Spotify Technology S.A.

Company Overview

Business Model: Spotify Technology S.A. operates as the world’s most popular audio streaming subscription service, offering both Premium and Ad-Supported Services. The Premium Service provides unlimited online and offline high-quality streaming access to music and podcasts, and in select markets, limited online and offline access to audiobooks. The Ad-Supported Service offers limited on-demand online music access and unlimited online access to podcasts, serving as both a Premium Subscriber acquisition channel and a stand-alone option. Revenue is generated through subscriptions for the Premium segment and from display, audio, and video advertising for the Ad-Supported segment, with advertising sold on a cost-per-thousand impressions (CPM) basis. The Company also operates the Spotify Audience Network (SPAN), an audio advertising marketplace.

Market Position: Spotify Technology S.A. is positioned as the world’s most popular audio streaming subscription service, with 675 million Monthly Active Users (MAUs) and 263 million Premium Subscribers across 184 countries and territories as of December 31, 2024. The Company has transformed the music industry from a transaction-based to an access-based model and has significantly invested in and grown the podcast industry. It competes vigorously against major technology companies like Apple, Alphabet, Amazon, Meta, and ByteDance, as well as other digital music, podcast, and audiobook providers. Key competitive factors include technology, content diversity, ease of use, pricing, and brand recognition.

Recent Strategic Developments: In 2024, Spotify Technology S.A. continued to expand the availability of audiobooks on its Premium Service to additional markets and launched an Audiobook Access Tier in the U.S. for Ad-Supported Users. A Basic plan was also introduced in select markets, offering Premium Service benefits without monthly audiobook listening time. The Company announced the Spotify Partner Program, a new monetization program for creators offering audience-driven payouts for eligible video streaming, set to begin in 2025. Significant investments are ongoing in AI initiatives, including new AI features in products and services. The Company also undertook an Office Space Optimization Initiative in 2023 and 2024 to reduce its real estate footprint.

Geographic Footprint: Spotify Technology S.A. operates in 184 countries and territories. Europe is its largest region, accounting for 27% of total MAUs (181 million) as of December 31, 2024. North America accounts for 17% of MAUs. The fastest-growing regions are Latin America (22% of MAUs) and the rest of the world (34% of MAUs). Key operational offices are in Stockholm, Sweden (485,000 sq ft) and New York, New York, USA (594,000 sq ft), with additional regional offices in the U.S. and other countries including Argentina, Australia, Brazil, Canada, France, Germany, India, Italy, Japan, Mexico, Singapore, Spain, and the United Kingdom.

Cross-Border Operations: Spotify Technology S.A. is incorporated in the Grand Duchy of Luxembourg, with its principal operational office in Stockholm, Sweden. It operates through numerous wholly-owned subsidiaries globally, including Spotify AB (Sweden), Spotify USA Inc. (USA), Spotify Ltd (U.K.), Spotify Spain S.L. (Spain), Spotify GmbH (Germany), Spotify France SAS (France), Spotify Canada Inc. (Canada), Spotify Australia Pty Ltd (Australia), Spotify Brasil Serviços De Música LTDA (Brazil), Spotify Japan K.K. (Japan), Spotify India LLP (India), S Servicios de Música México, S.A. de C.V. (Mexico), and Spotify Singapore Pte Ltd. (Singapore). The Company faces complexities in international operations due to diverse licensing terms, fragmented rights ownership, varied consumer tastes, language barriers, and compliance with multi-jurisdictional laws and regulations related to privacy, content, intellectual property, and taxation. Foreign exchange fluctuations significantly impact reported results, with hedging strategies in place for transaction exposure.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 30%
• Operating Margin: 9%
• Net Margin: 7%

Investment in Growth:

• R&D Expenditure: €1,486 million (9% of revenue)
• Capital Expenditures: €17 million
• Strategic Investments: Ongoing investments in AI initiatives, expansion of audiobook offerings, and the Spotify Partner Program. The Company also makes acquisitions and investments in other companies or technologies, such as its equity investment in Tencent Music Entertainment Group and DK Holdco, LLC (DistroKid).

