Spotify Co-CEO on AI music licensing, the live ticketing opportunity, and why 90% subscription revenue enables a low-regret product

Should

I get up?

Yeah.

Okay, cool. I don't know.

We will talk to you soon.

Let me tell you about Phantom Cash. Fund your wallet without exchanges or middlemen and spend with the Phantom card. And let me also tell you about Reream. One live stream, 30 plus destinations. If you want to multiream, go to reream.com. And we are uh shifting the schedule. We will continue to talk to more guests. We have Gustav from Spotify in the reream waiting room. Let's bring him into the TVP Ultradome. Gustav, how are you doing?

What's going on?

Hey, John. Hey, Jordy. How's it going?

Thank you so much for uh taking the time to join us. Uh first, tell us where are you?

So, it looks like I'm in some teenagers bedroom from the 80s here. It's actually a small studio we have in Austin. I'm here for South by Southwest.

You know, the first time I went to South by Southwest, the coolest party was the Spotify house. that I have a very fond memory of going I think this was in 2013 or 2020 uh 2012 something like that. Uh so you've clearly been there a long time.

Yeah. It's always a great time. Uh what's uh what's on the agenda? What is the message that you're trying to send to the world at South by Southwest today?

Well, first of all, I'm I'm here because Spotify is turning 20. Wow.

It seems crazy. You know, most companies don't don't make it five years.

Yeah. An overnight success. 20 years in the making for sure. So that's why I'm here. And then uh you know obviously I'm here talking about what it is that we're doing, our our thoughts and plans for the future.

Yeah. So I mean I'm sure you're getting a million questions about AI. Uh how do you see AI fitting into the Spotify ecosystem? There's a whole bunch of super useful ways that I think people would be super excited about. There's other people that are a little bit worried about AI and how it might play out in Spotify's world. Uh what are you thinking good looks like over the next couple years? Yeah, of course, everyone is asking about AI and as you said, there are a lot of, you know, hot takes and and breathless takes on on Twitter all the time and and there's a lot of dystopian takes. Yeah,

I'm very positive about the future and I think if we look at the consumer experience,

I think it's going to change completely and not just for Spotify. I think all consumer companies are going to have to change what they are and how they work because I think consumers are sitting over here, you know, with Claude or with Chat GPT or with Gemini and they're getting freaking AGIish intelligence and then you're going to media service over here and it's dumb as a rock.

That's not going to work.

Like it's going to it's going to need to get intelligent.

So So what we've said what I've said at our latest earnings call is that we're going to build the first the world's first truly intelligent agentic media system. Th those are a lot of buzzwords, but I'll tell you what I actually think they mean.

What what I think is so interesting with generative AI versus kind of old school machine learning and personalization, which Spotify has done for a long time,

is that computers finally understand English. What's the what's the point of that? Well, Spotify for a long time, you know, when we developed the product, we always had these these uh user focus groups. You know, you invite 10 people into a room, you have like deep English language discussions with them about what they actually feel and what they actually want. And then you went and built this average product that could only measure skips and swipes and you try to squint and approximate what the user was actually thinking. The problems of generative AI is you just talk to us in English at a scale of 750 million people. So I kind of think of it as a 750 million people user research always ongoing into you. That that's what products are going to be in the future and I want Spotify to lead that. So, we've been investing in some of these products. The first one was AIDJ.

Yeah.

Where you can literally talk to Spotify. You can ask, you can say, you know, I want to go for a run, give me some EDM playlist with big drops at 160 BPM for for my running cadence.

And then earlier this year, we launched prompted playlists, which takes it one step further. You can build your own playlist using English language. You're literally writing your own algorithm. So, if you want a playlist that goes out and looks at Tik Tok and what's trending right now, then takes that, filters it to your taste on Spotify, then removes any track you've already heard, you can literally do that today. And you can you can schedule it to update daily or weekly. So, so that's what we've done so far. And then today, what I talked about is sort of the next step, which is uh today's profile.

