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Marcus Johnson (00:00):

In today's economy, every ad dollar counts. That's why performance marketers are turning to Rokt Ads to reach 1.1 billion unique customers globally in the transaction moment when they're completing a purchase online. You only pay when customers engage, learn more at rokt.com/emarketer. That's R-O-K-T.com/emarketer. Hey gang, it's Friday, March 6th, Ross, Danny and listeners, welcome to Behind the Numbers: an EMARKETER Podcast. I'm Marcus and joining me for today's conversation, we have two gents. We start, living in Westchester, with our senior digital media analyst, Mr. Ross Benes.

Ross Benes (00:43):

Hey, Marcus.

Marcus Johnson (00:43):

There he is. We're also joined by, down in the city, senior editor, Mr. Daniel Konstantinovic.

Daniel Konstantinovic (00:49):

Hello. Happy to be here.

Marcus Johnson (00:51):

Hey, fella. Gents, today's fact. All right, so here's the problem. I'm back at my parents' house right now. I was speaking to my sister. I said five minutes before the show and I said, "I've ran out of fact of the day." And she was like, "Well, you should because you're on in five minutes." And she has a good point. But I said, "I don't have one." But her first reaction to that, I was like, "It's hard to find them." She said, "Well, stop doing it. " I said, "What? The podcast?" She said, "No, just kill the segment or quit your job." I don't know what she was going with, but that was her solution, was just stop.

Daniel Konstantinovic (01:29):

Is nothing sacred?

Marcus Johnson (01:31):

Thank you. A lot of people listening are like, "Please listen to her because we're sick of this." But some people would just still enjoy it. I get messages about people that like it, so we're going to continue. So she suggested-

Ross Benes (01:41):

You could clip older episodes and just reuse the facts.

Marcus Johnson (01:43):

We might have to. It's really hard. So we've got two. She suggested one, which I don't think is as good as mine. So you guys can decide. Hers is about a black hole. If you fall into a black hole, what happens? She was like, "Where do you go? What do you see? If you fall into a black hole, you get stretched and compressed by extreme gravity." A process, which is honestly, I'm not making this up, is referred to as spaghettification.

Ross Benes (02:09):

Wow.

Daniel Konstantinovic (02:09):

Yeah.

Marcus Johnson (02:11):

Yeah. You might see the other side before crossing the event horizon of a small black hole, you might possibly see the other side, but then you'll be crushed almost instantly.

Ross Benes (02:21):

I don't think you're seeing much there.

Marcus Johnson (02:23):

No.

Daniel Konstantinovic (02:24):

Yeah.

Marcus Johnson (02:24):

She watches a lot of horror films, so I'm not surprised this is dark. But my one, on a more positive note, the most medals, Winter Olympics medals of all time, Norway. This doesn't include this Olympics, but they basically won the most, again, so it doesn't really matter. Norway have the most medals. Prior to this Olympics, they had 405 medals total. The USA had 330. Germany in third place with 267, which isn't too bad. But that's crazy because Norway has the same population as less people than New York City.

Ross Benes (03:03):

Isn't it all from skiing?

Marcus Johnson (03:05):

Ross isn't that impressed.

Daniel Konstantinovic (03:06):

That's how they get around over there.

Marcus Johnson (03:11):

That's how they commute.

Ross Benes (03:11):

They just have so many skiing events.

Daniel Konstantinovic (03:11):

Yeah.

Ross Benes (03:11):

They're not winning hockey.

Marcus Johnson (03:13):

Yeah. Yeah. Apparently not. Congratulations, America. All right. Whose was better?

Daniel Konstantinovic (03:20):

I kind of like spaghettification.

Marcus Johnson (03:21):

[inaudible 00:03:21].

Daniel Konstantinovic (03:22):

I got to be honest. Spaghettification, it's a pretty fun word.

Marcus Johnson (03:25):

All right. She doesn't listen to this podcast anyway.

Ross Benes (03:26):

Yeah. I'm going with the falling into a black hole.

