
“The value always has to be vastly bigger than the price you are paying,” he said, adding that Spotify plans to continue adding value to Premium while developing more add-ons across music, podcasts, audiobooks and other categories.
AI Music Tools and Rights Holders
Addressing generative music, Söderström said Spotify intends to pursue tools for remixes and covers involving existing intellectual property while seeking permission from rights holders and giving artists the ability to opt in.
He said other generative music services are largely focused on creating new music, while remixes and covers involve copyright considerations. Spotify believes its existing relationships with artists and rights holders position it to create a legal framework for AI-assisted versions of established songs, he said.
Söderström said Spotify has been training its own generative music model and has made progress with Universal Music Group on cover modeling. The company’s next step is expected to be a research preview, through which users could compare versions of generated remixes and provide preference data to improve the model.
Spotify’s nearly 800 million users could provide significant scale for that feedback process, Söderström said. Artists would not be required to participate, but he argued that fan-created remixes and covers could increase an artist’s share of streaming activity and royalties.
Video, Emerging Markets and User Targets
Spotify has also expanded video capabilities across podcasts and music. Söderström said podcast video grew 50% year over year on Spotify and that the service now hosts more than 500,000 video shows. He said younger podcast audiences increasingly expect video, while older users remain more likely to consume audio-only shows.
The company introduced its Spotify Partner Program to support video podcast creators by reducing Spotify advertising within Premium and paying creators from the Premium revenue pool, Söderström said. He added that music videos have been particularly important for discovery, with songs that have video 24% more likely to be streamed or saved than songs without video, according to Spotify’s data.
Looking toward 2030, Spotify has said it is targeting 1 billion monthly active users and has a longer-term ambition of reaching 1 billion subscribers. Söderström said emerging markets are expected to drive much of the user growth, while more mature markets continue to convert free users into paid subscribers over time.
He said Spotify has tested individualized advertising load and conversion gates in India to maintain the desired monetization trajectory. Over the next year, Söderström said he hopes Spotify can demonstrate multiple successful add-on products and further develop interactive features, including personalized running playlists that can match music tempo to a user’s requested cadence.
About Spotify Technology (NYSE:SPOT)
Spotify Technology SA is a Luxembourg-based audio streaming company that operates the Spotify platform. The service gives users access to a broad catalog of music, podcasts and audiobooks, with features for searching, discovering, creating and sharing audio content across connected devices.
Spotify offers an ad-supported service at no subscription cost and paid Premium plans that provide additional features, including ad-free listening and offline playback. The company generates revenue primarily through subscriptions and advertising, while working with music labels, publishers, podcast creators and other rights holders to distribute content.
Founded in Stockholm in 2006 by Daniel Ek and Martin Lorentzon, Spotify launched its streaming service in 2008.
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