Both arrived more than a dozen years ago, when Spotify was still just a start-up of a few dozen employees. Since January, Alex Norström and Gustav Söderström have been the two co-presidents of the music streaming giant, its 183 markets and some 9,200 employees, respectively overseeing business for one and product and technology for the other, under the leadership of of the founder and CEO, Daniel Ek.
On the 12th floor of the headquarters of stockholm, in a conference room offering a panoramic view of the steeples and canals of the Swedish capital, they share their vision of the company with a panel of international journalists, to whom the group has exceptionally opened its doors. “The most exciting moments are also the riskiest”, says Gustav Söderström, while Spotify announced in March a major overhaul of the application, giving pride of place to video and adopting the vertical navigation popularized by Tik Tok.
Embracing the major transformations of the Internet since its creation in 2006, Spotify, after moving from an initial model of “curation”, where users sought content in the catalog, to a system based on recommendation by playlists, since the mid-2010s, is now taking a new turn, explains its co-president, Gustav Söderström. “We are entering a new world of content generation,” he says. To adapt, “we needed to update the very paradigm of Spotify, the way you navigate, in order to be more competitive in this personalized world,” he continues.
At the Stockholm headquarters, the two co-presidents Alex Norström, on the left, and Gustav Söderström, on the right, delivered their vision of Spotify’s strategy.Spotify
AI-powered DJ
In addition to the change in navigation, the application now accompanies its playlists with comments generated by AI and adapted to everyone’s listening, via a “text to speech” technology which uses the voice of one of its employees. Not yet available in France, this service called “AI DJ” has already been launched in the United States, Australia and Canada.
Spotify also offers more services to content creators, gathered under the dedicated counters “Spotify for podcasters” and “Spotify for artists”. For example the identification of priority songs to push to users (“Discovery mode”), or the automatic transcription of podcasts to read an extract before listening.
To counter fatigue, Spotify has also transformed its platform and added a stronger dimension of discovery. Excellent for recommending music similar to those appreciated by listeners, the service was less so for thinking outside the box. Some listeners left the platform when it was a question of “discovering something entirely new”, admits Gustav Söderström. New flows have therefore been proposed, without discarding the usual recommendations. Finally, additional services have been put in place to help artists for sale concert or derivative products.
Beyond this update, the group is gradually expanding the number of its verticals, with the launch of podcast in 2019, then audiobooks since last fall in the United States and the United Kingdom in particular. “The ambition is to go even further”, slips Alex Norström, without specifying what could follow.
By staying in tune with the times, Spotify, which had 515 million regular monthly users (+22% compared to a year earlier) and 210 million subscribers at the end of the first quarter of 2023, wants to continue its growth. . Thanks to its “freemium” model, offering a choice of subscription or free use with advertising, the group adapts to the level of maturity of the markets.
Path to profitability
In the United States, its largest market, or in the Nordic countries, where the penetration rate is very high, the service relies on subscriptions and the addition of services to increase engagement. In emerging countries, especially in Latin America, “we work more to get people on the platform, before converting them to subscription”, summarizes Alex Norström, who is delighted that Spotify is “already by far the first streamer” in this part of the world.
In total, nearly 3% of the world’s population is now a subscriber, he points out. And it’s not over, even if the reserve of growth offered by emerging countries, where prices are lower, brings a lower average income per user.
“500 million regular users for an Internet company” on a scale “is relatively small”, estimates the vice-president in charge of markets and growth of subscriptions, Gustav Gyllenhammar. Instagram has almost 2.5 billion. We have not reached maturity in terms of size, growth will continue. “Even in Europe, where some countries, including France, retain room for improvement. The goal is to reach one billion users by 2030.
The path that leads to the arrival of accounts in the green is more uncertain. In 2022, Spotify posted losses of 430 million euros, linked to significant investments in podcasts. An activity where the company reduces the airfoil. In early June, 200 jobs were cut there, after a first wave of 600 job cuts (across the entire company) in early 2023. Some onerous contracts, such as the one signed with Prince Harry and Meghan Markle, were also discontinued.
“We have very sustainable growth,” tempers Alex Norström. “In terms of profitability, there have been ups and downs, with some quarters profitable, others less, we remain largely in investment mode”, he adds. In an interview with the American channel CBS in March, founder Daniel Ek clarified that in 2023, “we are focusing more on profitability, while continuing to grow. See you at the end of July to see if this desire is already reflected in the half-year results.