Marcus Johnson (03:29):

All right. Thanks guys. Appreciate it. Jesus. She'll never know. She doesn't listen. She's probably outside the door right now thrilled. Don't say a thing, Nicole. Anyway, here's the real topic. The three big questions surrounding Spotify. All right, we set the table, gents. We're talking about Spotify today. How have they been doing? Well, we just added 38 million new users in Q4, a quarterly record, crossing the 750 million monthly active user mark. Not bad. Total revenue, not great. Up 7% in Q4, 10% full year. Both of those though are half as fast as previous periods. So the money not so great, the users do seem to keep climbing. Today we are talking about the big question surrounding the company at the moment. So Ross, I'll start with you. What do you think is on Spotify's mind right now?

Ross Benes (04:23):

I'm curious how they're going to gatekeep AI slop because people are going to be trying to make their own kind of music using prompts to mix and match all sorts of things. And it's kind of cool to see like, oh, this is what a Beyonce song would sound like with Hank Williams singing, but you're going to get a lot of garbage for everything that is decent. And how do you incorporate that stuff without letting it overwhelm the music that people are familiar with?

Marcus Johnson (04:50):

This is an interesting one because more broadly, people are concerned with AI getting into music and is it really music if AI is involved? Should you have separate distinctions between the two? Is that how we get around this? What do you think's on their mind? What do you think they're going to do about it?

Ross Benes (05:09):

I think they want to have some of it because it'll be cheap content. You probably won't have to pay the artists using AI the same way you pay a traditional label. And if it increases the amount of time people are spending on Spotify, that's good for them. So I don't think they'd want to entirely dismiss it, but they also have to be careful because they don't want to make the labels mad and they don't want to make the user experience terrible. If you log on to Spotify and you're just getting a bunch of AI stuff jammed into your playlist and you don't want that, that would be off-putting.

Daniel Konstantinovic (05:48):

Yeah. Something about the AI slop that's interesting is that it's not just stuff that is Hank Williams singing Beyonce, but it's a lot of fake artists. People who are pretending to be a musician releasing an album or a song, and then it turns out that it's an AI generated and not real, and it's very hard for users to distinguish between them. There have been several instances already of some of those songs climbing very high on Spotify's charts and then being removed. So yeah, I'm not sure what ... It feels kind of unclear what their approach to AI moderation is going to be because when it comes to user features, Spotify is trying to inject AI into almost everything. But when it comes to AI content and maintaining quality, I think that's a different question.

Marcus Johnson (06:41):

Yeah. AI to help place ads, yes. For recommendations, yes. In terms of content, what will they do about it? That's a good one. I hadn't had this one at all. Danny, what else do you think is on their mind?

Daniel Konstantinovic (06:54):

I'm wondering if Spotify's ads business will ever overtake subscriptions in terms of revenues.

Marcus Johnson (07:01):

Yes, that's a good one.

Daniel Konstantinovic (07:03):

In the marketing and advertising briefing, we write a lot about podcast advertising. There's a lot of interest in it. Even though it makes up a very small portion of the overall total digital advertising pool, it's kind of where I guess the zeitgeist is at the moment. And Spotify has leaned on podcasts pretty heavily to boost its ad business, but results are kind of mixed. I should also say there's a lot of pressure on Spotify from investors to increase ad revenues, and Spotify's tried to make it easier to buy inventory by opening up programmatic ad buying on the platform.

(07:45):

But in this most recent quarter, we saw that year over year, advertising revenues actually declined. So I'm curious what it's going to take for them to flip the switch, if ever. Because if you look at video streaming services that have a paid ad-free tier and a cheaper ad-supported tier, the ad-supported tiers are driving a lot of revenues for those companies in a way that ads on Spotify just aren't.

Marcus Johnson (08:14):

Yeah. The context here, so Spotify, the ad-supported subscribers are about two-thirds of their business, so a lot of them are ad-supported. In terms of money made, full year 2025, about 10% of the money comes from ad-supported, and then the other 90 comes from people paying to avoid ads. To Danny's point, in Q4, ad-supported revenue was down 4%. Full year 2025, it was down 1%, and that full year 2025 down 1% is on plus 10% the previous year. So not good at all. Actually, the ad revenue for the last three quarters of the year was in the red. So not so great for Spotify.