Currency Impact Analysis:

• For the year ended December 31, 2024, the general movement of the Euro relative to certain foreign currencies, including the Argentine Peso, had an unfavorable net impact on revenue. Total revenue would have been approximately €243 million higher if foreign exchange rates had remained consistent with 2023.
• Conversely, the movement of the Euro relative to certain foreign currencies had a favorable net impact on cost of revenue, which would have been approximately €181 million higher if foreign exchange rates had remained consistent with 2023.
• Spotify Technology S.A. engages in select hedging strategies, including foreign exchange forward contracts, to manage foreign exchange risk stemming from its operations, particularly for transaction exposure in currencies like the U.S. dollar, Australian dollar, British pound, Swedish krona, Canadian dollar, and Norwegian krone. The reporting currency is the Euro.

Business Segment Analysis

Premium

Financial Performance:

• Revenue: €13,819 million (+19% YoY)
• Operating Margin: 33% (Gross Margin)
• Key Growth Drivers: Increase in Premium Subscribers (up 11% to 263 million), a 7% increase in Premium ARPU, successful consumer marketing campaigns, enhanced content offerings, product enhancements, and conversion of Ad-Supported Users. Lower-priced plans (Family Plan, Duo Plan, Student Plan) and trial programs also contributed to subscriber growth and retention.

Product Portfolio:

• Major product lines and services within segment: Unlimited online and offline high-quality streaming access to music and podcasts. In select markets, limited online and offline streaming access to audiobooks.
• New product launches or major updates: Expansion of audiobook availability in 10 markets, launch of a Basic plan in select markets (without monthly audiobook listening time), and an Audiobook Access Tier in the U.S.

Market Dynamics:

• Competitive positioning within segment: Spotify Technology S.A. competes with other digital music streaming providers like Apple Music, YouTube Music, Amazon Music, Deezer, Joox, Pandora, and SoundCloud. Retention is aided by new features and functionality, and multi-device access (smartphones, desktops, cars, game consoles, in-home devices) leads to higher engagement and lower churn.
• Key customer types and regional market trends: Appeals to users with different lifestyles, demographics, and age groups, with pricing adapted to local market purchasing power.
• Regulatory environment by jurisdiction: Subject to various laws and regulations, including those related to content licensing and potential regulatory contributions (e.g., a €19 million charge in 2024).

Geographic Revenue Distribution:

• United States: €6,136 million (44% of segment revenue, estimated based on total revenue distribution)
• United Kingdom: €1,483 million (11% of segment revenue, estimated based on total revenue distribution)
• Other Countries: €8,044 million (45% of segment revenue, estimated based on total revenue distribution)
• Growth Markets: Latin America and the rest of the world are the two fastest-growing regions for MAUs, indicating potential for future Premium revenue growth.

Ad-Supported

Financial Performance:

• Revenue: €1,854 million (+10% YoY)
• Operating Margin: 12% (Gross Margin)
• Key Growth Drivers: Growth in music impressions sold, increased ad sales from podcasts, and growth in marketplace programs. Strategic realignment and reorganization costs incurred in 2023 were not materially comparable in 2024, contributing to margin improvement. Reduction in podcast production and personnel costs, and streaming delivery costs also supported margin growth.

Product Portfolio:

• Major product lines and services within segment: Limited on-demand online access to music and unlimited online access to podcasts.
• New product launches or major updates: Introduction of new advertising products across music and podcast content, expansion of automated advertising purchase options, and focus on analytics and measurement tools. The Spotify Audience Network (SPAN) connects advertisers to listeners across owned, exclusive, and third-party podcasts.

Market Dynamics:

• Competitive positioning within segment: Competes for advertising budgets with large online advertising platforms and networks such as Alphabet, Meta, Amazon, Microsoft, Snap, Pinterest, iHeartMedia, and Pandora. Focuses on innovative advertising products relevant to users to enhance returns for advertising partners.
• Key customer types and regional market trends: A large percentage of Ad-Supported Users are between 18 and 34 years old, a sought-after demographic for advertisers. Monetization is more challenging in Latin America and the rest of the world compared to Europe and North America.
• Regulatory environment by jurisdiction: Subject to evolving digital advertising industry trends, data-driven technologies, and privacy laws (e.g., GDPR, CCPA, ePrivacy Directive) that may impact data collection, targeting, and measurement capabilities.