Yeah,

this is what user have been asking us for forever. So like hidden in all these systems, we have we have a view of who you are musically and podcast wise and audiobook wise,

but you could never actually see that. You can see hints of it in wrapped, but you can never actually see it. So the idea is pretty simple.

We're just going to let you see who we think you are, and then we're going to let you edit it in English and just say like, "No, that's not true. I'm not like that anymore. I want to be like this."

Yeah, it makes me a lot. Yeah. Yeah. It makes so much sense from a uh personalization standpoint. I mean, Spotify has been doing machine learning for probably most of those 20 years. Uh, certainly more than 10. Um, what what how do you see yourself uh integrating with what OpenAI is doing with Sora where there's uh a persona and a person, an individual can kind of decide how their avatar is used. It feels like there's a natural extension here where not all artists, but some artists are going to want to go to you and say, "Hey, look, I'm a I'm a rock musician, but if people want to listen to my songs remixed with AI as country songs, that's fine as long as I keep getting a check. It's win-win for everyone." Has there been demand from musicians for that type of experience that feels like maybe the next year or later this year?

Yeah, 100%. So, this is the other big topic. We just talked about consumer experience, but what about generative content? And of course, everyone is asking me about that and specifically music.

And I think what's happening today is people can make net new songs

using these services.

Yeah.

Um and and that's great. I'm sure creators will will um I'm sure most creators are already using these tools

whether they they say so or not. Um, sorry, sorry to interrupt, but that's that's a big thing because you

uh there's this massive in in tech, like you know, traditional tech.

Uh, people will tell you they're using an AI tool, even if they're not really, right? They want to be constantly projecting, like I'm using the best tools all the time. I'm using them more than you. I've got, you know, 10 Mac minis running. they'll tell you. But in music, it's like the exact opposite where like people are, from my experience talking to musicians and people in the music industry, they're like, "This is changing everything. It's crazy. It's magical. It's an amazing tool." But then they won't talk about it at all, right? They It's like, you know, they'll never talk about

That's exactly it. And and I I understand that. I I have a lot of empathy for for musicians and artists being scared because everything is changing and and change is scary. So, you know, I want to be clear that it's understandable that people have a lot of fear.

Yeah.

Uh but the way we think about it is, you know, technology can can cause a lot of chaos. Um but if you can combine technology with a good business model, it can be very good for the world. So what I'm excited about is today I think some artists that use these tools they get help with creating net new music but most of the existing artists they they just get no benefit from AI

and I think that seems wrong to me. I think um what you mentioned John is if you're an existing artist what many of them do today is they work with other people to do remixes and covers right of their music. It's it's like existing IP. This is what you do in movies. like existing IP is supposed to be the most valuable part not the least valuable part. So I do think that many musicians this this will be voluntary of course would be very interested in letting their super fans play around with their music if they could get compensated correctly. It is the business model that needs to be figured out and this is what Spotify did during piracy. We took the long painful route of not going the illegal route and figuring it out. It was hard and painful. This is what we want to do here as well.

Yeah. Yeah. It feels like uh I mean you hear these stories about breakout songs. There was a song called Oldtown Road that sampled 9-in Nails and I think the original artist that remixed that song. Didn't actually have the rights because he just sort of whipped it up on a weekend but then once the song exploded the agencies came in and negotiated and I think they accepted award on stage together and everyone was happy. But Spotify feels like in a unique place to actually unleash that level of collaboration in an economically like you know safe way that everyone feels happy at the end of the day. Um I I'm also interested in hearing about uh how social features are evolving on Spotify. It feels like uh with a lot of the generative AI projects um there's a lot of stuff that goes out broadly, but there's also a lot of you're just having a new creative tool that allows you to tell express yourself to a smaller audience. I find that a lot of the generative images that I put I don't put them on my Instagram. I text them to a group chat and I'm wondering how you see the the social features changing on Spotify or where they are, how fast they're growing. Anything that you can tell me about social on Spotify these days? So you're you're completely right. We started investing we actually had a lot of social features when we started.