(08:56):

Ross, I'm wondering if they're doing this by ... If the reason advertising money isn't crushing it, it's potentially by design. And so our analyst, Grace Harmon, was writing quote, "Ad revenues could be failing to keep pace if Spotify is optimizing ad inventory and balancing user experience with monetization, like fewer intrusive ads and better ad targeting, that can pressure short-term revenues, but support long-term engagement and paid conversion." What do you think?

Ross Benes (09:21):

I don't get the sense that falling ad revenues is by design because they would like to have another substantial revenue stream so that it's not so predominantly coming from subscriptions, but they're kind of like Netflix in a way where you don't want to disturb the ad-free subscription product too much because that's what you've been known for and that's what users tend to like. So if you're making most of your money off subscriptions, as long as your total user base keeps growing, that's probably fine.

Marcus Johnson (09:57):

We think things are going to get better this year. We expect Spotify to grow ad revenue faster in 2026 than it did in 2025. We're opposed to that negative 1% on the year. Q1 looked good last year, up 8%, but as I mentioned, Q2, 3 and 4 all shrinking. So yeah, I think this is a good one. I've got another one for you guys. One of the ones I had was how concerning is it that a lot more people are watching podcasts on video streaming platforms like YouTube, Netflix versus Spotify? Because Marissa was writing an article, Marissa Jones, one of our analysts, Hulu joins the podcast licensing race to compete with Netflix and YouTube, and of course, Spotify.

(10:40):

And maybe you guys can help me. I still don't fully understand why Spotify did the deal with Netflix to let them showcase select Spotify video podcasts. Are they not more concerned about these video streaming players getting in on this corner, on their territory here?

Ross Benes (10:57):

Well, the licensing revenue is nice. If you can take shows and licensing them, that's another line of revenue there. So that's probably exciting. And then you increase the awareness for them, even if they're consuming them elsewhere for now.

Marcus Johnson (11:11):

Right. But as part of the concern, this led me to another one I had, which is, so Marissa Jones again, she interviewed Brian Berner, Spotify's global head of advertising, sales and partnerships. He told her podcasts will cement their status as a primetime media format in 2026. And so it got me thinking and posed this question, will people sit down in their living rooms and turn on a podcast to watch en masse? Is that an activity that we're moving towards? And if so, wouldn't Spotify want people to open up their app versus people watching their shows, Spotify originals on Netflix?

Daniel Konstantinovic (11:51):

I think it is a behavior that's already happening. YouTube is probably the most popular platform for podcasts, and the majority of YouTube viewing happens on TVs. That's not an exact one-to-one, but I do think that video podcasts make for great second screen content, something that a user can watch while playing on their phone or doing something else. It's kind of low attention, I guess, compared to other video content. And my guess for why Spotify made this partnership with Netflix is, like Ross said, it's a revenue stream. You can license out your podcasts, get more money in return.

(12:38):

Netflix also has an enormous reach. I'm sure that Spotify is eager to onboard as many Netflix users who may not have a Spotify subscription or may not use the Spotify platform as possible. And as far as does this eat away at their market if they were to try and get video viewership to happen on Spotify? I'm not really sure if I have a solid answer on that. I think yes, to some degree. If Spotify could control that time entirely, and you have listening happening there, you have video viewership happening there, I'm sure that would be to their benefit. It's something that they want, but perhaps the incentives for users are not in place yet, or it's just a behavior that they're not seeing. And so this is a lever that they have to pull to get something out of it.

(13:34):

Spotify is making a really big video push within its platform with music videos, video podcasts. So maybe they're inching in that direction. But I think a barrier for them is that when people open Spotify on their phone, TV, computer, what have you, I don't really think that video is something that they're opening it for in the way that obviously when you go to YouTube, that's the first thing that jumps to mind.

