Earnings Call Transcript - SPOT Q1 2021

Operator, Operator

Good day, and thank you for joining us. Welcome to the Spotify First Quarter 2021 Earnings Conference Call. I would now like to turn the call over to your speaker today, Bryan Goldberg, Head of Investor Relations at Spotify. Please go ahead.

Bryan Goldberg, Head of Investor Relations

Thank you, and welcome to Spotify's First Quarter 2021 Earnings Conference Call. Joining us today will be Daniel Ek, our CEO, and Paul Vogel, our CFO. We'll begin with opening comments from Daniel. After his remarks, Daniel and Paul will be available to answer your questions. We will be taking questions exclusively through Slido. You can submit questions by visiting slido.com and using the code #SpotifyEarningsQ121. Analysts can input their questions directly into Slido, allowing all participants to vote on the questions they find most relevant. If you don’t have access to Slido, you can email Investor Relations at ir@spotify.com, and we will include your question. Before we begin, I will quickly cover the safe harbor. During this call, we will make certain forward-looking statements concerning projections or estimates about the future performance of the company. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could materially differ due to factors discussed on today's call, in our letter to shareholders, and in filings with the Securities and Exchange Commission. We will also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures are available in our letter to shareholders in the Financials section of our Investor Relations website and also provided today on Form 6-K. Now, I will turn it over to Daniel.