Yeah.

The the idea was to sort of approximate the experience of of Napster pirate bay on the content side but then sort of uh you know Facebook and your friend graph cuz back then friends were your main tool of recommendation.

Yeah.

And then your algorithms came and and every got everyone got like an algorithmic friend and we didn't invest as much.

Yeah. But since since a few years back, we started investing a lot because we think that today these media platforms, they're they're single player experiences,

they're kind of lonely. They're mostly passive. You sit and swipe and swipe and swipe until you're like falling asleep, right?

We we don't want services to be like that. We would like you to lean in and we would like you to we would like to turn Spotify into an interactive multiplayer experience. So So what that sounds like hyperbole. What do I mean with that? I mean features like jam which is growing like crazy for us many many many tens of millions of users and still growing where you can join a queue and sort of have this shared music experience together in the same place or or actually remotely and then you have something that's been around for a long time which is collaborative playlist which have insane retention and engagement

where people collaborate around a playlist and they want to talk about that. So, we are investing quite a lot in turning Spotify into this place where you are with your friends.

Yeah.

Where you're not just by yourself. So, uh I'm I'm 100% with you. I'm very excited about trying to create sort of a more positive future, if that makes sense. One thing I really love about having worked at Spotify for 20 years is that we kind of lucked into music, which almost everyone agrees that music is a good in the world. There's very few people who think that music is bad.

But then we kept that, you know, we went into podcasts because we thought it was like

long form discussions. People spoke in full sentences. It was very the perfect counter to the shortification of media that was happening

and then you know last year we went into into books in a big way. So we try to do things that we think are good for the world. Internally we have some beliefs uh not all of which are public because we want to keep some secrets but one of them is no regrets. Yeah,

we try we focus on content that has very little regret. And

yeah, you guys are to me to me you guys are the the antislop

company platform and there's not any there really aren't any of them left. You could go on you can go on LinkedIn now and you could spend 24 hours straight scrolling through short form

video. Uh and and so talk talk to us about running running a company where it feels like you're constantly making decisions to avoid doing things that would almost certainly get a lot of engagement and usage but aren't necessarily aligned with the kind of core values of the company because eventually companies get 20 years in and they just start doing things that are just optimizing for all those metrics and a lot of that. uh every everyone has, you know, incredible values until you're a public company and and you've got all these, you know, different uh incentives.

Yeah, that's that's so true. And that is a risk that that's one of the benefits of me and and the other co Alex Northstrom having been at this company for like 17 18 years. So, you know, those those values are are ingrained in us. Now the way we think about it is I think it's both something that u is very motivating for for me as a person and for many of our employees but it has also to be aligned with your business model right and it is because Spotify in terms of revenue is majority of subscription service you know close to 90% of the revenue is from a subscription and if you think about what that means it means that a Spotify user every month they're going to vote with their wallet and if you ask yourself the question when you vote vote. What do you to to pay for something? Uh what do you what is it that you're going to pay for? Are you going to pay for time spent? I I don't think so. You know, when we survey users for the different services out there, I won't say which one, but many of the big services,

even young people regret 70% of the time they spent there.

On Spotify, they regret less than 3%. Right.

Wow.

And I think if you're going to pay for something, you're not going to pay for something you regret. That's like a

that's an oxymoron, right? So it's very it's very aligned with our business model. I actually think you pay for what you want to be something aspirational, right? So so I think it's both a value that we have but it is actually very much aligned with the business model. I think if we were 90% an advertising model, the pressure to maximize for engagement would be very tricky. So it's both a value and something that actually works for us. So so we're just leaning into that because we think it's a differentiated proposition. And right now I feel like the need for for low regret content is increasing, not decreasing.

Yeah. It's it's such a it's such a wildly different experience going into the Spotify app.