Marcus Johnson (13:59):

They wanted it to be, right? They wanted to be the everything app of a lot of types of content. They wanted to be the everything app kind of for media. They wanted to be the place for music, the place for podcast, the place for audiobook. They wanted to be the audio everything app. And so Ross, I am wondering what their thinking is here because we talked on the show recently. I was speaking to Ethan and Oscar about social media addiction trials going on right now and where people spend their time with media. And one of the conversation we're having there is about social apps moving across to TVs.

(14:31):

Much more people are watching, like we said, YouTube on a TV, over half of YouTube viewership now on a TV. We've got other platforms, TikTok, Instagram, talking about or putting out apps for TVs because they know that when it comes to time spent with media, any growth in time spent with media is really just on the TV. It's on the CTV. It's not growing anywhere else really.

(14:52):

And so because of that, I was wondering, it kind of seems like they're preparing for this world, where people are sat in front of their TVs and how can we have an app, how can we be the app that people want to open the way that YouTube has almost established itself? So Ross, I'm surprised, does that not surprise you that if this trend is going to happen where people are sitting in their living rooms and turning on a podcast, turning on whatever content, that Spotify wouldn't want to be front and center there?

Ross Benes (15:12):

Well, about the TV thing though, the time spent on mobile is still much higher than time spent on CTV just in general. Even if CTV is growing, mobile's probably double, if not more than that. So you're still going to have a ton of people listening on their phones. Now with podcast ads, I think something we should keep in mind though is the ad reads tend to be host read, baked in, especially for those huge shows. So if you're watching The Ringer on Netflix, I get what you're saying, you don't want to send a user elsewhere to Netflix. You don't want to have them habituated to a platform that's not you.

(15:56):

But you're still seeing the Spotify branding if you're actually watching it. I don't think most people actually watch video podcasts even if they have them on because they're doing all sorts of other stuff and you're still extending your ad reach. So if Spotify sold those host read ads, the advertiser's still getting the impression even if it's elsewhere. So I think they're seeing the benefits outweigh the cons.

(16:21):

And also another issue though is Spotify has tried several video initiatives in the past that have failed. They're just not really mentioned anymore. This isn't like the first time they've tried to jam video into the platform. So Netflix is a place that is video by default. So if you're making a big production investment on these video podcasts, you're hedging your bets a little bit in case users on your platform don't actually use it, you will still get that audience reach on Netflix.

Marcus Johnson (16:57):

Speaking of jamming in video, trying to make it work, Apple announcing recently that they're going to ... Apple Podcast are going to start adding video. So if you're watching a podcast on Apple Podcast now, you can either flick between being audio or being video the way that you can with Spotify. Danny, what do you think of this one?

Daniel Konstantinovic (17:18):

I mean, it doesn't really surprise me considering it's what all of the audio platforms are doing. I'm not sure it's something that's really going to drive users to Apple Music over any other streaming service, but if you're already an Apple Music subscriber, maybe it increases your time spent by some small amount, which is good for Apple. Going back to the quote that you read from Marissa's story with the head of advertising at Spotify about podcasts becoming primetime TV or primetime media, I do think that's true and very interesting.

(17:57):

I mean, a lot of the high profile interviews that used to go to late night talk shows are kind of dispersed more around podcasts and other internet content, and we're seeing a lot of late night show declines. It seems like podcasts are really taking over as the popular interview format, whether it's video or audio for this generation of consumers. So I think that is part of what's driving all of this interest from the platforms to find a way if they can get in on that pie. Yeah.

Marcus Johnson (18:32):

It's an interesting way of looking at it, that watching Conan O'Brien, The Late Show, The Late Late Show, whichever one, similar format, interview show, but people are now saying, "Maybe I don't need to sit and stare at the people on the screen. I could just take that content with me." And it's just being repackaged doing new things in old ways, as the saying goes. Ross, you have-

Ross Benes (18:55):

I would expect Colbert will probably have a podcast within a year after the CBS.

Daniel Konstantinovic (19:00):

Oh, weeks.

