Spotify Technology SA’s (SPOT) Management on 2022 Morgan Stanley Technology, Media and Telecom Conference – Transcript

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Spotify Technology SAs SPOT Management on 2022 Morgan Stanley Technology

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Spotify Technology S.A. (NYSE:SPOT) 2022 Morgan Stanley Technology, Media and Telecom Conference March 9, 2022 7:10 PM ET

Company Participants

Paul Vogel – Chief Financial Officer

Conference Call Participants

Ben Swinburne – Morgan Stanley

Ben Swinburne

Okay, we’re going to get started. Good afternoon everybody. I’m Ben Swinburne from Morgan Stanley, a quick disclosure statement that I know you’ve heard a million times. Please note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures all appear as a handout available in the registration area and on the Morgan Stanley public website. Very happy to welcome back to the conference in-person, Paul Vogel, the CFO of Spotify and former Morgan Stanley research analyst. Paul, it’s great to see you again. Thanks for being here.

Paul Vogel

Thanks for having me.

Ben Swinburne

So I want to start – if we go back to your year-end earnings call, Daniel really highlighted that Spotify is focusing on becoming the preferred destination for audio creators. And there has been a lot of talk at this conference about the creator economy and specifically, I think, you guys are targeting taking 11 million creators on the platform to 50 million over time. Can you talk about what that means from a business point of view? And why investors and shareholders should be interested in this?

Paul Vogel

Yes. Well thanks everyone and I was actually reminded that this was actually, I think, the last in-person thing I did two years ago before, so it’s glad to be back again. So, I think, when we think about there’s a couple ways to think about it. I think one is we are building on a platform where we want all sorts of creators to be able to bring their creative art and be on Spotify and so that’s the first thing. And so, when we talk about growing the 50 million creators, it’s really about expanding that opportunity for anyone who has a creative engine to be on Spotify. I think 50 is interesting number. It’s not that if we don’t get to 50 or if we get above it, there is a magic number.

I think there is incremental benefits of adding more creators onto the platform as we’re doing it. I think there is a number of benefits. One is the more creators you have on the platform, the more they’re going to bring incremental users onto the platform. So creators bring users, having more diversity of creators will be huge for us. Obviously more creator means more opportunities for monetization both for the creators and for us. And so we’re going to continue to build out tools and services that will allow creators to monetize on our platform in different ways. And so obviously the most obvious would be just a podcaster you can bring on the platform and we can help them monetize through advertising, be musicians through merchandise and ticketing and adding all those things. So there is the benefit of both helping the creators monetize and then also monetizing for ourselves and then also just having a more robust platform, which will drive incremental users on to Spotify.

Ben Swinburne

That makes sense. Another long-term goal that you guys have talked about consistently and I think you’ve been brought up on the last call is getting to a billion users on the platform. And yes, you’ve had a lot of growth. I mean, I think on our numbers, our estimates is you’ll cross half a billion sometime next year, but just talk about why you think there is such a huge opportunity overall from a usage point of view from here.

Paul Vogel

Yes. I mean, I think, there is a number of reasons. I think one, if you look at it a high level, I mean, there’s $3.5 payment enabled smartphones in markets that will be in. And so there’s a huge opportunity for growth. When you look at penetration of markets, other than the few countries in the Nordics, most countries or all countries are actually still less than 50% penetrated with streaming audio, many of them much less than that. So we still see a big opportunity in North America and Europe to continue to grow where there’s lots of penetration, obviously in places like Southeast Asia, LatAm, newer markets like Africa that are – there’s really no presence there. We think we have a huge opportunity. So we think there is a long runway for growth in terms of users.

I’ve said this before, but when you think about it there is no reason why every smartphone in the world shouldn’t have an audio service on it. It’s pretty simple, particularly in – everyone can enjoy audio. Most people like music for the – folks who don’t like music, there’s podcasting in other ways over time to enjoy the audio. And for us, it’s great because we have both offerings. So if there is something you want to pay for, we have a premium offering, but if you’re someone who’s more, more casual or more price sensitive, we have our ad supportive free version. So we think that the numbers is definitely achievable.