Mhm.

For me where it's always like it's always intentional. I'm coming in and like I'm doing the thinking around

what what what content do I want to consume? that is just completely opposite to every other app that I use which is deciding basically on the fly what is going to keep him what is going to keep him in the app as much as possible and that's not necessarily

that's that's why I'm so excited about this the user control right because I think it's very aligned with that to give back control to the user like now you control the algorithm it's tricky um but that's the path we're going uh because it's very much aligned with uh no regrets if you can tell ahead of time what you want Spotify to do.

You're not going to, you know, chances that you regret that are very low. And and we've seen this people saying like, you know, when we test this internally, the taste profile. Uh, one of the people I spoke to said, I used to be into classical music a lot

when I was younger, but then the Spotify algorithm like it it preferred popular music, so I fell out of it. I went into my taste profile and just said, "I want the classical shelf on my homepage every day."

And now they're back into it because now that's what they get fed with. And I think that's very cool when you can like game yourself to what you actually want to be.

Yeah. I I wouldn't have predicted that Spotify would be the first one to have that sort of like natural language control over your feed. People have been demanding that in in across all different social media platforms, threads launch something where you can say dear threads and then it will update. Dear Algo, that's it. Dear Algo um but but yeah, that makes a ton of sense.

I think it's because of the advertising model for us. If we the risk here is that the user takes control and says something that lowers engagement a bit.

Yeah.

For us it's fine because they pay per month.

Yeah.

We don't monetize the engagement directly for the most part.

Yeah.

That I think is the key.

Yeah. What what's the biggest misconception about Spotify right now?

Oh, the biggest misconception. Oh, now now Okay, you'll have to stop me. I'll get up on my little soap box here. This is something that has hurt me so much for so many years. Uh because we got it wrong. Uh This is about artist payouts and the pay and and the the the idea that we pay less to artists than than other companies.

And for the longest time, you know, this has gone back a long time, people talked about per stream payouts and so forth. And the the the sort of advice at the time was you shouldn't engage because you only bring more attention to the matter and if we just keep paying more than anyone else, the record is going to set itself straight.

Yeah.

That doesn't happen. What happens when you leave a narrative like that forever is that it becomes truth, right? So, I kind of want to set that straight.

So, if you look at Spotify, we've paid out over 70 billion to the music industry. 11 billion of those just last year. I want to be clear, that's more than anyone has paid anyone ever in the music industry.

Yeah.

So, like the music industry is bigger than it ever was. People talk about the heydays of the 80s and and the seed era, but the music industry is bigger than that.

Yeah. And not only that, you know, in the CD era, the the sort of distributor, the the record store, they, you know, we we give about 70% of what we make back to the music industry. If we bring in $1, we get about 70.7 70 cents to the music industry.

The record store,

if you wanted to be at the front of the record store, could keep 70% or 100. So like the pie is bigger

and the share of the pie that goes to the music industry is bigger than it ever was. And so when I tell that to people, they're like, "Huh?" But I keep hearing that you guys pay less per stream, right? Like you're evil somehow, aren't you?

Yeah.

And my point is like, and this is not backed by public data, no one in the industry pays per stream. We all pay per user.

Yeah.

And we all pay roughly 70% per user. You know, Apple, Amazon, YouTube, all of them. The thing is Spotify has almost three to four times the amount of usage per user of our competitors, which is crazy to me. Actually, when I first saw it, I couldn't believe it. But now it's backed by public data. So, what happens if you take the same amount of money, but we divide it by three to four times more streams.

Yeah,

of course, our per stream is going to be lower.

But that's because people use the product more. And the solution to that isn't to make the product three, four times worse to gain the per stream metric

or raise the price three, four times because that that would just be bad for the entire music industry.

So this is the misconception I want to set straight. No one pays per stream. We all pay per user. And we happen to have much more engagement per user than the other platforms. And they've actually sort of weaponized and used this against us uh to say like we pay more more than Spotify per stream.