Daniel Ek, CEO

All right. Hi, and thanks for joining us. I'm pleased with the continuing momentum we're seeing across many aspects of our business this quarter, including our subscriber growth. 2020 was a very strong year for Spotify. And as we reported our Q4 results, I discussed the high degree of uncertainty we knew we would continue to face in this unprecedented environment. I also shared that we likely pulled forward some growth as evidenced by our outperformance in MAU throughout this past year. In Q1, this uncertainty played out largely as expected. Several metrics like subscribers, revenues, gross margin and ARPU came in a little higher, while MAU came in a little lower, but still well within our range. Some markets that we have previously seen really strong performance from, like parts of Latin America and Southeast Asia, showed some softening on the MAU side while others in both new and mature markets continue to demonstrate really impressive growth. While it's worth noting that of our four quarters, Q1 historically tends to be the quarter with the lowest new user activations, we also know that the world is in various stages of recovering from the pandemic, and we see that reflected in aspects of our business. While I expect the ups and downs that we saw in Q1 to continue throughout much of this year, I still feel very confident in what's on the horizon, looking at the remainder of the year and beyond. As always, I want to focus the bulk of my time with you looking ahead. I am more confident than ever in our ability to deliver on our ambition to become the world's #1 audio platform. If you tuned into our Stream On event in February, you probably understand why I'm so bullish. Our strategy to move from being a streaming service to being an audio platform is really starting to come to life. Look no further than the clarified messaging we launched yesterday around how we will enable access to paid audio products on top of Spotify. I really think this positions us to truly be the audio browser of the world. For those who may have missed it, we detailed several new innovations and enhancements in our pipeline that will benefit both creators and the users. This includes our recent launch into more than 80 new markets, which has opened up a new exciting opportunity for growth, and I will share more on that in a minute. I also shared more on why I continue to believe that the opportunity in audio is still largely untapped with tremendous growth potential, far beyond what most of us can imagine today. Take music as an example. The latest numbers from IFPI just out this quarter reinforced the strength of the industry. It's seen an increase of 54% in global recorded music revenues since the 2014 low, and streaming revenues with a growth rate of more than 600% over the same time period, continue to propel the industry forward. Industry sources recently forecasted that the streaming market will triple, reaching $79 billion in revenues by 2030, and Spotify continues to be the primary driver that is pushing global music revenues to record highs. Related to this, look no further than the price increases we just announced across 12 key markets, including the U.K. and U.S. We did this on the back of successful rollouts in the previous two quarters when we implemented price increases in more than 30 markets. The positive data we continue to see in terms of the value users see in Spotify underscores the significant opportunity here. You should expect that we will continue to leverage increases as we evaluate market conditions. I hope you've also checked out our new site, Loud and Clear, which is increasing transparency on the economics of music streaming. There, you'll see that the number of the most listened artists in the world is growing, and it's more diverse than ever. As more artists are finding success, the bigger the impact we, as a platform, can have in serving them and their teams. The more successful artists there are, the more impact we can have on creating an even better consumer experience. Speaking of consumer experience, we continue to see lots of opportunities to enhance our user experience across the board, and you should expect us to move quickly and invest aggressively when we do. Because the broader audio market is still in its infancy compared to music, the opportunities to innovate there are immense and evolving fast and furiously. We have long enjoyed a first-mover advantage, and we will continue to prioritize introducing new capabilities across all facets of audio. Our recent acquisition of the live audio room, Locker Room, is an example of this commitment to improving our experience. We want to be the absolute best partner to creators by giving them opportunities to create, grow, engage, and monetize their art and fan base. We have some exciting plans for Locker Room, and we will share more details in the coming weeks. While we decided early to go all-in on audio, it's giving us a head start of more than a decade and unrivaled size and scale. Others are, of course, taking notice. This isn’t surprising at all given the enormous size of the audio market, which some projections indicate could be valued at $200 billion by 2030. Competition is nothing new for us. We saw it in music and always expected others to jump on the audio train when they realized how attractive it is to billions of listeners around the world. We believe we have at least 5 to 7x growth left in the business we are in today: music, podcasting and paid audio, and we intend to win in those businesses. All that said, you should expect us to remain focused on our core pillars. For consumers, this is delivering a great consumer experience through freemium, ubiquity, and personalization. For creators, it is a maniacal focus on serving them through a personalized marketplace set of offerings and not a one-size-fits-all approach. As always, when we see opportunities that we believe will strengthen our capabilities for creators or consumers, you should expect us to prioritize the long term over the short term. To help realize our ambitions, over the last couple of months, we've led our most sweeping geographic expansion to date, turning Spotify on in more than 80 new markets across Asia, Africa, Europe, the Caribbean, and Latin America. In doing so, we're introducing the passions, creativity, sounds, and cultures of creators in these markets to a global audience. We are ramping up quickly, evolving our content and adjusting our product as we learn what makes the most sense on a hyper-local level. These are only a few examples of the tangible efforts underway, and we will continue to aggressively pursue opportunities to expand our content and our offerings while enhancing our user experience despite the uncertain environment. And with that, I'll turn it back to Bryan for questions.

Bryan Goldberg, Head of Investor Relations

All right. Thanks, Daniel. Again, if you've got any questions, please go to slido.com, #SpotifyEarningsQ121. Once your question is entered, you can edit or withdraw your question by selecting the option in the bottom right. We'll be reading the questions in the order they come in with respect to how people vote up their preference for questions. And our first question today is going to come from Doug Anmuth at JPMorgan. You noted that the percentage of MAUs consuming podcasts was consistent quarter-to-quarter, but you saw a strong increase in podcast consumption hours. Can you explain potential reasons for the delta there? And can you comment on how much of total consumption hours are currently podcasts?

Daniel Ek, CEO

Paul, do you want to go?

Paul Vogel, CFO

Yes, I'll start with that one. So yes, at a high level, Doug, the consumption numbers were very strong. They're up about 20% quarter-over-quarter, so we feel really good about that. When you look at the percentage of podcast MAU relative to total MAU, some of that is kind of dependent on the point in time that the quarter ends. December had a very strong month, particularly with Joe Rogan going exclusive. When you look at the average podcast MAU over the average MAU over the period, it was up from Q1 over Q4. When you look at the trend over the last six or seven quarters, particularly the last four quarters, that average growth in podcast MAU to average MAU has been up about 150 basis points quarter-over-quarter. So we feel really good about the overall trends in podcast MAU. Sometimes there's a little bit of lumpiness in the actual reporting just on how any one quarter ended with respect to new releases or launches or exclusivity. In terms of how much consumption we don't break out how much consumption is on podcast. I will say that March is at an all-time high in terms of the amount of podcast consumption on the platform.