Ben Swinburne

Yes. You brought up the pandemic in talking about our conference from a couple years ago, but I wanted to ask you – and I’m sure you got the question all the time from investors, which is how did the pandemic impact Spotify’s growth trajectory over the course of the last couple years we had the sort of pull forward debate and engagement debate, still not entirely sure if it was a tailwind or a headwind, but you guys seem to think that the second half of last year, which was quite a strong period for the company is kind of indicative of sort of normal or the future. I don’t want to put words in your mouth, but you can help talk a little bit about that.

Paul Vogel

Yes, I think that’s mostly right. I think if you go back and look at 2020, we had a really, really strong year. It was one of those things where we – when we looked at it in hindsight, there was clearly some pull forward in terms of people at home and looking for things to do and streaming and those types of things. So we definitely saw it. We saw some impact as we talked about in the kind of first half of the year, some of that was related to, I think, some of that pull forward, some of it was also related to – there was actually some markets where COVID was really bad where we actually pulled back on marketing and did some things that we thought were the right things to do at the time for Spotify and the brand and for what people were going through in those markets. India is a great example of a market that’s been really strong for us in general over three years, but in the first half of last year, we cut back on a lot of marketing and we did see that that impact growth. I do think the second half of last year was kind of more indicative of how we think about the sort of growth and growth trends.

Ben Swinburne

Yes. And are you seeing engagement perform better in markets that are reopened or…

Paul Vogel

Yes, we definitely are.

Ben Swinburne

Okay, great. Maybe one more last sort of bigger picture question, which is a little bit specific to your role and sort of how you guys think about communicating with all of us. You shifted your approach to guidance last quarter. And I’m certainly not suggesting you should have false precision and guide to every single number, but certainly I think some investors reacted to the reduction in overall guidance quantity as something that’s – a reflection of something potentially negative, but maybe just talk about what went into your thought process? Maybe you should remind everybody what you changes and why is that sense.

Paul Vogel

Yes, sure. So just as a reminder for what we had done since we were a public company was we would guide two ways. We guide on the next quarter as well as full year. And within that guidance, we would historically give a range of outcomes and we always say we would target the 70 percentile of that range. And that’s how we guided for, I guess, the first kind of three plus years as being a public company. And what we changed going forward is two things. One we’re no longer giving annual guidance, which I’ll touch on a second. And we’ve switched from giving ranges to point estimates. And so why do we do that? I think there was couple of reasons. One was we gave ranges, but we told everyone our goal was the 70 percentile. So in essence, we were giving you a point estimate anyway, that’s number one.

I think number two is I think quite frankly we’ve performed better than sometimes the metrics have – people have perceived the metrics to be and so what do I mean by that without this coming out defensively at all, if we said we’re going to do something in a range, but our point estimate to 70 percentile, that’s literally what we were trying to do. So when we come in, in the 90th or 95th percentile to us that’s actually a strong quarter with an outperformance, but to a lot of people you’re still in the range of outcomes. And so it was kind of in line. And so we felt like there was this perception that we historically were a company that never outperformed. And yet relative to our internal metrics, we actually felt like we had outperformed a lot.

So we thought going to point estimate would be a cleaner way of doing that and we’ll see. And then with respect to the full year guidance, think for us again because we try to be transparent and open. We felt like every quarter we were constantly tweaking our full year guidance up or down, depending on how a quarter did or if we were shifting a marketing campaign. And so for instance, we could report Q1 decided something in Q3 was going to be different, which may or may not impact Q4. And now I’m adjusting full year numbers, which was – had no reflection on how we thought we would do. So that’s one part of it. And the second part is we don’t really run the business for a specific one-year plan, right. And so everything we do is long-term, all the models, I see everything on green light, tends to be minimum two to three years and last time three to five years in nature.

