Spotify (Minutes): Currently focusing on further activating the user ecosystem

The following is a summary of the 3Q25 earnings call for $Spotify(SPOT.US) organized by Dolphin Research. For a review of the financial report, please refer to "Can Spotify's New Price Increase Cycle Soar Again?"

I. Key Financial Metrics

1. Third Quarter User Numbers: In the third quarter, our monthly active users increased by 17 million, reaching a total of 713 million, exceeding our target by 3 million. We also added 5 million net subscribers, bringing the total number of subscribers to 281 million, a 12% year-over-year increase, in line with our expectations.

2. Total Revenue: Total revenue reached 4.3 billion euros, a 12% year-over-year increase at constant currency. Subscription revenue grew by 13% year-over-year at constant currency, primarily driven by the increase in user numbers.

3. Profitability: The gross margin reached 31.6%, exceeding expectations by 50 basis points and growing approximately 50 basis points year-over-year. The outperformance was mainly due to adjustments in the estimation of related liabilities, almost entirely related to the first half of 2025. Excluding these factors, our gross margin would still slightly exceed expectations due to favorable content cost factors.

Operating profit was 582 million euros, exceeding expectations by 97 million euros. Due to stock price fluctuations, social-related expenses contributed a positive 41 million euros to the company. It should be noted that we do not predict stock price movements in our business outlook as these factors are beyond our control. Other factors contributing to the variance between actual operating income and expectations include more favorable marketing timing, reduced personnel-related expenses, and better-than-expected gross margin performance.

4. Cash Flow: This quarter, the company's free cash flow was 806 million euros. By the end of the quarter, our total cash and short-term investments reached 9.1 billion euros; additionally, we repurchased 77 million dollars of stock in the third quarter. As of November 3, we have cumulatively repurchased 410 million dollars of stock this year. As announced last quarter, our focus is on repurchasing stock at appropriate times, primarily to offset the dilution effect caused by employee equity incentive plans.

5. Outlook:

(1) User Numbers: In the fourth quarter, we expect monthly active users to reach 745 million, an increase of 32 million from the third quarter; meanwhile, the number of subscribers is expected to reach 289 million. According to our forecast, the net addition of subscribers will be 8 million, slightly lower than the same period last year, mainly due to an expected slight increase in churn rate after the price increase. This year, we launched new pricing schemes in over 150 markets, compared to only 6 markets implementing new pricing policies in the same period last year.

Additionally, we recently launched an upgraded free package globally, which has positively driven our user growth. We believe that with these advantages, our business is fully capable of achieving user conversion and maintaining healthy user growth momentum by 2026.

(2) Total revenue for the fourth quarter will reach 4.5 billion euros; at constant currency, the year-over-year growth rate will increase to about 13%, compared to only 12% in the third quarter. Meanwhile, we expect the year-over-year growth rate of average revenue per user (ARPU) at constant currency to also reach about 2%. We expect the fourth quarter gross margin to be 32.9%, with operating profit at 620 million euros.

(3) Regarding 2026. Although it is still too early to provide specific forecasts, I would like to point out: Due to the seasonality of the advertising business, our company's gross margin in the first quarter is usually lower than in the fourth quarter. We expect the same situation in the first quarter of 2026. Apart from this, we are confident in the company's prospects, expecting 2026 to be a year of steady revenue growth, prudent investment behavior, and continuous improvement in gross margin and cash flow.

II. Management Business Report

This year has been a transformative year for me, and I have been contemplating what factors have been driving the company's development. When I set aside all other factors, I find the answer remains consistent: it is our user base.

Everything starts with the user and ultimately returns to the user. As the data from this quarter shows, our performance on the user side is very strong. User engagement with music, podcasts, videos, and audiobooks continues to increase. Once people start using Spotify, they continue to stay on the platform—this is a common occurrence across all markets and product formats. Gustav will further elaborate on our product delivery progress and the actual impact of these initiatives during this critical period of accelerated execution this year, but the data clearly shows: our multi-platform development strategy is progressing smoothly as expected.