Bryan Goldberg, Head of Investor Relations

All right. Our next question comes from Rich Greenfield at LightShed. Everyone appears to be getting into the live audio business following Clubhouse. I'm curious how you think about live audio as a feature versus a stand-alone product? And how will creators decide where to go live, whether it be Spotify, Clubhouse or another platform?

Daniel Ek, CEO

Yes. This is Daniel. I think live audio is clearly something that you should expect as capabilities go pretty much every major platform will have. My expectation is really no different than how you think about Stories. Stories today exist in a format on several platforms, including Spotify, Instagram, Snap, and many others. So I do look at this as a compelling feature set. I think creators will engage in the places where they have the best creator-to-fan affinity for the type of interactions they're looking for. This is very similar to how Stories played out historically.

Bryan Goldberg, Head of Investor Relations

All right. Our next question comes from Mario Lu at Barclays. You recently announced pricing of podcast subscription for content creators undercuts your competition. Are there opportunities outside of the podcast subscription itself that you can monetize to receive better than 5% economics?

Daniel Ek, CEO

I think this is a long-term play for us in podcasting, but I do want to go back and talk about here why I think this is important. As many of you know, we have, for now, better part of more than two years talked about how we believe openness is what's going to be important to drive innovation across the ecosystem. The most important thing for us is that we play by those rules. What we announced yesterday is just a very compelling product for creators where they have control. They have control of how they can message their consumers, they have control over how they can monetize their consumers. It's just a very attractive proposition creators are very excited about and want to work with us. As revenue opportunities going forward from that, I believe that there are so many tools we can create for creators and consumers alike, and there will be plenty of revenue opportunities that will be coming from that. Look at this as the beginning. As I've said many times before, we are in the early innings of audio. The key thing right now is still moving off-line linear audio listening to online on-demand listening. That's the trend line we are pursuing. There will be many opportunities for finding monetization paths between creators and consumers in the future.

Bryan Goldberg, Head of Investor Relations

All right. We'll go to the next question, Mark Mahaney at ISI. Why did you reduce your full year MAU guidance but maintain your full year Premium Subscriber outlook? What's causing better-than-expected conversion of MAUs in the premium subs?

Paul Vogel, CFO

Yes. I'll start with that one. I think for us, if you look at the guidance, a lot of it is just taking into account coming to the bottom of the range in Q1 on the MAU side, and the subscriber side was actually stronger than expected. When you take a step back, when we started the year, we did say we expected some greater variability within our metrics. I would say actually, we probably had more concern on the subscriber side. So the fact that the subscribers number came in better than expected is really positive for us. In terms of conversion, if you look at the subscribers-to-MAU ratio, it was up in Q1. It’s still lower in Q1 this year than it was in Q1 last year. Typically, there are periods where MAU seems to be the bigger driver and then subscribers become a bigger driver. A big function of that is when you have periods where MAU grows very fast, it grows the top of the funnel. It normally takes six, nine, twelve months for us to convert those free users into premium-paying subscribers. It’s logical to see that growth in MAU that we saw last year then translate into subscribers down the line. All the numbers are consistent with what we expected, and we feel good about the overall trends in user growth and particularly subscriber growth.

Bryan Goldberg, Head of Investor Relations

All right. Next question comes from Ben Swinburne at Morgan Stanley. What percentage of your users have seen price increases thus far? If that's not having a material impact on top of funnel growth, can you elaborate more on what you see as the drivers of MAU softness relative to expectations?