Geographic Revenue Distribution:

• United States: €6,136 million (39% of total revenue, Ad-Supported portion not separately disclosed but U.S. is a top advertising market)
• United Kingdom: €1,483 million (9% of total revenue, Ad-Supported portion not separately disclosed but U.K. is a top advertising market)
• Growth Markets: Monetizing the Ad-Supported user base in Latin America and the rest of the world is historically more challenging but represents significant growth potential.

International Operations & Geographic Analysis

Revenue by Geography:

International Business Structure:

• Subsidiaries: Spotify Technology S.A. operates through numerous wholly-owned subsidiaries globally, including Spotify AB (Sweden), Spotify USA Inc. (USA), Spotify Ltd (U.K.), Spotify Spain S.L. (Spain), Spotify GmbH (Germany), Spotify France SAS (France), Spotify Canada Inc. (Canada), Spotify Australia Pty Ltd (Australia), Spotify Brasil Serviços De Música LTDA (Brazil), Spotify Japan K.K. (Japan), Spotify India LLP (India), S Servicios de Música México, S.A. de C.V. (Mexico), and Spotify Singapore Pte Ltd. (Singapore). These subsidiaries primarily handle sales, marketing, and other support services, with Spotify AB being the main operating company.
• Joint Ventures: Not explicitly mentioned as a significant part of the current structure, but strategic alliances are pursued.
• Licensing Agreements: Extensive multi-year license agreements with major record labels (Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin), independent labels, aggregators, music publishers, performing rights organizations, podcasters, podcast networks, audiobook publishers, and authors globally. These agreements often include marketing commitments, advertising inventory, financial and data reporting obligations, and specific operational prescriptions.

Cross-Border Trade:

• Export Markets: Not explicitly detailed, but the global reach of the Service implies content and services are "exported" to users in 184 countries and territories.
• Import Dependencies: Relies on third-party licenses for the vast majority of its content, sourced from rights holders globally. Dependence on major record labels (Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin) for approximately 71% of audio content streams.
• Transfer Pricing: Spotify Technology S.A. is subject to detailed transfer pricing rules in most jurisdictions where it conducts business, requiring inter-company transactions to be priced using arm’s length principles. The Company is subject to ongoing tax audits in several jurisdictions, many involving transfer pricing matters.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Spotify Technology S.A. has an authorized program to repurchase up to $1.0 billion of its ordinary shares, expiring April 21, 2026. Since commencement, 469,274 shares have been repurchased for €91 million. No repurchases occurred in 2024 under this program. The maximum value of shares that may yet be purchased under the program is approximately €865 million as of December 31, 2024.
• Dividend Payments: Spotify Technology S.A. has never declared or paid any cash dividends on its share capital and does not expect to pay dividends in the foreseeable future, intending to retain future earnings for working capital and general corporate purposes.
• Dividend Yield: N/A (no dividends paid).
• Future Capital Return Commitments: The share repurchase program is executed consistent with prioritizing investment to grow the business over the long term.

Balance Sheet Position:

• Cash and Equivalents: €4,781 million (as of December 31, 2024)
• Total Debt: €1,539 million (Exchangeable Notes, as of December 31, 2024) + €537 million (Lease Liabilities, as of December 31, 2024) = €2,076 million
• Net Cash Position: €4,781 million (Cash & Equivalents) + €2,667 million (Short Term Investments) - €1,539 million (Exchangeable Notes) - €537 million (Lease Liabilities) = €5,372 million (approximate, excluding other liabilities)
• Credit Rating: Not disclosed in the filing.
• Debt Maturity Profile: The 0% Exchangeable Senior Notes due 2026 have a principal amount of $1,500 million (€1,449 million) maturing on March 15, 2026. Lease obligations have maturities up to 9 years, with €113 million due in less than one year, €334 million due in one to five years, and €253 million due in more than five years.