We do not pursue short-term optimization of quarterly performance but focus on the lifetime value of customers. Because at our scale, few metrics change rapidly. The decisions we make today were actually made long before these data truly manifest. In some cases, this means we made these decisions several quarters ago, or even years ago.

But this does not mean we can be complacent about our performance. Our responsibility is to make wise investments to create more value in the long term, and we fully expect you to supervise this. Our goal is to achieve outstanding performance, which not only means having excellent products but also having a sound business model.

When we sign new multi-year licensing agreements with partners, the market generally views this as a zero-sum game—either one side wins or the other loses, and everyone is trying to figure out which side they belong to.

But our view is completely different; we believe this is not a zero-sum game at all. Although the benefits of such cooperation may not immediately appear from quarterly data, the reality is that these agreements provide us with room for innovation, bringing us closer to our long-term financial goals.

We can develop new products, launch new features, and accelerate experimentation, resulting in a better user experience, higher business growth, stronger user stickiness, and more stable customer retention, thereby driving the continuous development of the entire business. This is like a "flywheel effect"—we have long verified the feasibility of this cooperation model many times. Our partners also gain better development opportunities, so both sides are winners.

In just the past few months, we have launched over 30 new core features. In fact, the number of these new features has already exceeded the total for the entire last year, and this year we are far from finished.

1. User Ecosystem & Product Updates

If we look at the monthly active users alone, the global rollout of our new free experience feature played a key role—this attracted millions of new listeners to join the Spotify ecosystem and was the first substantial update to the service since 2018. Since most users start using Spotify from the free version, we are eager to further enhance the user experience to continue attracting more new users.

This initiative has had a significant impact on user engagement and retention, and we know that these metrics are key to achieving further growth and improving user conversion rates. In terms of subscribers, we have seen a continuous growth trend in all regions; users are spending more time on Spotify than ever before. Notably, even in the most competitive market environments, we continue to gain market share.

After implementing price increases in over 150 markets, we observed that user retention rates remained stable. These results fully demonstrate the appeal of our products and the loyalty of our users.

Users have been sharing music, podcasts, and audiobooks with each other. With our newly launched in-app messaging feature, the experience of sharing and discussing this content has become more convenient. Since we launched this feature in the first batch of markets a few months ago, nearly 25 million users have sent a total of about 200 million messages. We believe this feature provides users with a new, more effective way to connect on Spotify.

Many people have been eagerly awaiting a Spotify app for Apple TV. Now, the user experience of this app has been significantly improved because it was specifically developed for the Apple TV platform. One thing I particularly like is: the reason we didn't launch a dedicated Apple TV app before was that the additional development costs were not worth it for us. However, by leveraging artificial intelligence technology, we successfully reduced these development costs significantly—we can actually port the app originally designed for the iOS platform directly to the TVOS platform. I find this very interesting because it precisely illustrates that in many cases, we have not yet been able to truly leverage artificial intelligence to significantly enhance our development efficiency.

Perhaps you saw Spotify's live demonstration of Meta AI's latest technology at the recent developer conference. This technology integration allows users to connect Spotify, play music, and fully control Spotify's various functions. We are honored to be one of the latest and most anticipated innovation cases in this field.

We have also established a new partnership with ChatGPT. This once again demonstrates how we are continuously expanding our "ubiquitous" service strategy—no matter where you are, we can help users discover and use Spotify in new ways. Once you connect your Spotify account with ChatGPT, you can have ChatGPT generate various content for you: such as a perfect playlist tailored for a special moment in 2025; or a playlist suitable for creating a tranquil atmosphere when relatives come over for the holidays... In short, whatever you think of, ChatGPT can help you achieve it.

The experience of using Spotify in the car has far exceeded our expectations, becoming an indispensable part of users' daily lives. In fact, currently, 245 million people use Spotify in the car, accounting for 34% of Spotify's average monthly active users, and also 15% of total user usage time.

2. Three Major Content Areas

(1) Music

In the music field, we continue to help artists reach a large global audience. Last quarter, we witnessed many artists breaking multiple streaming records across various music genres; at the same time, many emerging artists quickly rose to become fan favorites worldwide and topped our streaming charts.