Yeah. Yeah.

But that's that's important. How are you thinking about the evolution of Spotify's role with live events? I feel like in the age of AI, the recommendations get even better because I listen to a lot of different genres. I don't go to a lot of different genres of concerts. There's definitely bands that I listen to where I'm like, I'm too old for that mosh pit. I'm not going to that heavy metal concert, but I would love to go to this old maybe. Maybe.

Yeah. Yeah. We'll we'll we'll go to the Sleep Token concert together. But um but but it does feel like um like Spotify will be in an increasingly more interesting role in actually surfacing uh awareness around live in-person events which also might get more important in an age of AI in an age of unlimited content. Uh you might actually see this barbell effect where there's endless content and then very unique experiences in the real world. What do you think about live events?

Yeah, I I think you're 100% right.

And two things there I think are important. You know, if everything in the world is kind of a power law, right? Yeah.

You have the endless the endless long tail, but you also have a very big head. So, so you know, people ask me like, are Netflix or YouTube winning? I'm like both.

The biggest Netflix shows are bigger than ever, monoculture, and YouTube is bigger than ever. And the same is true in music, right?

So, there are more indie artists than there's ever been,

but Taylor Swift is bigger than anyone has ever been. and the aeros is the biggest thing that ever happened.

So people want me to say it's one or the other.

Yeah.

And it's actually both. And I think you're you're you're right because I think what's happening is

and and this will probably be exaggerated even more with generative content as people get more and more individual content which they like.

They also feel more and more lonely. So the need for like shared experiences increases.

Totally.

And this is just not me theorizing. We're actually selling tickets on Spotify since a few years back. Yeah. because we have such good data on who Taylor Teles's very biggest fan. That is one person in the world in terms of streams actually is right.

That is yes. So, so we've been selling tickets for a while and we've sold over $1.5 billion dollars worth of tickets now

and that is increasing quickly which proves your point like live events are becoming more popular than ever

and bigger than ever and for many artists the fact that we're selling tickets is very important because for many artists especially well both big ones and up and cominging ones they can be more than 50% of their income. So you have the royalties from from from us but touring is a very big part

of most artists income. are is is Spotify uniquely well equipped to enter the live ticketing market because you come from uh an origin where you had to do big deals with big organizations and it was not this permissionless company that some other platforms have engaged with. You had to go to the table in Hollywood and sit down with these folks and it feels like you sort of have to do that again if you want to sell ever more tickets. Yeah, it's funny that you say, you know, we we've never been this permissionless company. That is true. And it's been painful watching other people just run with like, you know, whatever illegal content or something. They're so fast. But over time, it's it's

itatches worked out for us.

Yeah.

Yeah. It it has in many cases,

but um

but you're right. We are well positioned to work with that industry and right now we're actually selling for all of them. You know, we're an aggregator.

We're an aggregator of content and we're an aggregator of of concert tickets. Mhm.

So, I think we're really well positioned. We're already telling most artists where they should tour, in which cities they have the most fans, and which songs they love. And now, it's pretty natural for us to help them actually sell tickets. Obviously, the scalping problem is enormous. And that's something where we are really well positioned to help. The analogy I like to make is that your stream count is is like um proof of work in crypto.

It's very hard to fake your stream count,

right? So, so using that I think is is very important. and we want to work with the with the with the live

you're like oh you want to buy tickets to this artist that you've not streamed a single time it's like