Cash Flow Generation:

• Operating Cash Flow: €2,301 million (for the year ended December 31, 2024)
• Free Cash Flow: €2,285 million (for the year ended December 31, 2024)
• Cash Conversion Metrics: Operating cash flow increased by €1,621 million in 2024, primarily due to an increase in operating income adjusted for non-cash items.

Currency Management:

• Cash holdings by major currencies: Not explicitly detailed, but the Company's international operations expose it to fluctuations in various currencies, including the Swedish krona, Australian dollar, British pound, and U.S. dollar.
• Natural hedging through operational diversification: Not explicitly stated as a strategy, but the global distribution of revenue and costs provides some inherent diversification.
• Financial hedging instruments and strategies: Spotify Technology S.A. uses foreign exchange forward contracts as cash flow hedges for a portion of its transaction exposure, particularly for revenue and cost of revenue line items.

Operational Excellence

Production & Service Model: Spotify Technology S.A. provides an audio streaming service that allows users to access over 100 million music tracks, 6.5 million podcast titles, and over 350,000 audiobooks (in select markets). The service is available on a wide array of devices, including computers, tablets, mobile devices, speakers, receivers, televisions, cars, game consoles, and smart devices. The Company focuses on advanced data analytics and proprietary algorithms, including AI and machine learning models, to predict user preferences and offer tailored content recommendations, driving discovery and engagement.

Global Supply Chain Architecture: Key Suppliers & Partners:

• Content Licensors: Universal Music Group, Sony Music Entertainment, Warner Music Group, and Merlin (representing independent labels) for sound recordings (71% of streams in 2024). Also licenses from hundreds of independent labels, aggregators (CDBaby, Distrokid, TuneCore), music publishers, performing rights organizations, collecting societies, podcasters, podcast networks, audiobook publishers, and authors globally.
• Cloud Computing Service: Google Cloud Platform (GCP) provides the vast majority of Spotify Technology S.A.'s primary data storage and computing infrastructure.
• Payment Processors: Adyen and PayPal (including Braintree) handle the vast majority of payment processing.
• Advertising Partners: Advertising agencies and large direct advertisers, as well as automated exchanges and internal self-serve platforms.

Facility Network:

• Manufacturing: Not applicable as Spotify Technology S.A. is a digital service provider.
• Research & Development: R&D efforts are focused on enhancing user experience, developing new products and features, and improving advertising and operational efficiency, with significant investments in AI initiatives.
• Distribution: Digital distribution network reaching 184 countries and territories. Physical office network includes principal operational offices in Stockholm, Sweden, and New York, New York, along with regional offices in various countries globally. The Company is optimizing its real estate footprint through its Work From Anywhere program and subleasing initiatives.

Operational Metrics:

• Total MAUs: 675 million (+12% YoY)
• Premium Subscribers: 263 million (+11% YoY)
• Ad-Supported MAUs: 425 million (+12% YoY)
• Total content streamed: 190 billion hours (+15% YoY)
• R&D expenditure: 9% of total revenue in 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Primarily through its online platform and direct sales of subscriptions to end users.
• Channel Partners: Telecommunications companies that bundle Spotify Technology S.A.'s subscription with their own services or collect payments.
• Digital Platforms: Available through various operating systems, application stores, wearables, and intelligent voice assistants. Engages Ad-Supported Users through product links, campaigns, and performance marketing across social media platforms to encourage conversion to Premium.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Major record labels (Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin), music publishers, and other content rights holders are critical partners. Large advertisers and advertising agencies are also key enterprise customers.
• Strategic Partnerships: Collaborates with content creators and rights holders to promote new releases. Engages in strategic alliances to advance business success, though specific examples beyond content licensing are not detailed.
• Customer Concentration: Not explicitly detailed for enterprise customers, but the reliance on a few major record labels for content presents a concentration risk.

Regional Market Penetration:

• Europe: 181 million MAUs (27% of total MAUs), +7% YoY growth.
• North America: 17% of total MAUs, +4% YoY growth.
• Latin America: 22% of total MAUs, +14% YoY growth (fastest growing region).
• Rest of the World: 34% of total MAUs, +20% YoY growth (fastest growing region).
• Growth Markets: Focus on expanding into new geographic markets, particularly in Latin America and the rest of the world, where monetization of the Ad-Supported user base has historically been more challenging.