We also held numerous immersive fan interaction events and private performances. We launched in-app experiences specifically designed to commemorate the most iconic music works. Additionally, our partnership with FC Barcelona continues—this collaboration not only connects fans worldwide but also brings strong user recruitment effects to Spotify.

Daniel also talked about our partnerships with music record companies and publishers. During this quarter, we successfully reached several groundbreaking direct licensing agreements, which brought tangible value to artists, songwriters, copyright owners, and Spotify. What benefits Spotify naturally benefits the entire industry we support, which of course includes music, podcasts, and audiobooks. Now, I am very much looking forward to seizing the various opportunities brought by these agreements.

(2) Podcasts

In the podcast field, over 390 million users have listened to video podcast programs on Spotify, a 54% increase from the same period last year. Currently, there are nearly 500,000 video podcast programs on our platform. The time users spend on video content has more than doubled compared to the same period last year, with most of the growth coming from video podcasts. Since the launch of the Spotify Partner Program (SPP), users' video content consumption has increased by more than 80%.

We recently announced that starting in early 2026, we will introduce some premium video podcast content from Spotify Studios and the Ringer platform to Netflix in the United States, with plans to expand to more markets later. We hope our creators can expand their audience globally, which also represents a highly attractive profit opportunity for Spotify. Through collaboration with Netflix, our ecosystem will further grow, attracting more new fans and providing broader distribution channels for these contents.

(3) Audiobooks

In just two years, Spotify has attracted tens of millions of new young listeners to start listening to audiobooks. Our audiobook service now covers 14 global markets, and the number of English audiobooks has tripled, currently reaching over 500,000 works.

Among all our eligible Premium users, more than half have listened to audiobooks; compared to last year, the number of audiobook listeners has increased by 36%, and the listening time per person has also increased significantly.

Recently, we also launched an additional subscription service for Premium users, providing more choices for listeners, allowing this audiobook format to attract more potential fans globally, while also enhancing the listening experience.

3. Advertising Business

Last quarter, we mentioned the need to readjust strategies and improve advertising effectiveness. We remain confident in our long-term strategy, and the current market environment is gradually improving, as we are fully committed to laying the foundation for the company's long-term development. Although these changes take time to implement, we believe these efforts will yield significant results in the coming years.

III. Analyst Q&A

Q1: Could you please explain in detail the gross margin situation for the Premium and ad businesses in the third quarter? How should we view the gross margin for the fourth quarter and 2026?

A: This year, the company's gross margin is continuously improving. Currently, the pressure on the premium business is indeed greater than on the advertising business. However, this is nothing to worry about. At the beginning of this year, we announced our new plan:We will launch the SPP project and transfer some podcast videos and content to the paid subscription product business to enhance the quality of high-end products.

As a result, the related costs will shift from the advertising business to the high-end product business,. Although this adjustment has little impact on the company's overall operations, it will slightly reduce the profit margin of the high-end product business while increasing the profit margin of the advertising business. Since we started implementing this plan in the first quarter of this year, this change will run throughout the year and will also affect the fourth quarter.

Q2: Major record companies have hinted at their plans to launch exclusive services for high-end super fan groups. Will these services be jointly developed by major record companies for all digital music platforms, or will they be tailor-made exclusive products for Spotify?

A: We will only bring products to market when they are truly ready. However, I can clearly tell you that we are working closely with most of the relevant copyright holders.

We will provide additional Spotify add-on services based on users' Premium subscription services. A few months ago, we launched a new service called "Audiobooks+", which is a regular subscription option for users who have already listened to 15 hours of content when listening to audiobooks. This add-on service has been very popular, and user feedback has been extremely positive.

More importantly, in addition to this, users are also purchasing additional service content. Therefore, the ARPU level we are currently seeing is indeed unprecedented. This makes us very excited—because we are constantly launching new add-on services that involve more industry fields.