I don't know about that

exactly and the artist they absolutely we've done some of our own events you know for smaller events for just the super fans sometime

and you can tell the difference in in the room when it's just like the stalker level fans in the room

uh I want to talk I want to get your kind of highle view on podcasting how it's how it's evolving thing. Uh it I started doing some work with podcast when I was in college back in 2017. At that time it's it felt late uh to me. Uh it always does. It always it always it always feels late. Uh of course I was totally wrong that the biggest deals and and many of the biggest shows were still to come and you guys obviously made a splash uh uh with some of the larger acquisitions in the space. But uh how are you processing the industry today? So what what happened that was very interesting for us is we looked at the podcasting industry actually the way we came about it was you know we found a lot of our best features looking at either our our users what they do or the publishers start uploading like audiobooks in Germany what is that and then we realized there's demand for audiobooks the podcast is a case of looking our developers because they're this unique crowd that are often early adopters of trends and they have the power to just build what they want to see in the world. And we saw them sort of hacking podcast into the main Spotify app again and again at hack weeks. So we started looking at the podcasting industry and we saw that it was it was amazing. It was this amazing pool of fantastic long form content and very good creators. But it was just sort of left for dead. So we decided to go in there and bet that if we supported it, it would grow. And that worked out. We we grew like crazy for for what was then called sort of traditional podcast, audio podcast. Then what happened was and Joe Rogan was always the first with this many podcast started doing video but for a long time it was just Joe Rogan and the interesting thing is because we had Joe Rogan on our platform we had to build video support. It was partially thanks to him that we did it because he was like I can't be without video. If you want the show it has to be video. We're like oh [ __ ] are we going to build a full video stack for one podcast? I guess we are.

Yeah.

And then we built it.

Yeah. But that was very lucky for us because then we could see what video podcast how they performed on the platform and we saw that people listen a lot in the background and they dip in and out and we're like huh this is probably where the whole thing is going. So we started investing more and then all the creators started doing video.

Yeah.

So what's interesting for us is that the audio podcast market was this like I don't know couple of billion dollar market. It wasn't that big.

Yeah. But because audio became video, they kind of pushed us into a much bigger market which is video which is you know 10 times bigger at least one two orders of magnitude. So for us it was like a gift that the creators quote unquote forced us to get into this bigger market.

Yeah.

So we're very happy about it. And what we find from creators like yourselves is

they they want to multihome. They want distribution. They want to be on all the platforms. And that's always been our, you know, in music we were always, all the artists were multihomed. All the book, all the book authors we have, they're multihomed. So, so that's our strategy. And then in terms of what we've done that really changed the trajectory for us is yes, technically we could have video podcast for a long time, but as you guys know who are into the details, audio podcast uh used to monetize in in a in a certain way uh with audio ads. And what happened was

when you couldn't have your dynamic audio ads, the DAI when you went to video, actually the weird thing is you put video on Spotify and you would make less money.

Oh,

which is completely wrong cuz the users loved it. So your experience got better, but you made less money.

So finally,

beginning of 2025, we solved that because what we said was, okay, we're just going to pay out of the premium pool.

Sure.

For video podcasters. So now your use, you don't have to stuff ads into the podcast as much. So your user experience goes better, your retention goes up. Y,

but you don't have to compromise on economics. We're going to pay as much. And that really that made all the video podcasters come on board Spotify.

That's amazing. Well, thank you so much for taking the time to we're uh we we've been uh kind of beating the beating the drum on we think there's a lot more shows for to to make like TVPN basically look at any cuz cuz in many ways we've done some interesting things on the formatting side but a lot of interesting things

but but we just took what had worked in many ways on traditional cable and I think that every single show on traditional cable is re is just sort of waiting to be rebuilt for the Spotify platform and and other platforms. So, I think that uh lots more to come.

This is such an innovative format. It's awesome. I watch it every day and and you know because you guys publish the whole thing to Spotify. Catch up.

It's amazing. I love when we get a Spotify comment that is clearly someone who watched the video because they noticed something that you would only it wasn't really in the audio feed, but they were clearly watching in video.

You know, you said you said creators want to be multihome. Uh but I disagree. I wish we lived in a world where there was just Spotify and we could just focus all of our energy.

I'll take that. I'll take it. You got more work to do.

Thank you so much. Enjoy the rest of South by Southwest. Say hello to everyone for us and we'll talk to you soon.

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