Ross Benes (19:00):

Yeah, exactly.

Daniel Konstantinovic (19:01):

He's probably already in touch.

Ross Benes (19:03):

Yep.

Marcus Johnson (19:06):

Ross, anything else on Spotify's mind at the moment?

Ross Benes (19:09):

For years, Spotify and all of the music services really kept their subscription prices flat. It was like $10 a month for a long time, which is a really good value when you consider how much streaming video prices have increased. And lately, Spotify and others have been gradually increasing it usually by a dollar a month. It's not gone up really that much, but it has gone up a few bucks. And that's a surefire way to grow your overall revenues if you have a loyal audience. Netflix for sure has demonstrated that. I do wonder, at some point, does digital audio, which has been reluctant to raise prices on consumers, will it eventually become as beholden to price increases as a revenue driver in the same way that digital video has for years?

Marcus Johnson (20:02):

Yeah, this is a good one. We talked about the ad-supported revenue declining 1% for year 2025. On the other side of it, premium revenue was up 11% full year 2025. However, that's half as fast as 2024. And so you can see, Danny, why Spotify, here's the third price increase in three years, why Spotify has decided to bump prices because that can duce the revenue?

Daniel Konstantinovic (20:24):

Spotify has been raising prices. I think the slow roll of it shows some nervousness about exactly what Ross is saying. Is access to music streaming going to become a premium thing? Because even though Spotify has raised the prices for its subscription plans to I think it's about 12.99 a month right now in the U.S.-

Marcus Johnson (20:48):

Yes.

Daniel Konstantinovic (20:49):

... For an individual plan.

Marcus Johnson (20:50):

Which went up in January by a dollar. Yep.

Daniel Konstantinovic (20:53):

You've also seen them launch a lot of bundles at the same time that they're increasing prices. There's duo plans. Some of these have been around before the most recent swath of price increases, but yeah, you have duo, family plans, subscriptions that are audiobook only. So you see them extending these olive branches to users who maybe want access to ad-free music or this particular kind of content or style of consumption. So I wouldn't be surprised to see them increase the prices more.

(21:29):

But I don't know if it will ever reach the same kind of divide that we're seeing with Netflix and it's ad-supported too, if that makes sense. The average ad-supported user on Netflix gives way, way more revenue to Netflix than a premium subscriber, and it's kind of unclear if that dynamic is the same for digital audio. I don't know. Do you have any insight into that, Ross?

Ross Benes (22:00):

Advertising is one-third of total digital audio revenue. The other two-thirds are subscriptions, that's actually very similar to video. So I guess the audio and video breakdown of ads versus subscriptions is more similar than I realized.

Daniel Konstantinovic (22:19):

Going back to the value idea, a lot of music streaming services like Apple are bundling into phone plans as well. If you sign up with a plan with Verizon or whomever, there are perks there, you can get access to Spotify, Apple Music, or whatever music service they have partnered with. And that's something we've also seen for ad-supported plans on video streaming. So it's a way for them to keep churn low to maybe increase subscription prices without really squeezing consumers too much who are looking for value. I expect that Spotify will increase prices further. It's kind of hard to imagine them not doing that.

Marcus Johnson (23:03):

My take here is that I think that Spotify can put the price up to 40 bucks a month, I'd pay it. Because you don't choose your music [inaudible 00:23:10].

Ross Benes (23:10):

Don't give them ideas.

Marcus Johnson (23:11):

A lot of this is based on, do I have an iPhone? I'll probably use Apple Music. Do I not? I'll probably use Spotify. And if I have one or the other, maybe I'll listen to things on YouTube, but I don't think that anyone would change music streaming services if the price went up too high. And they've got so much run ... I think it's a great question, Ross, comparing it to video streaming services and how much they've hiked the prices, but they went from 35 a month to 45 and then 50 and then 60 and it went up quite ... Spotify is going up by a dollar a year, so they know what they're doing.

Ross Benes (23:48):

Are you talking about the YouTube TV? Because 35 bucks, that'd be a lot for one service.