Q3: What impact do you think artificial intelligence will have on the music industry? How does the integration of ChatGPT align with this trend? In your cooperation with major music companies, you also mentioned developing products that can bring new revenue sources to the music industry. Could you further explain how these new products will impact royalty income?

A: As the entire industry, including us, shifts to so-called "generative recommendation systems," the recommended content we receive will be significantly improved. These systems will use generative artificial intelligence to gain a deeper understanding of consumer behavior and needs.

Today's recommendation systems no longer rely solely on users' passive click behavior or data records; we truly begin to understand the content itself and understand users' personalized needs. For us, the most exciting thing is that these systems can even understand users' language. Because of this, you can communicate with Spotify's "DJ" in English, and it really understands what you mean and provides you with personalized recommendations. I believe that if this technology continues to develop, users will be able to have a richer interactive experience in the future—we internally call this technology "Personalization 2.0". At that time, users can talk to Spotify as if they were communicating with a real person, and Spotify can truly understand your personalized needs.

You can tell Spotify that you are actually tired of this specific type of music and now want to listen to some new music—content that has never appeared in our listening data. Therefore, we cannot predict your preferences at all. However, you can tell us: what kind of personalized experience you want and how much user control you want.

The real advantage of ChatGPT is that it can not only use its own capabilities to understand the world and various usage scenarios but also combine Spotify's understanding of user preferences to tailor personalized content for you. Now, you can request to generate a music playlist based on something happening in the world; moreover, this playlist will not be the same for all ChatGPT users, as it will adjust the content based on your personal Spotify usage habits to truly meet your needs. Such a combination was simply impossible before.

Regarding the products you mentioned that we are developing in cooperation with the music industry, our view is: just as when dealing with piracy issues, we believe that someone must work hand in hand with the music industry and artists to use this technology legally. We will not ask for anyone's understanding but hope that artists can truly participate in this process and benefit from it. This is why we are doing this.

Q4: Could you talk about the potential impact of collaborating with Netflix to produce video podcasts? How will this affect your overall strategy to increase video viewing on the platform?

A: We believe that when creators succeed, we succeed. Since creators are committed to creating the best programs and interview content, they naturally hope their works can be played on as many platforms as possible.

Of course, we are also willing to help them spread these works to as many audiences as possible, which aligns with our core philosophy of "innovation at the core" and helps them achieve maximum commercial value. As for the collaboration with Netflix you mentioned, this undoubtedly provides an excellent opportunity to realize these ideas and is also a natural extension of our entire ecosystem. More importantly, we have already seen many creators express strong interest, hoping to use Spotify as their content distribution platform.

As for your second question, specifically: usually, when our programs are initially released on Spotify, we also upload these programs to YouTube. From past experience, doing so does indeed further enhance people's awareness of these programs. Moreover, we usually find that due to the spread of these programs on YouTube, the number of plays on Spotify also increases accordingly. Therefore, seeing Netflix now establish this new partnership with us, we are very excited and gratified.

Q5: In your Instagram post, Gustav mentioned that free users are very satisfied with the recent free feature upgrades. So, has the conversion rate from free to paid changed due to these upgrades?

A: From our data, user activity has indeed increased. For Spotify, there are several key metrics to measure user retention and subscription value. These metrics are user activity—specifically, the number of active days per month, which we call "active days". Therefore, our goal is to increase user daily activity and the number of active days per month. We know that over time, doing so will inevitably lead to more user conversion rates.

We proposed this idea many years ago: the more frequently you use it, the higher the cost you will eventually need to pay. Therefore, we are always committed to maximizing user engagement in both free and paid services. We are very confident that things will continue as usual—people will use our services more, which will undoubtedly bring us more good news, whether in free or paid services.

Q6: Regarding leadership transition. Gustav and Alex, since you will be co-CEOs in January, what excites you most in your respective areas of responsibility?

A: Excited about pursuing higher goals, as we said before, about 3% of the global population regularly subscribes to Spotify services—these people use our services again every month. With these three core business areas, our potential market scope is actually very broad. We believe that most people in the world are interested in music; in addition, they are also keen on reading books, listening to podcasts, and watching videos. Therefore, these factors put us in a very favorable position, enough to help us achieve the new goal of having 1 billion subscribers.