And so while we are very diligent about looking at our business plans and seeing how they hold, we may decide in any period of time to – because we have so many initiatives going on to the company. We made any point in time decide, hey, actually, this would be better if we launched this in Q3 or we should pull this up in to Q2. It’s not always a bad thing, right. Sometimes by pulling something forward, you’re actually gonna accelerate revenue. You’re going to accelerate users or sometimes by pushing back a quarter, you may, in the grand scheme of again a two, three to or five year LRP, it doesn’t really matter.

And so we just felt like, again, that false precision of a year-end estimate that we don’t really manage to wasn’t super helpful. I will add though to the question though, Ben, what we did say, because there was some questions around, well, does this mean there’s a material change in your outlook for 2022 relative to 2021. And we – what we had said at the time was we don’t expect a material difference in the type growth we will see in 2022 relative to the type of growth we saw in 2021.

Ben Swinburne

That’s a great pivot to the question I was going to ask you next, which is about this. Last year you had a pretty significant geographic expansion of the business, I think early in 2021. So there was a lot of concern in the market that you guys would not be able to continue to grow as quickly. And as you pointed out, your outlook sort of suggested you can talk. Why do you think you can continue to grow premium users in particular this year as quickly as you did last year, given the lack of a geographic tailwind and anything you want to say about the first quarter would be interesting too?

Paul Vogel

Yes. So for the full year in general, I think, look, I think we still see a tremendous amount of opportunity for growth, both on the user side and the premium side. And we’ve over time been able to sort of prove out that model of getting people in through the free users the three business offer and then convert them into the premium users. And as I kind of highlighted earlier, we still see a huge opportunity in terms of how big the markets are and how penetrated they are and where they can go. With respect to Q1, we saw a couple things, one is through February, we were trending above plan. I know there was lots that went on. There was lots of publicity around kind of Spotify and bunch of stuff over January and February.

But within all of that, we actually we’re performing and still are performing very well. But with the Russia’s invasion of Ukraine, we have decided to pull all of our employees outside of – out of Russia and we are longer charging for premium users within Russia. And so the premium users we do have in Russia will churn off, the majority of them in Q1 a little bit in Q2. So the really good news is we were actually above plan heading into – heading out of the end of February and into early March. We do expect probably a churn of about 1.5 million users out of the subs business.

We are continuing to operate our service in the area. We think it’s really important that information is still flowing there. Podcast usage has gone up in that region. So we’re trying to continue to provide information and non-propaganda information as much as we can. So again, we feel really good about how the trends are – the trends in Q1 from user and subs, we feel really good about, again, notwithstanding the impact we’ll have from discontinuing the premium service in Russia.

Ben Swinburne

I would imagine advertising in that markets demand.

Paul Vogel

Yeah, we’ve cut all monetization off in Russia, so there’s no advertising and no premium revenue in Russia coming up.

Ben Swinburne

Okay. And your point about trending ahead of plan, you mean plan, you mean guidance?

Paul Vogel

The guidance, yeah. So again, if you think about, we are trending above that guidance plan, we felt really good about it. Obviously we’re going to have a little bit of a hiccup with a kind of 1.5 million turning out in Russia, but if you isolate Russia aside, the quarter was performing above plan, which we felt really good about.

Ben Swinburne

And that obviously is happening with, I think, investors worried that with the podcasting controversies of the quarter, that maybe there’d be some pressure on growth. It sounds like that was not the case.

Paul Vogel

Yeah. I mean, like I said, I think obviously when you go through a little bit of controversy, there’s always going to be some impact. But without getting too specific, based on what I said, that we were above plan for both users and subs kind of before Russia’s invasion of Ukraine, that should give you some indication of the overall impact that some of the issues we dealt with in the first month or two.

Ben Swinburne

Got it. Okay. You guys implemented price increases, Paul I think in about 34 markets or so something in that range over the course of the last 12, 18 months. What’d you learn from that? And what do you think about the longer-term premium ARPU outlook as you think through the business?