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: The digital media industry is highly competitive and dynamic, characterized by rapid technological changes, evolving consumer needs, and frequent introduction of new offerings. Competition is based on quality of experience, content relevance and diversity, ease of use, price, accessibility, advertising load perception, brand awareness, reputation, presence, and visibility. The market for on-demand audio on the internet and mobile/connected devices is growing, leading to the emergence of new competitors, business models, and solutions.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Digital Music Streaming Providers: Apple Music, YouTube Music, Amazon Music, Deezer, Joox, Pandora, SoundCloud. These competitors often leverage broader product ecosystems (hardware, software, services) and larger user bases.
• Internet Radio Providers: Pandora, SiriusXM.
• Podcast Streaming Providers: Apple Podcasts, YouTube, Audible, Facebook, Pandora, Deezer, TuneIn.
• Podcast Creation and Hosting Platforms: Acast, Buzzsprout, Podbean, Libsyn.
• Audiobook Content Providers: Amazon’s Audible, Apple Books, Google Audiobooks, Librivox, Kobo Audiobooks, Downpour, Storytel, BookBeat.
• Online Advertising Platforms: Alphabet, Meta, Amazon, Microsoft, Snap, Pinterest, iHeartMedia, Pandora. These companies have significant sales personnel, advertising inventory, and proprietary advertising technology.

Regional Competitive Dynamics: Competition is global but also varies by geographic region. Some competitors have preloaded services on their devices, creating a competitive disadvantage for Spotify Technology S.A. in certain markets. Local content and local major labels or individual artists can also present challenges in obtaining content on favorable terms in specific international markets.

Risk Assessment Framework

Strategic & Market Risks

Global Market Dynamics:

• User Attraction & Retention: Failure to attract new users, retain existing users, and effectively monetize products and services due to changing consumer tastes, technological advances, or competitive pricing.
• Competition: Intense and rapidly evolving competition from well-funded global technology companies (Apple, Alphabet, Amazon, Meta, ByteDance) with broader ecosystems, and from new/emerging technologies like AI.
• New Products/Services: Risks that new offerings (e.g., audiobooks, video content, AI features) may not achieve anticipated consumer demand or market acceptance, or may divert resources from established products.
• Long-term Engagement Focus: Decisions prioritizing long-term user engagement may not maximize short-term financial results, potentially affecting stock price.
• Content Recommendation Failure: Inability to accurately predict and recommend content users enjoy, leading to reduced user retention and growth.
• Advertising Effectiveness: Failure to convince advertisers of the benefits of offerings due to incomplete/inaccurate demographic data, changes in operating system privacy policies (e.g., Apple's App Tracking Transparency, Alphabet's Privacy Sandbox), or reliance on third-party measurement services.

Operational & Execution Risks

Global Supply Chain Vulnerabilities:

• Content Licensing Dependency: High dependence on third-party licenses from a concentrated group of rights holders (major record labels, publishers) for most content. Adverse changes to, loss of, or claims of insufficient licenses could materially affect business.
• Royalty Payment Complexity: Complex royalty payment system with numerous variables and estimates, leading to potential underpayment/overpayment, disputes, or litigation (e.g., MLC lawsuit).
• Financial Commitments: Significant minimum guarantees and financial commitments under license agreements (€4.4 billion as of December 31, 2024) that are not always tied to revenue or user growth, limiting operating flexibility.
• Third-Party Content Liability: Exposure to disputes or liabilities (e.g., intellectual property infringement, defamation, privacy) associated with content made available by creators or users on the Service, exacerbated by new technologies like AI.
• Technology Infrastructure & Security: Vulnerability of internal and third-party systems (e.g., Google Cloud Platform) to cyberattacks, security incidents, software bugs, and misconfigurations, leading to operational disruptions, data breaches, and reputational harm.
• Platform Dependencies: Reliance on operating systems, online platforms, hardware, and networks (e.g., Apple's App Store policies) not controlled by Spotify Technology S.A., which may restrict access, impose unfavorable conditions, or limit functionality.
• Stream Manipulation: Attempts by third parties to artificially manipulate stream counts or gain unauthorized access to features, impacting data integrity, contractual obligations, and key performance indicators.