My enthusiasm for Spotify has lasted for more than 17 years. And the reason I maintain this enthusiasm for Spotify remains unchanged to this day—as Daniel initially mentioned: just look at this market opportunity to understand,the music field, especially content related to podcasts and books, may be the most promising market field. I think the potential of this market even exceeds fields such as social networks. In this world, there should be no one who completely dislikes music.

We are in the midst of such a major macro change—the macro change of augmented reality technology. I have said before that for me, this change is undoubtedly the most exciting, its importance comparable to the birth of smartphones. If you look at these two together, when such a macro change comes, from a product perspective—and I am a person focused on product development—you will find many opportunities to drive product innovation, and various situations will change as a result. In this case, you better be in an environment with a large market size, strong company strength, and a lot of excellent talent support. And currently, I happen to be in such a position, which is why I am excited.

Q7: You have mentioned many times that the number of Total Active Users (TAM) has reached billions. Considering the emergence of new types of content such as audiobooks, what development opportunities do you see for music and non-music content in terms of user usage time?

A: When you examine this phenomenon from the perspective of user engagement (TAM)—not necessarily measured by the number of users, but by the time users actually spend—you will find that there are a lot of wonderful content and experiences in the market.

However, for various reasons, this content or experience may not yet be attractive enough to users, or its price threshold is too high, preventing ordinary users from enjoying it. Take Spotify as an example, it happens to be at such a critical point of innovation. I think we have achieved innovation not only in the music field but also in the podcast field; and in the audiobook field, we have also put in a lot of effort.

You know, in fact, more people are interested in audiobooks, and this number far exceeds the data shown by the market at that time. This is related to both user experience and business models. Now it seems that many other fields have also invested a lot of resources in research and development, but the products in these fields may not necessarily provide a good user experience, nor do they necessarily have a suitable business model.

When artificial intelligence is introduced into these fields, this foundational technology will give birth to new user experiences and business models. We are very excited about this. Of course, in the current field of artificial intelligence, those foundational models and core auxiliary systems have indeed made significant progress.

However, we have not yet seen many new artificial intelligence applications that can truly gain widespread consumer recognition. But we believe that this situation will change in the next few years, and we also have the opportunity to benefit from it.

Q8: From the advertising revenue growth data over the past two years (excluding the impact of exchange rates), the advertising revenue growth rate has decreased from 31% in the third quarter of 2024 to 7% in the third quarter of 2025. In addition, you have mentioned several times that advertising pricing has shown weakness in the past few quarters. So, how do you plan to achieve strong growth in the advertising business again?

A: Currently, our business growth rate has slowed to single digits. We have developed a new long-term development strategy, and we are confident in achieving this strategy.

We announced the company's progress in the second quarter, acknowledging that we are still slightly behind expectations and need more time to make up for this gap. However, we have indeed made significant progress in programmatic advertising.

The question is: when will programmatic advertising revenue grow enough to fill the revenue gap caused by direct sales?To this end, we also need to establish partnerships with more DSP platforms. Currently, Amazon and Yahoo have decided to join our cooperation system in the third quarter, bringing more value to our business; at the same time, our customers are gradually turning to programmatic advertising.

Overall progress is smooth, but the specific timing of reaching the inflection point is later than we expected before the second quarter. However, as I mentioned in my speech,we expect to return to the ideal growth track in the second half of 2026. Alex, do you have anything to add?

Q9: Regarding the market situation in countries such as Australia, where prices have risen slightly higher recently, can you talk about consumer purchasing behavior and price elasticity changes in this situation? What insights can these phenomena provide us about the market situation in countries like the United States?

A: Price increases are indeed part of our strategy, and our pricing decisions are always based on a variety of different factors. Most importantly, we are committed to developing pricing strategies that reflect the value of the products we offer. We strive to balance the ratio and take appropriate action when the timing is right in each specific market; at the same time, we determine the appropriate pricing based on the actual market situation.