Paul Vogel, CFO

Yes. I guess I'll start with that one as well. We haven't disclosed the actual number of subscribers affected by price increases, but we're in over 40 markets right now. We feel good about what we've accomplished so far in terms of price increases. When you look at gross additions and churn, we've seen very minimal impact on either one of those metrics. We feel good about the price increases. Yes, price increases wouldn't impact top of funnel because top of funnel is the free users, so there is really no impact there. Like a lot of folks, we saw exceptionally strong 2020. We did see a pickup in MAU growth starting in March of last year that, in hindsight, looks to be somewhat correlated to COVID in some ways. So there's just a little bit of that comparison. But in general, I think we expected some variability, so it was not surprising to us. It was the complete range of our expectations. We feel good about the fact that we're able to grow subscribers faster than expected.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Jason Bazinet at Citi. Investors tend to think of Spotify as very sticky, implying low churn rates. You've made progress on churn, but it's still high relative to other subscription-based businesses like Sirius, DIRECTV, et cetera. What causes churn to remain elevated? And what's your long-term churn goal?

Paul Vogel, CFO

Yes. I would actually argue that our churn is not high. In markets where we're established, our churn is at really good levels, and we're growing really fast. When you grow into newer markets where you're a newer product, churn tends to be higher and it comes down over time. The fact that our churn rate continues to come down is a positive for us. I don't think we've ever put out an actual churn target, but you can expect it to continue to come down over time. We feel really good about it. The churn in some of our more mature markets is at levels that you expect from mature businesses. When you think about the mix between the mature markets and the growing markets, the churn is pretty appropriate for the level of growth we have right now.

Bryan Goldberg, Head of Investor Relations

Okay. Our next question is going to come from Matt Thornton at Truist. Can you talk about the Facebook partnership, how accretive you think it could be to the business as well as Car Thing, including how you're thinking about go-to-market?

Daniel Ek, CEO

Yes, sure. These are two very different partnerships. They fall under the same strategy for us, which is ubiquity. When you look at Facebook as an example, it's one of the world's largest platforms, reaching billions of consumers around the world. One of the key insights for us has been just how many Spotify users are constantly sharing their tracks on Facebook and Instagram and other social platforms and expressing themselves that way. You should view this as a way of reducing friction, which will enable a much better experience. It's too early to say what the overall impact will be. Generally speaking, when you reduce the friction for consumers, you tend to see great results. I have high hopes that the Facebook partnership can certainly do that. When it comes to the Car Thing, I think the most important thing regarding audio products is that the car happens to be a major use case. The car radio is still where most of the offline radio listening happens. It is clear that an ongoing transformation is taking place. Look at cars like Tesla; you see it clearly where these streaming services are now the de facto radio in the car. Car Thing is our attempt at speeding up that progress into a future where you have a great experience in your car. You can use it as your in-car entertainment system instead of using antiquated radio systems. Early results are very encouraging. We feel that we've really struck a chord with what consumers want. So we're seeing a lot of excitement, but it’s still very early. Based on how people will use the product, we will certainly think a lot more about the appropriate go-to-market strategy and how we can most effectively roll it out.

Bryan Goldberg, Head of Investor Relations

Okay. Thanks. Next question will be from Deepak at Wolfe Research. Given the recent launch of several new offerings, can you discuss your updated thoughts on the potential gross profit contribution from Marketplace in fiscal '21 and in the next few years?

Paul Vogel, CFO

Daniel, do you want to talk about Marketplace at a high level and then I could talk about the gross margin directly?

Daniel Ek, CEO

Yes, sure. I’ve said this before, but I’ll say it again: we are very early in our efforts of moving the entire music industry from a one-size-fits-all to more individual offerings. We’re trying to create real opportunities for creators across the entire audio stack, even beyond music, to create, distribute, grow their audience, and monetize their audience. Most of the Marketplace products we have today enable music creators to grow their audience. The early response we've had on those products has been phenomenal, with many artists seeing twice the uplift they have from other marketing channels and strong retention from customers engaging with these products. There’s a lot of excitement in the music community among people who have used these products, and we’re gradually rolling it out with more artists and teams experimenting with our products.