Financial & Regulatory Risks

Currency & Financial Risks:

• Foreign Exchange Fluctuations: Exposure to volatility in currency exchange rates (e.g., Euro vs. U.S. dollar, Swedish krona, British pound, Argentine Peso) impacting revenue, expenses, and reported operating results.
• Capital Access: Potential need for additional capital to support strategic objectives, which may not be available on acceptable terms or could dilute shareholders.
• Indebtedness: Indebtedness from Exchangeable Notes (€1,539 million as of December 31, 2024) could limit cash flow and expose the Company to adverse economic conditions.
• Accounting Volatility: Fair value accounting for Exchangeable Notes and social costs for share-based compensation can cause significant fluctuations in reported financial condition and results.
• Investment Risk: Exposure to changes in market value of long-term investments, primarily Tencent Music Entertainment Group, due to share price volatility and exchange rates.

Regulatory & Compliance Risks:

• Multi-Jurisdictional Compliance: Subject to complex and evolving laws and regulations globally (privacy, data protection, content, IP, advertising, competition, AI, consumer protection, taxation), with inconsistent interpretations and potential for increased operating costs, fines, or business practice modifications (e.g., EU Digital Services Act).
• Trade Regulations: Compliance with U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, import/export controls, and economic sanctions laws.
• Tax Regulations: Complex taxation regimes in various jurisdictions, including transfer pricing rules, ongoing tax audits, and potential changes from global tax reforms (e.g., OECD Pillar Two Model Rules), which could increase tax liabilities.
• Privacy & Data Security: Stringent laws (GDPR, UK GDPR, CCPA) governing personal data collection, use, and transfer, posing risks of lawsuits, regulatory fines, and reputational harm.

Geopolitical & External Risks

Country-Specific Risks:

• Political/Economic Instability: Risks from political, economic, and social instability in some countries, including inflation, changes in interest rates, trade policies, and geopolitical conflicts (e.g., Europe and the Middle East).
• Regulatory Changes: Local law changes affecting operations, such as those related to author/performer remuneration or internet neutrality.

Innovation & Technology Leadership

Research & Development Focus: Global R&D Network: Spotify Technology S.A. invests heavily in research and development to drive user engagement and customer satisfaction. R&D expenses were 9% of total revenue in 2024. The focus is on developing products and features for its platform and Service, new and existing advertising products, and improvements to its mobile and desktop applications and streaming services.

• Innovation Pipeline: Actively investing in AI initiatives across the business, including launching new AI features in products and services (e.g., AI DJ). Exploring additional potential monetization opportunities, though not expecting significant near-term revenue.

Intellectual Property Portfolio:

• Patent Strategy: Attempts to protect intellectual property under patent, trade secret, trademark, and copyright law through registration, contractual agreements, and technological measures. Files patent applications on certain innovations.
• Licensing Programs: Engages in extensive licensing agreements with rights holders globally to stream content.
• IP Litigation: Has faced and may continue to face claims of intellectual property infringement, misappropriation, or other violations by third parties.

Technology Partnerships:

• Strategic Alliances: Relies on Google Cloud Platform for its distributed computing infrastructure. Collaborates with various third-party service providers for payment processing, advertising technology platforms, and content distribution.

Leadership & Governance

Executive Leadership Team

International Management Structure: The executive leadership team includes individuals with international experience (e.g., Christian Luiga's roles at Saab AB and Telia Company AB). Regional leadership and reporting relationships are implied by the global operational structure and numerous international subsidiaries.

Board Composition: The board of directors consists of ten directors, including Daniel Ek (Chairman), Martin Lorentzon (Co-Founder), and eight independent directors. The board has established a People Experience and Compensation Committee and an Audit Committee. The Audit Committee consists of Thomas Staggs (Chair), Christopher Marshall, Mona Sutphen, and Padmasree Warrior, all of whom meet NYSE and Exchange Act independence requirements.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments: Spotify Technology S.A. is subject to a variety of laws and regulations in the 184 countries and territories where it operates, including those related to privacy, data protection, content, intellectual property, advertising and marketing, competition, machine learning and AI, protection of minors, consumer protection, recurring billing, credit card processing, foreign exchange controls, and taxation.