Paul Vogel

So I think we learned a couple of things. I think one is we definitely do have pricing power and pricing power in some markets. Most of the price increases we did was on the family plan. And there were some markets, particularly in the Nordics where we did raise standard plan, but we know that we continue to add more value into Spotify and into the ecosystem. And so we feel really good about that. I think we’ve talked in the past about we didn’t see any really material impact on either churn of subscribers or gross intake in the markets where we raised price. So that’s great.

I think over time, we’ll continue to figure out what we want to do with pricing. I don’t think we necessarily know right now how consistent we will be. I think we’re trying to figure that out, but I think if you take a step back, I think what we do believe is we continue to add more and more value into Spotify, right? So whether it’s on the music side, whether it’s on the podcasting side, whether it’s marketplace tools to creators, that we think the ability to raise ARPU across the platform is still a lot in front of us. And that will come both in ways that we think we can monetize our premium users and also ways where we can better monetize our free users as well.

Ben Swinburne

Want to talk about advertising next, but just sticking with premium. Are there ways to drive gross margin in the premium business as people are obviously very focused on that?

Paul Vogel

Yeah, I mean, I think there are. I mean, I think again, a lot of the marketplace tools will impact the premium side, so that’s number one. I think over time, there’s probably ways to monetize premium users who are loyal fans, passionate fans in ways that we’re not doing right now. So I definitely think there is on the premium side and then, keep in mind as premium grows on the podcasting side, there’s advertising goes across the entire user base.

And so while that actually fits to the ad-supported business from a gross margin standpoint, having a premium growth where they’re listening to podcast and advertising service on top of it is also beneficial.

Ben Swinburne

I see. Let’s talk more about advertising. I mean, you guys have been in the ad business for a long time. How would you describe the organization and sort of your strengths and weaknesses in advertising monetization, ad tech, et cetera? I felt like for a number of years pre-pandemic, you guys were in the business, but it was a little bit of a secondary focus, I don’t know if you describe that as fair but are things different today? Do you feel like you’ve got a more robust offering and team than you had before?

Paul Vogel

We definitely do. So if you take a giant step back for a long period of time at Spotify, the free business was really a business we ran to try and drive people into the premium ecosystem. So for those of you who are new to Spotify, historically roughly 90% of our revenue comes from premium and about 10% comes from the ad-supported side. That’s actually moving more towards ad-supported. And the ad-supported was actually 15% of revenue in Q4, but it really was how do we use the free business as a way to drive quality users into the premium business, and do it in LTV to stack that was advantageous to us and we thought was good.

And we considered all of that cost of the ads business as part of that stack to drive users to premium. So that’s kind of how the business operated for a long period of time. And then what’s evolved is, as we’ve grown, as music has grown and then as we’ve added podcasting, we realized that advertising can be a real significant driver of growth for us; A, in developed markets, because there’s an opportunity to monetize better, B, with podcasting, where there’s a huge opportunity to completely modernize how people advertise in podcasting and then see able to grow outside the U.S. in markets where the advertising isn’t that strong.

So yes, I think it was sort of an afterthought or something that we did really focus on. It was really a mean to drive people to premium. And we definitely believe and we focus on this in the last couple of years that advertising unto itself is going to be a great business for us. As I mentioned, just a few minutes ago, it was 15% of revenue in Q4. It’s been up from historically sort of 10%. We’ve talked about advertising becoming north of 20%, but maybe even more 25% to 30% over time, it’ll definitely be a driver of revenue growth for us.

Ben Swinburne

And Paul, I think most of your ad business today is music, probably the, the large majority, but there’s clearly a big debate and big focus at the company on podcasting. Why do you think – why do you and the team think that’s a big TAM long-term? I think the market globally in terms of advertising is, I don’t know, maybe a couple of billion? Something like that, not great numbers out there, but why do you guys – why are you excited about this?

Paul Vogel

Yeah, I mean, I think it’s exactly that. I think the and my IR team could correct me if I’m wrong in this, but I think it’s something like in the U.S. alone, there’s like 125 million users who listen to more than 50 minutes of podcasts a month or something like that. So the podcast growth is growing materially. It is only about $1 billion or so in the U.S. in particular and a couple of billion globally. And I think a lot of that is because historically it’s been a really bad offering, right?