Paul Vogel, CFO

Yes. From a gross margin perspective, we haven’t given specific targets, but we did see significant growth in 2020, expecting significant growth again in 2021. Marketplace was in line with expectations in Q1, and we expect to have another strong growth year for 2021. It is starting to be a positive contributor to gross margin, and we expect it to continue to grow over time. We haven't provided any specific targets, but we feel good about the ramp over the last year or so.

Bryan Goldberg, Head of Investor Relations

All right. The next question is going to come from Justin Patterson at KeyBanc. On advertising, could you elaborate more on the strength in podcast advertising? And how are advertisers responding to SAI technology?

Paul Vogel, CFO

Yes. Podcast advertising was strong in the quarter. Organically, it was very strong. Topping that with Joe Rogan, Ringer, and Megaphone is really starting to see an accelerant to growth on the advertising side. SAI is in high demand. The feedback has been great as we roll that out into more areas within the advertising business and more areas in podcasts. We expect it to be a big driver of growth. Taking a high-level view of advertising in general, I think, from a product and technology standpoint, from an innovation standpoint, we're really just scratching the surface of where we're going to go, and we feel really good about the tech stack we're investing in. We're excited about all the incremental inventory we have with respect to Megaphone and Joe Rogan, The Ringer, and other products. We feel really good about the opportunity to drive advertising across the business.

Bryan Goldberg, Head of Investor Relations

Okay. Next question is going to come from Richard Kramer at Arete. It's on pricing. Do you expect competitors to match your price increases in key markets like the U.S. and the U.K.?

Daniel Ek, CEO

So I'm not sure, to be honest, but that was never a deciding factor in how we approach the decision. We focused on our business and the data we’re seeing. It’s very clear and very compelling data, which is we see enormous amounts of engagement with our consumers that have been growing year-over-year as we've been improving the proposition, both in terms of better personalization, better features, and obviously expanding the content library significantly with the addition of podcasts and exclusives as well. On that basis, we feel comfortable with doing that. You should look at the expansion of these price increases as evidence that we see the strategy working.

Bryan Goldberg, Head of Investor Relations

All right. Next question from John Egbert at Stifel. Can you discuss how Locker Room complements your existing spoken word content strategy? What are some of the immediate synergies you see with your existing offering? Do you view linear consumption of spoken word audio as a more interesting opportunity than live music streaming?

Daniel Ek, CEO

Yes. The important thing is to visualize Spotify as a platform. We have over 8 million creators and more than 350 million users on this platform. Most of the time, our users ask for help finding more great content, while our creators ask for help connecting with their fans in more ways. You should view live as an opportunity for creating new and meaningful ways to connect creators and fans. As platforms mature, typically the features in the beginning tend to be used by creators who experiment a lot more and may not be the most successful creators. As more people engage with a feature in a medium, you start seeing more professional creators join. While it's going to start out with spoken word content, I believe there will also be many musicians who want to engage in everything from speaking to their fans to having listening parties and other things, as engagement drives meaningful conversion to monetization on our revenue model.

Bryan Goldberg, Head of Investor Relations

Okay. The next question is going to come from Maria Ripps at Canaccord. Live audio is a fast-growing space but also one that gained popularity during the pandemic when people were spending more time at home. How does Spotify plan to integrate this feature within its audio ecosystem to make it just as useful when people are back to their normal routines?

Daniel Ek, CEO

I think it really just comes down to creating compelling content. For example, you can imagine, with an artist who has an upcoming album, you as the fan may experience that earlier than other consumers, or an artist could explain the thought process behind writing a song. Comedians could engage on relevant topics they are currently experiencing or imagining. It depends on the quality of the content. We have some of the world's best storytellers on the platform, and that's ultimately what people will tune into, and that's what matters.