Q10: Now that you have reached cooperation agreements with all major record companies, what achievements do you think you have made? What additional rights or flexibility have these cooperation agreements brought you? Do you still have enough flexibility to implement your diversified cooperation strategies unrelated to music?

A: As you may have heard, we are about to complete a new round of renewal negotiations with all our partners. For us, this is a very important moment.For the first time in our history, we have reached a new, modern cooperation agreement with the top five copyright Changs in the United States. These agreements are indeed a win-win result, and we have developed these agreements to achieve the core goals of both parties. For our publishing partners, these agreements more fully recognize the value created by songwriters in our various products.

This cooperation has given us the broader video rights we have long desired. This is a crucial strategic goal for us—because these rights give us the ability to innovate, launch more new products and features. The launch of these new products will not only enhance our own business scale but also bring more development opportunities to the entire music industry.

In addition, this cooperation also allows us to continue moving towards long-term business goals. I am very much looking forward to establishing more partnerships with the entire music industry to jointly create a better future for music.

Q11: Could you talk about the future prospects of the advertising business, revenue growth, and gross margin trends? How much impact did the current advertising environment have on the revenue growth in your third-quarter report? Additionally, how is your new cooperation on digital advertising platforms laying the foundation for the company's growth in 2026?

A: First, from a profit margin perspective, as I explained in detail in the first question today, the advertising business actually benefits from the transition of SPP to the high-end market, and this trend will continue into the fourth quarter. Starting from the first quarter, the profit margin of the advertising business will no longer have the advantage of year-over-year growth.

In terms of revenue, to increase advertising revenue, we have taken several measures this year, one of which is to increase auction-based advertising revenue. As Alex mentioned, from our data report, it can be seen that this type of revenue is indeed steadily growing. And the real growth inflection point will appear at some point—at that time, this growth rate will exceed the stagnation or slight decline trend of direct sales business.

We are currently not too focused on the current advertising market environment because we already have enough momentum in this transformation process. Therefore, we are very optimistic about the current situation and believe that in the second half of 2026, our revenue will achieve healthy growth.

Q12: You have previously regarded video as a very exciting development opportunity. In October this year, you agreed to license your 16 video podcast channels to Netflix. How will this partnership help you achieve further development goals for the video business? Additionally, is there a risk that over time, Spotify's user activity will decline, or Netflix will develop its own competitors?

A: As you said, we are indeed very excited about video podcasts. Currently, there are 500,000 users on our platform listening to these video podcasts. As Alex mentioned, the number of video podcast users on Spotify has exceeded 390 million, a 54% year-over-year increase. This shows that the project has indeed achieved significant results.

We can understand it this way: whether on mobile devices or TV screens, our user experience is constantly improving. From a creative perspective, this change provides us with great opportunities for creators.

For creators, this is indeed a good choice. We cannot decide for them which platform they should publish their works on; they can choose to upload their works to Spotify or other platforms. But now, we can provide creators with such an opportunity: their works can not only be played on Spotify but also have the opportunity to be spread on Netflix. This is undoubtedly very beneficial for podcast creators and can also bring us revenue sources.

This is part of our overall development strategy; while striving to create a high-quality user experience, providing highly creative content is equally important. Therefore, we have been continuously strengthening our content creation capabilities, which is why more and more creators are willing to publish their videos on Spotify.

Q13: We recently noticed that you updated the Apple TV app to make it more focused on video content. What proportion of Spotify usage through TV accounts for the total user usage? How does this affect your planning in the video advertising field?

A: The reason we want to create such a TV viewing experience is that it is part of our overall strategy to "make the product ubiquitous." We have repeatedly observed this phenomenon—Alex also mentioned this point: once people use Spotify in more scenarios, whether on operating systems, mobile devices, or other platforms, this usage habit will gradually form. Fundamentally, this is the key to achieving user retention and product popularity.

We are very satisfied with the user usage situation, and we believe there is still a lot of room for growth in terms of user numbers. Therefore, we are very excited about the current user usage situation and also believe that there is great potential for increasing user numbers. Of course, this user data is also helpful for the advertising business, but this is not the core reason for us to carry out this work. Our core goal is: to enhance user engagement through product popularity, thereby achieving long-term user retention.