Marcus Johnson (23:55):

Yeah, like a YouTube TV. I mean, even Netflix was going up by a couple of dollars each time where Spotify is only going up by a dollar every year or-

Ross Benes (24:03):

And they've done it more times.

Marcus Johnson (24:04):

Yeah, exactly. So I think that Spotify's got a lot of runways still to increase prices. I don't think people are going to be bothered. They might be a bit annoyed by it, I don't think they'll lose any subscribers at all of it. Danny, anything else on Spotify's mind at the moment?

Daniel Konstantinovic (24:18):

I guess one question I had here was how its audiobook push is going to play out.

Marcus Johnson (24:22):

Oh yeah.

Daniel Konstantinovic (24:23):

I feel like information on how it's going with audiobooks has been a little sparse.

Marcus Johnson (24:29):

Yeah, it's a bit quiet.

Daniel Konstantinovic (24:29):

But they've launched a audiobook only subscription plan. Spotify has a partnership with bookshop.org where users can buy the physical copies of the books that they're listening to.

Marcus Johnson (24:39):

Interesting.

Daniel Konstantinovic (24:41):

So yeah, they're clearly trying to get deeper into the audiobook space and turn it into more of a revenue driver.

Marcus Johnson (24:49):

Yeah. All right, gents. So to end the show, well pick a top three. This is the ones I've written down. Number one, what will Spotify do over AI slop? Number two, advertising continues to underperform despite management's optimism. Number three, will audio streaming platforms have to start raising prices as fast as video platforms? Number four, will people sit down in their living rooms and turn on a podcast to watch en masse and how concerned should Spotify be with people like YouTube or Netflix or Hulu maybe taking a bit of this corner from them? And then number five, what's the audiobook strategy and how's it going? Danny, what do you want to keep?

Daniel Konstantinovic (25:22):

I think the question of how Spotify ... If ad revenues will ever overtake the subscription is an interesting one for Spotify.

Marcus Johnson (25:30):

Okay. Ross.

Ross Benes (25:32):

Daniel's convinced me to choose his audiobook analysis.

Marcus Johnson (25:37):

Oh, okay. Nice.

Daniel Konstantinovic (25:38):

Interesting. What's piqued your interest there?

Ross Benes (25:42):

I'm also just curious if it's going to work. Bringing in the physical books through bookshop.org, that's interesting. I feel like that's a high barrier, but I like anyone that's trying to get people to buy books outside of Amazon. So I'm rooting for them to have this work out.

Marcus Johnson (26:03):

So you'd listen to the audiobook and then you'd buy the physical copy and just have it on the shelf completely unused. Isn't the beauty of the book like it's a bit battered, you turn a few pages [inaudible 00:26:13] a few pages?

Daniel Konstantinovic (26:15):

I haven't read any books on my shelf. I don't touch them. They're there for aesthetic purposes only.

Marcus Johnson (26:19):

Okay. Nevermind.

Daniel Konstantinovic (26:22):

Got that new book smell.

Marcus Johnson (26:25):

I'm going to pick this, will people sit down in the living rooms and turn on a podcast to watch and which platform will they open? I think that's a big one. So we have that one I just said. Advertising, will their advertising revenue ever get close to how much they make from subscriptions? And then what's the audiobook strategy and how's it going? Great top three gents. That's what we've got time for for today's episode. Thank you so much for hanging out with me today. Thank you first to Ross.

Ross Benes (26:48):

Thanks, Marcus.

Marcus Johnson (26:49):

And of course to Danny.

Daniel Konstantinovic (26:50):

Thank you.

Marcus Johnson (26:51):

Yes, indeed. And thank you so much to the whole production crew. We have Danny, Lance, Luigi, and Mike all hanging out and helping us out with this one. So thank you to you guys. Thanks to everyone for listening in to Behind the Numbers: an EMARKETER Podcast. Make sure you subscribe and follow and leave a rating and review. We'll be back on Monday. Of course, of course we will. Happiest of weekends.