Paul Vogel, CFO

I'd also add, with our ubiquity strategy, we've been able to pivot in both directions. When people started spending more time at home, we leaned into that, and we were successful. As people begin to travel and go out again, they will use other devices just as effectively. Our platform's presence on as many devices as possible allows us to succeed regardless of when and how audio content is consumed.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Lloyd Walmsley at Deutsche Bank. Based on the improvement in churn, it would appear that gross Premium Subscriber additions didn't grow year-on-year in the quarter despite opening up new markets. Do you think gross additions' growth will decline year-on-year going forward, or can you grow those again?

Paul Vogel, CFO

I'm not going to comment specifically on gross additions. I will say our gross additions were very strong in the quarter. Without getting too technical, I think because we provide rounded numbers and not actual numbers, sometimes trying to backtrack into our gross add numbers can be misleading. Our gross additions were strong in the quarter, so we feel good about that and the overall subscriber numbers. As for the new markets, they will take some time to ramp up. There wasn't an expectation of massive increases in subscribers in our new markets, although they performed in line with our expectations.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Nick Delfas at Redburn. How do your DAUs compare to your MAUs? Are you seeing lower engagement? Is that why MAUs were below expectations this quarter?

Paul Vogel, CFO

The DAU-to-MAU ratio has been pretty steady, both overall and for Premium and ads. It has been ticking up a bit across both over the average of the last couple of quarters, so we feel good about that ratio. We've talked about the MAUs a lot. There was some pull forward. We had a very strong 2020 overall, but we feel good about the overall trajectory. We still expect a strong number of net additions for MAUs for the full year, and engagement remains solid on the platform.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Mike Morris at Guggenheim. How does your share of listening in the car compare to your broader share of overall listening? How significant is this segment of the market? Can broader distribution of Car Thing be a step toward significant engagement expansion?

Daniel Ek, CEO

Yes. That's the right way to look at it. If you look at audio as a category, it has three distinct use cases: home, on the go, and in the car. In the home, it competes with other media like video. On the go, there are many things you can do, but audio is a strong medium there, too. In the car, you don't see much video or immersive experiences. Audio is a big part of what people do in their cars, especially in the U.S. You should view Car Thing as our full stack approach to reimagining the in-car user experience for next-gen entertainment systems. We are encouraged by early results and how engaged consumers are with sharing the message and their excitement about it. It's early days, but we're encouraged.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Andrew Marok at Raymond James. With Q1 podcasting MAU penetration consistent with Q4 levels, but consumption hours increasing, how are you thinking about the opportunity in terms of increasing podcast penetration versus driving more engagement with existing podcast users?

Paul Vogel, CFO

Yes. I touched on this earlier, but in general, podcast MAU penetration continues to move up. We had really good growth last year in Q4, where we were up about 300 basis points quarter-over-quarter. December, in particular, was strong given some of the exclusivity we had. The average podcast MAU over the average MAU over the last couple of quarters continues to trend up. We expect the overall percentage of MAUs engaging with podcasts will continue to increase. We feel like that line is really strong, and engagement has continued to improve. We’re seeing it in new users and existing podcast users, with strong quarter-over-quarter growth.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Mark Z. at Rosenblatt Securities. Could you discuss the variables in the low versus high end of your gross margin guidance? I assume that's for fiscal '21.

Paul Vogel, CFO

Yes. There are always a number of things that go into that. One is content, and the speed of growth in our content base. There's an element of that in there. As I've said, overall music margins will be relatively stable; there’s some variability. We do see benefits from Marketplace, so the upside or downside there could be a driver. We have seen more leverage on things like streaming delivery and payments than expected. At least in Q1, it was better than we thought, so how that trends over time will dictate it. Those are the main points. We raised the gross margin guidance for the full year, so we feel like we're on track for a better gross margin year than we expected when we started.