So if you think about what podcasting was, it’s just simply somebody’s downloading a podcast. They may or may not listen to it. And people are trying to monetize through a download that may or may not get listened to. And now we’re getting to a world where we actually charge based on streams. We actually have streaming ad insertion on anchor and dynamic ad insertion across the Megaphone and others. We’re actually able to dynamically adjust the advertising based on your demographics, based on geographics, so there’s much better ability to actually serve you an ad that you want.

We recently made an acquisition – two acquisitions in the podcasting space Podsights and Chartable, which are products that will allow us to do better measurement of podcasting in general, and then better analysis to allow podcasters to know how to attract advertisers and get advertisers. So we think the usage is going to continue to grow up. We’ve seen the percentage of our MAU who engage with podcasts continues to tick up every quarter. We’re seeing the stream share of podcasts relative to other forms. Continue to tick up every quarter. We’ve seen the monetization come.

We’ve seen the demand from advertisers, I think, Spotify alone, the number of kind of significant advertisers in the last year. I’m not going to define significant, but it’s a pretty big number has jumped from like four up to nine. And so we’re seeing the number of people who are now in that category of significant advertising continues to increase. We see a lot of opportunity

Ben Swinburne

And I usually talk to investors about your podcasting business and sort of two categories, the O&E podcasts and the third-party business or Spotify Audience Network. Maybe we could talk a little bit about your original and exclusives. Can you just help us think about the size of that business or at least the key assets there and your ability to grow that over time?

Paul Vogel

Yeah, so it’s a reasonable share of podcasting overall comes from O&E. We have a strategy where it’s kind of multi-prong, some of the strategy is licensed and exclusive content that’s we have with Dax Shepard and Call Her Daddy and those types of things. And we have the own stuff that we have that comes from Gimlet and Parcast; and acquisitions like Bill Simmons and The Ringer and those types of things. And so we’ll continue to grow those. I think those are huge opportunity to continue to monetize those through, our own advertising.

And then on the Megaphone side and the Spotify Audience Network, what we’re seeing is we are now building on a tech advantage that’s actually allowing publishers to monetize at better rates than they would in other places. And so if you look at our advertising over the last couple of quarters, you’ve seen it outperform. And one of the reasons it’s outperformed in the Megaphone side and that third-party selling ads for publishers. We’re actually monetizing in lots of cases, better than they’re able to on their own first-party direct sales teams. And so we’ve seen them add inventory into the ecosystem throughout the quarter, which has helped us outperform over the last two quarters.

Ben Swinburne

It sounds like demand in general from advertisers is more or less succeeding supply in most periods of time. How do you drive more inventory in the business?

Paul Vogel

So I think it’s a couple of ways. I think one is simply more shows that’s number one, more engagement, more usage is kind of, it’s all the obvious stuff. And so the goal is to not do it by just adding inventory, that’s obviously not something you want to do, but we’re seeing podcast users going up, we’re seeing engagement go up, which means people are using more podcasts.

We’re getting more people to opt into SPAN, Megaphone because it’s actually working better. And then, continuing to drive our own O&E. So it’s sort of all of those and we think we have a big opportunity to do that.

Ben Swinburne

Got it. Is the – are the CPMs you can generate materially different between the two, I mean, typically in a third-party business, usually it can be rendered inventory. That’s less attractive to advertisers. What are you seeing?

Paul Vogel

Yeah. So obviously, or maybe not obviously, but we do get high CPMs for some of our key shows in The Ringer. You can imagine there is a certain types of advertisers who really want to be there. But what we’ve seen is on the SPAN side, we are generating revenue even though sometimes it’s not the best revenue, the best inventory higher than the direct sales people are doing for the inventory they do have, which is why they’re actually throwing more inventory into our system. So, yes.

Ben Swinburne

And you guys can make a nice margin on that.

Paul Vogel

Yes.

