It can provide this thing at a scale that would be impossible to do by humans. And then on the AI voice translation part, it is a meaningful one because if you fundamentally think about Spotify, the more content we have on the service the generally better engagement we start seeing because the more likely it is that we’re able to serve up something that consumers love. And so the AI voice translation thing is amazing, both for creators and consumers. For consumers, especially in non-English language content, they generally have a lot less content to consume. And for many other creators, this is an ability for them to be able to go with their content through many more geographies that they currently aren’t able to penetrate at all. And so this is one of those things where you’ve heard me say this before, but the win thing is what we look for at Spotify something that’s great for creators and great for consumers.
It’s usually great for Spotify, and this is exactly that. And then the primary way you should think about these initiatives, it does create greater engagement. And that greater engagement means we reduce churn. And that, of course, greater engagement also means we produce more value for consumers. And that value to price ratio is what then allows us to raise prices like we did this past quarter with great success. And we’re constantly focused on improving that ratio all the time by just adding more and more and more value for consumers. And I think that’s what you can see with our top line growth coming into the year with MAUs growing very nicely. And then eventually, segueing itself into better subscriber growth, which then, of course, leads to better revenue growth.
And so it’s kind of this trifecta things, but it really starts with improving the consumer and creator value proposition, which we’re focused on and AI can be a real enabler there.
Bryan Goldberg: All right. Another question from Matt Thornton on growth drivers. What are the key incremental drivers of growth as we look into 2024? For example, can marketplace grow faster than the core business? Do you expect audiobooks to move the needle in 2024? Is ticketing and merch at all material yet? What about a full global rollout of a new UI, AI DJ or anything else?
Daniel Ek: Yes. Maybe I’ll start, and then Paul can chime in. So I think for 2024, just to set the expectation, it is about delivering on the core. And I think, hopefully, investors should be able to see now that the core has plenty left to offer when it comes to growth. And we feel really good about the growth we’ve had in 2023, and we can nicely see that segueing back into 2024. And that’s, of course, delivering against all of the things we already have. So our advertising business on one hand, seeing more scale there, which will drive more efficiencies. You mentioned marketplace. We’re heading very nicely there, too, on the business side, and we’re offering more and more products to people on the marketplace side, which is seeing better and better results relative to all the other marketing spend that labels and artists teams are encountering, which, of course, is a great testament for meaning more and more artists will keep on investing with us there.
And then on the product side, you’re right in pointing out the new UI. It is being fully rolled out. So we’re seeing great results with that. AI DJ has been rolled out to many more countries already, but that’s the English language one. So you should definitely expect to see local versions of the AI DJ to allow for even more engagement. But that engagement, as I mentioned in my previous response, allows for more flexibility for the business. That allows for either more top line growth through a better proposition at a low price, which will mean we’ll grow even faster or we have the ability, of course, if we produce a great value to raise prices again to keep that value and price ratio at a good clip. So there will be plenty of opportunities in 2024 for the core business to produce.
And that’s what you should expect. We are making great progress on ticketing and merch and all of these other fronts, too, but they are not yet material drivers, so I don’t want any investor to have that expectation. But long-term, they will be and we’re excited about them. But for 2024, it’s about delivering on the core, which has plenty more to give.
Paul Vogel: Yes. And I would just add real quickly to Daniel’s point. Obviously, we’ll have almost three, four quarters of the price increase from a growth perspective on the revenue side impacting 2024. And then as Daniel mentioned, advertising business has improved throughout 2023. So we’re hoping that advertising can continue to be a driver in 2024 as well.
Daniel Ek: I forgot to mention, by the way, on the audiobook side, which you asked about as well. So yes, we do think audiobooks will be helpful to the 2024 results as well, but it will be early days, of course. It’s still in early product development — early launch. And the primary focus is to bring it out in more markets.
Bryan Goldberg: Great. Another question from Justin Patterson. This one is on subscription pricing. Spotify is now delivering a lot more value through product innovation and the inclusion of audiobooks. It also seems like churn was minimal from recent price increases. So given these dynamics, how is your approach towards pricing as a lever changing versus what we’ve observed in the past?
Daniel Ek: Well, I think that there’s two paths to mention. One was before this prior quarter and one is going forward. And we talked about this when we did raise prices that are — we were adding a leg to the stool. So again to kind of bring everyone back and put context. We had plenty of growth drivers. We can grow in a market by keeping the price relatively low and grow top line that grows the market and grows our revenue. We can, of course, again, increase the engagement even further and have more advertising. That’s another way to grow our business. And then we have the third lever, of course, which is to grow through price increases. We hadn’t up until that point, used the lever of price increases to a great extent, we did.
I feel really good about what we learned there. So it’s definitely part now of the arsenal of tools we can deploy to keep growing the business. And I think you should expect us to use that when we see the appropriate dynamics. But the primary thing, again, just to level set with investors, why you’re seeing the top line growth the way you are is because we’re providing an amazing value to consumers. That is the primary thing we are focused on to keep on delivering amazing value. And then when we get to that amazing value, then, of course, we have more flexibility and we can choose to increase prices to get that value to price ratio in the right balance. So we definitely have a lot more opportunities going forward, and we feel really confident given what we’ve learned in this price increase.
Bryan Goldberg: All right. Next question is going to come from Benjamin Black on gross margin. You’ve guided to sequentially improving gross margins for all of 2023. When we look forward to 2024, given the price increases and improving profitability at podcasts, should a similar gross margin progression hold true?