• Luxembourg: As a Luxembourg-incorporated company, it is subject to Luxembourg Company Law and tax regulations.
• United States: Subject to U.S. federal and state laws, including the U.S. Securities Exchange Act of 1934, Copyright Act (Section 115, Music Modernization Act), and state privacy laws (e.g., CCPA).
• European Union/UK: Subject to GDPR, UK GDPR, ePrivacy Directive, and the EU Digital Services Act (DSA), which imposes rules on content liability, transparency, and reporting, with potential fines up to 6% of total annual worldwide turnover.

Cross-Border Compliance:

• Export Controls: Compliance with U.S. government import and export controls and economic sanctions laws, and similar laws in other jurisdictions.
• Sanctions Compliance: Compliance with United Nations and EU sanctions, which restrict the remittance of dividends, distributions, and other payments.
• Anti-Corruption: Compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions.

International Tax Strategy:

• Transfer Pricing: Subject to detailed transfer pricing rules in most jurisdictions, requiring inter-company transactions to be priced using arm’s length principles. The Company is subject to ongoing tax audits in several jurisdictions, many involving transfer pricing matters.
• Tax Treaties: Benefits from double tax treaties between Luxembourg and other countries (e.g., the U.S. tax treaty) to reduce withholding tax rates on distributions.
• BEPS Compliance: In scope of the OECD Pillar Two model rules, which aim to ensure a global minimum tax of 15% on income, with legislation enacted in Luxembourg as of January 1, 2024.

Environmental & Social Impact

Global Sustainability Strategy: Spotify Technology S.A. is committed to addressing the climate crisis by focusing on reducing its greenhouse gas (GHG) emissions and leveraging its platform to inspire climate engagement. The Company aims to reach net zero emissions by the end of 2030 through various initiatives, including joining external coalitions and identifying levers to reduce its climate impact.

Regional Sustainability Initiatives:

• Supply Chain: Not explicitly detailed, but the Company's global sustainability strategy implies consideration of ESG requirements for its global suppliers.
• Local Environmental Programs: Leverages its platform to raise awareness of the climate crisis by creating and curating climate change content to make it more accessible to users.

Social Impact by Region:

• Community Investment: Provides one full day of paid time off per year for employees to contribute to social causes of their choice.
• Labor Standards: Focuses on talent development, competitive compensation, flexible benefits (e.g., parental leave, flexible public holidays), and health, safety, and wellness programs (e.g., Heart & Soul mental health initiative). Embraces a "Work from Anywhere" program.
• Equity, Diversity and Impact (EDI): Efforts focus on pay equity, fairness, and equal access to career growth opportunities, including embedding inclusion mindset content into manager training, designing fair hiring processes, and supporting Belonging Groups for employees. The global workforce is predominantly non-unionized, but some employees in the U.S. and internationally are represented by unions or works councils.

Currency Management & Financial Strategy

Multi-Currency Operations: Currency Exposure: Spotify Technology S.A.'s international operations expose it to fluctuations in various currencies. While royalty expenses are primarily in U.S. dollars and Euros, revenues are generated in local currencies, leading to multiple currency conversions.

Hedging Strategies:

• Transaction Hedging: Spotify Technology S.A. engages in select hedging strategies related to foreign exchange risk stemming from its operations, primarily through foreign exchange forward contracts. These contracts are designated as cash flow hedges to mitigate the impact of currency fluctuations on revenue and cost of revenue. The notional principal of foreign exchange contracts hedging revenue was approximately €1,609 million and cost of revenue was approximately €1,014 million as of December 31, 2024.
• Translation Hedging: The Company does not conduct translation risk hedging for net investments in foreign operations.
• Economic Hedging: Not explicitly detailed as a distinct strategy, but operational diversification across 184 countries and territories provides some inherent economic hedging.
• Functional Currency Considerations: The Group's reporting currency is the Euro, but individual entities operate in their respective functional currencies, leading to foreign exchange gains and losses on monetary assets and liabilities.