Happy Customers… Spotify = Free User Conversion to Paid Subscribers… Free Ad-Supported Product… …Rising LTV / Subscriber Acquisition Cost Ratio Morgan Stanley LTV:CAC Estimate g 4x n i s t rtios e v C r Adon 3.0x ti fo i s d i te qu s Ac u j r (Adbe ri rs c e s b ri c / Sub 2x s ) Our freemium model accounts for b Su ers ~60% of our gross added premium subscribers... s 1.5x m U u the ad-supported service is a subsidy program i m Free that offsets costs of new subscriber acquisition. Pre f m o fro e u Developing a better user experience l ue Va en produces by far the most viral effect & e ev m R impact when investing in growth. ti fe i Engagement drives conversion from L free consumption to paid subscription. 0x 2015 2016 2017 2018 Barry McCarthy – CFO, Spotify, 3/18 Source: Spotify releases & Morgan Stanley estimates of LTV & SAC. Barry McCarthy @ Spotify Investor Day (3/18). Note: Morgan Stanley estimates LTV by calculating the value of a subscriber (including advertising revenue they generate before they upgrade to a paid user) accounting for gross margin & churn. Internet Trends Subscriber acquisition cost calculated by dividing sales & marketing spend in a relevant period by the number of new subscribers in the same period. 32 2019