Spotify to monetize free tier, Benzinga says

Spotify told investors on August 4 that it expects monthly active user growth to slow in the third quarter as it changes its free-tier product in emerging markets, while pushing harder to turn ad-supported listeners into revenue and paid subscribers. The company reported second-quarter results the same day and said it had reached 300 million subscribers and 777 million users across 184 markets. Benzinga, citing Spotify executives on the earnings call, reported that the company was prioritizing monetization over faster user growth in parts of its ad-supported business. The shift comes as Spotify also broadens a separate music product tied to fan-made covers and remixes. Spotify and Merlin said on August 4 that they signed a licensing agreement for Spotify’s upcoming tool, which the companies described as a paid add-on. The agreement gives eligible artists under Merlin’s Spotify deal the option to participate and adds an additional revenue stream for those who opt in, the companies said. (investors.spotify.com) ### Why is Spotify willing to accept slower user growth? Benzinga reported on August 5 that Spotify expects third-quarter monthly active user growth to slow as it adjusts its free-tier strategy in emerging markets, with a focus on long-term monetization and paid conversion rather than rapid user expansion. Reuters, citing Spotify’s forecast, separately reported that the company blamed weaker user growth on product changes in emerging markets including India and Indonesia that it said may help it raise prices. (newsroom.spotify.com) Spotify’s own investor materials show the scale of the audience it is trying to monetize. The company said this week it has 777 million total users, including 300 million subscribers, across 184 markets. That leaves a large ad-supported base alongside its paid business, even as management signals that not every free listener will be pursued at the same pace in every market. (benzinga.com) ### What does “monetizing the free tier” mean here? Benzinga said Spotify executives told analysts that free-tier changes are intended to drive more revenue and more paid subscribers. Reuters reported that Spotify is making those changes in emerging markets while also betting more heavily on AI-powered features, with higher marketing and development spending expected to weigh on current-quarter profit. (newsroom.spotify.com) The company has not, in the materials reviewed here, published a simple one-line list of those free-tier changes. But the reporting and Spotify’s own statements point to a mix of product adjustments, pricing-related levers in some markets, and new paid features designed to create more ways to earn from listeners who do not yet subscribe. That is an inference based on Spotify’s forecast, Reuters’ account of the earnings call, and Spotify’s paid add-on announcements. (benzinga.com) ### Where does Merlin fit into this? Spotify and Merlin said on August 4 that their new agreement covers Spotify’s upcoming fan-made covers and remixing tool. Charlie Hellman, Spotify’s senior vice president and global head of music, said the agreement would ensure participating artists are credited and compensated and that each creation sends listeners back to the original work. Charlie Lexton, Merlin’s chief executive, said the arrangement gives Merlin members’ artists the choice to make their music available while participating in an added revenue stream. (money.usnews.com) TechCrunch and Benzinga both reported that Merlin’s participation expands the project beyond Universal Music Group’s earlier agreement with Spotify. Spotify and Universal said in May that the tool would launch as a paid add-on for Premium users, with participating artists and songwriters able to opt in. ### Is this only about AI music tools? (newsroom.spotify.com) Spotify’s August 4 messaging tied together two tracks: a slower-growth, higher-monetization approach in parts of the free tier, and continued rollout of paid music features. Reuters reported that the company said higher marketing and development costs tied to AI-powered features would pressure profit in the current quarter. Benzinga separately reported that Spotify executives said the AI music launch does not require agreements with every major label before release. (techcrunch.com) The company’s public statements show that the remix and covers product is one of those paid features now moving ahead. Spotify and Merlin said more partners could be added, while Spotify’s investor site lists the August 4 second-quarter release as the company’s latest financial update. ### What should investors and artists watch next? (money.usnews.com) Spotify’s next formal checkpoint will be its third-quarter 2026 earnings release, when the company is expected to update investors on monthly active users, subscriber additions and ad-supported monetization. The August 4 earnings materials and related reporting are the current public baseline for whether slower growth in emerging-market free users is offset by better revenue and more paid conversions. (newsroom.spotify.com) (investors.spotify.com)