Q14: You recently raised prices in markets offering bundled services such as Australia and the UK. In Australia, the percentage increase in prices is higher than in the UK. Why is the price increase in the UK smaller? So, do you expect future price adjustments to be closer to the increase in Australia or closer to the increase in the UK?

A: When we adjust market prices, we consider many different factors. We pay attention to household income, market maturity, and the ratio between specific products and prices—if there is a product with unique value in a market. We take all these factors into consideration, and when the time is right, we will implement price adjustments, and the extent of the adjustment will also be determined based on the specific situation of the market.

Q15: The capabilities of artificial intelligence models in handling media formats such as video and audio have greatly improved. As a platform, do you think Spotify has the potential to provide artists with artificial intelligence tools to help them create music? Can you talk about Spotify's specific strategy for providing these artificial intelligence tools to creators?

A: Indeed, this is what I mentioned before—when we discuss industry-related initiatives, I think it is important that someone must advance this work in a way that allows the music industry to participate and let them decide whether they want to use these tools. Obviously, people are both excited and worried about these tools. Therefore, we are working hard to be those who can responsibly advance this work. We are very excited about this.

However, I don't want to discuss specific details at the moment. But it is equally important to remember that the application of these tools is not limited to the music field. We believe that artificial intelligence tools are also very helpful for podcast creators and writers. Therefore, we hope to use these tools to help all creators.

Q16: Can you talk about the impact of the added features of the free version on user engagement and the conversion of users to paid users? How should we view these changes in terms of future profit margins and profit opportunities?

A: First, our strategy has indeed worked—we have gained market share even in the most competitive markets. As you just mentioned, regarding the growth of subscriber numbers, I can't give specific data.

Therefore, the key to achieving subscriber growth is to build an efficient user conversion channel. To build such a channel, three key factors are indeed needed.

1) Of course, it is user engagement—we have discussed this in previous calls. Our user engagement is continuously improving, specifically reflected in the listening time on Spotify and the number of active days mentioned by Gustav. The growth of these data is due to our continuous launch of new products. This means that users will continue to stay on our platform, which is undoubtedly very important for building an efficient user conversion channel.

2) When we adjust prices, the user churn rate caused by price increases must be as low as possible, and our actual situation is exactly that.

3) The key is user acquisition and healthy growth of the subscription business. To achieve this goal, we need to ensure that users can continue to use our services.

As we mentioned in this quarter's report,the growth of user activity (MAU) is indeed a very significant indicator. Our user activity has increased to a level beyond our expectations. As user activity increases, user engagement also increases; and when user engagement increases, conversion rates usually increase significantly. In Spotify's development history, every time we improve the free product, it brings more user activity, thereby driving continuous business growth. Therefore, we just need to believe in this virtuous cycle mechanism.

Q17: You have already raised prices in some markets, but the price gap between Spotify and competitors varies by market. What are your thoughts on price adjustments? Specifically, what indicators give you more confidence to set service prices much higher than competitors' prices?

A: We do pay attention to market competition, but we focus more on our own products. We attach great importance to the cost-effectiveness of the product. Last quarter, the speed of product development and launch increased significantly—more than 30 new features were added to our products, and users responded very positively.

Therefore, for us, the most important thing is to continuously improve the cost-effectiveness of the product, that is, to continuously increase the value of the product while striving to create the best quality product. The best quality products always win the market. When we examine our products and the value they reflect, we will decide whether to adjust prices based on the specific situation. As I have said many times before, these decisions are based on specific market dynamics.

I think this question implies a point: people may compare Spotify with other music service providers. But in many of the markets we are currently in, Spotify is no longer just a music service platform—it also offers music podcasts and audiobooks. In some markets, we have not yet launched the audiobook business. Therefore, when formulating pricing strategies, we consider not only the value of music itself but also the value we provide in other business areas. I think this supplement is very important because in many markets, people's perception of Spotify is very different from that in other markets.

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