Investor Day Outlook Is Music to the Market's Ears

Research evidence excerpt

Investor Day Outlook Is Music to the Market's Ears

TD Cowen Spotify Technology

Global Research May 21, 2026

Today's product announcements were impressive, but we note that (1) it's not clear

how much interest there will be in cover/remix music generation, (2) Reserved seems

like a massive PR win and potential churn reducer but doesn't obviously increase

ARPU or profitability (at one point, the narrative was that concert ticket availability

was going to be a key feature of a super-premium tier), and (3) add-on products in

other verticals like podcasting and audiobooks likely don't have the kind of revenue

leverage that music-related products do given that Spotify's value proposition is still

dominated by music (Audiobooks+ currently has an annual runrate of < 1% of

Spotify's total revenue). The apparent walk-away from super-premium tiers

underlines our view that when you are already giving your users humanity's entire

music catalog for a standard monthly price, it's hard to find places to add value that

justify higher rates.

As far as AI's benefits, the data management provided was qualitatively impressive,

but that has to be balanced against the fact that (a) opex growth is currently

accelerating and (b) it's not yet clear that more bells and whistles for consumers will

drive meaningfully higher LTVs for a service that already has very low churn

(especially if other DSPs play the fast follower card).

Finally, we are sure that the music labels are keeping an eye on Spotify's margins and

will likely see margin growth at Spotify as an opportunity to press for better terms on

music rights. Spotify remains a distribution company - a very well-run distribution

company with a best-in-class product, to be sure - and we remain of the view that

content is king.

2 TDSecurities.com