Bryan Goldberg, Head of Investor Relations

Okay. We've got a question from Steven Cahall at Wells Fargo. Can you tell us what per user consumption hours are in North America and Europe, where they grew in the quarter, and in developing regions, where there was some COVID pressure in Q1?

Paul Vogel, CFO

Yes. I don't believe we've given that number in the past, so I don't know if I can add to that other than general consumption trends have recovered above COVID levels in many markets. In some markets where it was weak, recovery is ongoing. Overall, we feel good about consumption trends across the platform.

Bryan Goldberg, Head of Investor Relations

All right. Next question from Atlantic Equities. I believe that's Hamilton Faber. Can you talk about monetization models for live, and how these differ from your current capabilities? What do you need to drive this new opportunity?

Daniel Ek, CEO

Yes, sure. I’m really excited about this. I think this is one of the areas where we can learn a lot from what’s happening in China, which has a more developed ecosystem when it comes to live products. Right now, we're primarily focused on creating more meaningful engagement on live products across our base, which is about getting our 8 million creators to connect with our hundreds of millions of consumers on the Spotify platform. Over time, this will be a very big potential revenue source in addition to our existing models. I want to emphasize that this is a huge transition for us: going from music to audio. The audio platform narrative centers around four main pillars: create, distribute, engage, and monetize. We are investing massively in all four pillars, making it easier for creators to create, and ensuring that creators can express themselves in different formats, engage with their audiences, and monetize those engagements. I’m very encouraged by how our platform is evolving, and I’m excited about our audience of 350 million and our 8 million creators connecting and monetizing their engagement. We are at the early stages of development, but we have a very strong roadmap ahead.

Bryan Goldberg, Head of Investor Relations

Okay. We're going to go to the next question from Jessica Reif Ehrlich at Bank of America, another one on Car Thing. What's the timing on a broader rollout for this initiative? What are the incremental revenue opportunities that Spotify can capture by targeting in the car?

Daniel Ek, CEO

So early days still. We are still shipping the products to the consumers that signed up. It's too early to say from a broader rollout perspective. When we roll it out broader, it will likely have a consumer price point and will not be free as it has been in these early stages.

Bryan Goldberg, Head of Investor Relations

Okay. We're going to go now to follow-up questions. We've got time for one more, and that's going to come from John Egbert at Stifel. How much interest are you getting among Megaphone publishers and other podcast creators looking to participate in the Spotify Audience Network? Are you sensing any hesitance to participate from larger, more established creators? How quickly do you expect network inventory to scale in 2021?

Paul Vogel, CFO

Yes. I think it's a little too early to tell. We're optimistic about what the audience network will be able to provide for both publishers and advertisers, as well as us, in terms of broadening out the inventory, the audience they can reach, and the targeting capabilities. The excitement around podcasting and audio content only bolsters that. We feel really good about where we are, especially after making the acquisition last year in terms of our future setup.

Bryan Goldberg, Head of Investor Relations

All right. Great. So we are out of time now for Q&A. I will turn the call back over to Daniel for some closing remarks.

Daniel Ek, CEO

Thank you, Bryan. In my experience, the key to our future success is to stay focused on our long-term opportunity. Short term, we will continue to perform while navigating the ups and downs inherent in a challenging and unpredictable environment. Put another way, we at Spotify, are stubborn on ambition but flexible on the details of execution. We will continue to experiment and prioritize being nimble and accelerate plans when the opportunity makes sense. In this audio world where creators and consumers are at the heart of everything we do, we see ourselves as a huge catalyst for growth. We're committing to holding ourselves accountable to live in a constant state of improvement. This is what drives me and the team to come to work every day. I'll be talking more about our earnings report on our podcast, For the Record, which will go live on our platform tomorrow. Thanks again, everyone, for joining us.

Bryan Goldberg, Head of Investor Relations

And that concludes today's call. A replay of the call will be available on our website and also on the Spotify app under Spotify Earnings Call Replays. Thanks again, everyone, for joining.