Ben Swinburne

Great. So let’s talk about gross margins, maybe starting with podcasting. I think there’s a lot of debate in the market about how podcasting can or won’t scale for you guys. Let’s start with last year. How did podcasting impact your overall gross margin performance in 2021?

Paul Vogel

So it impact – well, less badly is probably the best way to put it. So we had assumed there would be a negative hit to podcasting growth. And so we continued to grow the advertising side, but we’re investing a lot in podcasting. So we knew it would be a drag. We’ve talked about this publicly that podcasting bill that would be a drag on gross margins. It was less of a drag because the advertising far exceeded our expectations on the podcasting side.

So we continue to see those trends. It will still be a drag in 2022, but we see the inflection point is not too far away in terms of when we’re cross that. And we when we look out sort of at our five-year model, the steady state gross margins on the podcasting business should be really nice and will definitely be additive to kind of where we are from a consolidated basis right now.

Ben Swinburne

So podcasting margins, you think scale to margins higher than your consolidated gross margins today?

Paul Vogel

Definitely.

Ben Swinburne

You made a comment in talking about 2022 gross margins and at the risk of turning in this into the Fed minutes. You said you expect improvement in your core podcast margins, and you talked about both O&E and the third-party business. But given the traction, you plan to invest in incremental content and music initiatives. So when you think about your content investment, isn’t it? Or is there a tailwind from podcasting or headwind from podcast? It was a little confusing.

Paul Vogel

Yes. So I think what we’re trying to show is in the most direct way, people are looking for proof points that says all the investments we’re making are driving incremental gross margin are going to lead us to the promised land of 30% to 40% gross margins in long term. Right. And so we get that and we’re going to try and continue to on impact that as the year unfolds.

But what I was trying to say was when we look at the business and say, are we seeing the core fundamentals of some of the initiatives we’ve done that we’ve been in for more than a year? Are we seeing the improvement? Are we seeing a model that has gross margins heading to where we want? Yes. We’re seeing all of that. If we weren’t investing as aggressive as we are behind is good stuff. Would we have higher gross margins? Yes, we would.

And so it’s a combination of, we’re trying to be thoughtful about how much to invest, but we think there’s a huge opportunity in front of us. And while we could clearly show even more gross margin expansion in the near term if we wanted to, I’ll quote my predecessor, that profitability as a managed outcome often. We’re not managing necessarily to optimize gross margin right now. We’re optimizing to build a business that’s going to optimize gross margin three to five years from now.

Ben Swinburne

Okay. So I was going to ask you about your confidence in that 30% to 40% guidance from the mid-20s today. It sounds like podcasting, what else would you throw in the bridge, so to speak?

Paul Vogel

So I think podcasting, I think advertising in general across all of them, but podcast has done is it’s obviously been a good driver of advertising. Having both podcasting and music in one app has actually helped us sell. We sell a lot of sort of mixed media advertising across both music and podcasting. So while music has done really well, the combination of the two of them has actually been also additive to advertising growth.

Marketplace has grown really nicely for us. So I think continue to add creator tools, creator services into the ecosystem. And then just building out this whole platform strategy that we have, we think having a platform will allow us to layer on top of it, more opportunities, more tools, more, more services that will be really beneficial to creators, but a lot of them have gross margin profiles that are different than sort of the historic core gross margin on Spotify,

Ben Swinburne

Different as in higher.

Paul Vogel

Different as in higher.

Ben Swinburne

Right. One potential new product coming maybe to Spotify, consumers would be around audiobooks. You made some acquisitions in that space. I don’t think people are particularly focused on it, but what’s the opportunity there you think?

Paul Vogel

Yes, I think – so, I think we’re an audio first company and we want that to sort of what we lead with. And we think audiobooks is another great opportunity for a creators to be able to have another avenue to express themselves and have their art discovered. It’s another way for our users to have more content and better content and more differentiated content on the platform. So we’ve made an acquisition, we’re still waiting to get through the regulatory on that, but we’re optimistic hopefully that will happen. And we think audiobooks is a huge opportunity. We think there’s probably some opportunity to maybe do things different in the marketplace that would actually even spur on more growth there, and for us to be kind of the number one player on audio, the audiobook is another component of that.

