Gustav Söderström

I'd love to talk about the evolution of the relationship with the music industry. It's a company that unquestionably has wholesale changed music, which is so interesting and so cool. You've been here a long time. Thinking back to the early days, it's amazing the impact that it's had.

I'd love to talk about the evolution of the relationship with the music industry. It's a company that unquestionably has wholesale changed music, which is so interesting and so cool. You've been here a long time. Thinking back to the early days, it's amazing the impact that it's had.

And from an investor's perspective, one of the things that many were always keyed in on, it's just the gross margin of the business. Just how much transfer pricing problem are you always going to have that No matter how big you get, the music industry that owns the IP is just going to always take their same cut of the meat. Talk about how you've thought about that change over time.

And from an investor's perspective, one of the things that many were always keyed in on, it's just the gross margin of the business. Just how much transfer pricing problem are you always going to have that No matter how big you get, the music industry that owns the IP is just going to always take their same cut of the meat. Talk about how you've thought about that change over time.

It seems like it's been both a good relationship for them, but also a very patient path for Spotify. Maybe just give us the insight into how it's worked and how you think about it.

It seems like it's been both a good relationship for them, but also a very patient path for Spotify. Maybe just give us the insight into how it's worked and how you think about it.

Yeah, for sure. I grew up and Spotify grew up in the era of piracy in Sweden, which was the worst market. And there's this famous quote from a UK label exec to a Swedish label exec around early 2000, where the Swedish label exec showed the P&L of one of these Swedish companies. And he said, that's not a business. That's a hobby. That's how broken it was.

Yeah, for sure. I grew up and Spotify grew up in the era of piracy in Sweden, which was the worst market. And there's this famous quote from a UK label exec to a Swedish label exec around early 2000, where the Swedish label exec showed the P&L of one of these Swedish companies. And he said, that's not a business. That's a hobby. That's how broken it was.

And that's actually why Spotify could happen because the music industry was prepared to take risk in Sweden. And I want to give a lot of credit to the music industry. They took a lot of risk with Spotify. Spotify took an enormous amount of risk, enormous amount of capital risk. We MG'd a lot. We ate a lot of the risk, but certainly they took a lot of risk.

And that's actually why Spotify could happen because the music industry was prepared to take risk in Sweden. And I want to give a lot of credit to the music industry. They took a lot of risk with Spotify. Spotify took an enormous amount of risk, enormous amount of capital risk. We MG'd a lot. We ate a lot of the risk, but certainly they took a lot of risk.

I think the music industry certainly deserves the success, as does Spotify. I joined in 2008, somewhere around 2012 or something. I started saying that my team, the R&D team, and all of Spotify, we are the R&D department of the music industry. And first people were like, What do you mean? And I'm like, well, look at it. It's an entire industry that doesn't have an R&D department.

I think the music industry certainly deserves the success, as does Spotify. I joined in 2008, somewhere around 2012 or something. I started saying that my team, the R&D team, and all of Spotify, we are the R&D department of the music industry. And first people were like, What do you mean? And I'm like, well, look at it. It's an entire industry that doesn't have an R&D department.

Mobile phones has an R&D department. It's called Apple or Google. Everyone has a lot of R&D, but there's no R&D spend in the music industry. And I think that's turned out to be true. And if you look at the trajectory, this year... is the first year of profitability for Spotify since its founding. People say that there's a lot of talk about Spotify sharing enough of the revenue. We share about 70%.

Mobile phones has an R&D department. It's called Apple or Google. Everyone has a lot of R&D, but there's no R&D spend in the music industry. And I think that's turned out to be true. And if you look at the trajectory, this year... is the first year of profitability for Spotify since its founding. People say that there's a lot of talk about Spotify sharing enough of the revenue. We share about 70%.

But the truth is the other 30% we haven't kept. We've invested all of that in the music industry and then more. So we were unprofitable. for 15 years. We just invested, invested, and invested. So a ton of patience. And at the same time, actually, the music industry has been profitable. Spotify has been unprofitable.

But the truth is the other 30% we haven't kept. We've invested all of that in the music industry and then more. So we were unprofitable. for 15 years. We just invested, invested, and invested. So a ton of patience. And at the same time, actually, the music industry has been profitable. Spotify has been unprofitable.

So I think it's fair to say we are literally the R&D department of the music industry. We invested and had losses for 15 years, and the music industry has been gaining profit. Now, that is not sustainable forever. We needed to get profitable. We can't beat the R&D department of the music industry unless we can have the best machine learning engineers, the best product people, developers, et cetera.

So I think it's fair to say we are literally the R&D department of the music industry. We invested and had losses for 15 years, and the music industry has been gaining profit. Now, that is not sustainable forever. We needed to get profitable. We can't beat the R&D department of the music industry unless we can have the best machine learning engineers, the best product people, developers, et cetera.

And for that, You need to be profitable. It turns out these people are expensive because they're sought after. We are a very, very patient and long-term company, and we invested for a long time. But it was just time. About two years ago, we decided now it's time for us to become profitable, to take control of our own fate in terms of being able to invest in ourselves.

And for that, You need to be profitable. It turns out these people are expensive because they're sought after. We are a very, very patient and long-term company, and we invested for a long time. But it was just time. About two years ago, we decided now it's time for us to become profitable, to take control of our own fate in terms of being able to invest in ourselves.