Ben Swinburne

Can you talk about when we might see that on the service or is it too early of given the deal hasn’t closed.

Paul Vogel

Yes, I mean, it’s a little early beecause the deal hasn’t closed. I mean, we’re still working on things behind the scenes on the assumption that it will close. There’s only so much you can do, but we are working on stuff and obviously making sure that the strategy is there when the deal does close.

Ben Swinburne

Okay. We had Warner music group here yesterday. I wanted to ask you about Spotify’s relationship with the labels. There’s a lot of investor focus on label renewals still and just your relationship with them and how they’re evolving. I guess my first question is how would you describe your relationship with them? And my second is, should we care about label renewals anymore?

Paul Vogel

Yes. I mean, look, the relationships are always, they’re always the same, right? It is to use a really bad cliche. It’s a friend of me kind of a relationship and we need to work together. We do work together. We work together really well. There’s oftentimes things that we went from them and things that they want from us. And that goes into a negotiation. I think people overly focus on one number that’s a “headline rate” of what we pay. There’s so much that goes into the negotiations with the labels. As I said, about things that we want to do, perhaps we want to add into the service, ways we want to do business that require us to work with the labels and there’s things that they would want for us in terms of benefiting their creators and their artists and those types of things.

And so there’s always this natural, give and take. When we go into, well, a couple things. One is the negotiations themselves never really end. So there’s this notion that we sign a deal and we go away for two or three years, and then we come back and start again. The minute we sign a deal, we’re back with them a couple weeks there working on what’s the next things we want to work on. So that’s number one.

And then number two is those deals have hundreds of nuances in them, again that are – that work. So the headline rate is only one part of it. And for us, it’s about partnering with them in ways to grow the overall ecosystem. I think like we’re super proud of the fact that if you look at where this, where music was in 2001 and where the total music industry is right now, it’s up almost double from where it bottomed out. We like to take a lot of credit for that. Streaming has really been the resurgence of the music business and we’re the largest player in this space. And so we feel really good about our contribution to the growth of music and the revenue generated from music. And so we’d just like that to continue.

Ben Swinburne

Yes. That’s a great way for us to kind of wrap it up. Paul, I was going to ask obviously the stock has been tough. As you think about – you and Daniel think about the outlook for the company post COVID and eventually we’ll stop talking about the pandemic. What do you think the market’s missing and how do you size up the opportunity ahead of you from here?

Paul Vogel

Yeah, I don’t like to say the market’s missing anything, because I think at the end of the day, it’s incumbent upon us as a company to make sure we’re telling our story properly and that it’s understood by investors. And so if the stock’s not performing well and yet we feel like the numbers have been strong, that’s on me, that’s on my IR team and that’s on the company to make sure that we are telling the story in a way that resonates. I’d say we feel super proud of the fact that how much we’ve grown, 400 million users, 180 million subscribers, like, over 10 million in revenue. We’ve now passed over $1 billion of advertising revenue, like really big monument stuff. I won’t pick on you, but we actually went back and looked at your initiation report from 2018. And we’ve pretty much exceeded most of the metrics that you had put in that report.

Ben Swinburne

So you will pick on this.

Paul Vogel

But my point is, so we feel really good about how we’ve grown and where we are. And so I don’t want to say anyone’s missing any, I think we need to tell our story. We feel really proud. We need the opportunity in front of us is still massive. Like you said, we’re at 400 million users. We think we can get to 1 billion. So there’s obviously a lot of opportunity in front of us, but there’s ways to monetize. There’s ways to grow gross margin. We believe we have a path to get there. And so there’s two ways to do it. One is to properly tell our story, which we will do. And then two is to us deliver the results.

Ben Swinburne

Sure. Great. Well thank you for coming. Come back again next year, please.

Paul Vogel

Thank you.

Ben Swinburne

Thank you everybody.

Question-and-Answer Session

Operator

Q –

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