(Reuters) -Spotify ( SPOT ) founder-CEO Daniel Ek will step down to become executive chairman in January, the Swedish streaming company said on Tuesday as it named longtime executives Gustav Soderstrom and Alex Norstrom as co-CEOs.

The leadership change comes as Spotify ( SPOT ) expands into podcasts and audiobooks amid questions over how it will balance growth and profitability. Its U.S. shares were down about 3% after gaining 63% this year.

"Ek leaves the CEO role on a high note, with big boots to fill for the incoming CEOs," said PP Foresight analyst Paolo Pescatore.

As executive chairman, Ek will focus on capital allocation and long-term strategy in what the company called a European-style chairman role.

He is one of Europe's most prominent tech entrepreneurs, having built Spotify ( SPOT ) into a rare global consumer technology leader from the region. 

The billionaire said he will continue to steer the company's strategy. "I will be more involved than a typical US chairman. So think of it a little bit like moving from a player to a coach," said Ek, who has been on the company's board since 2008.

Spotify ( SPOT ) remains the clear market leader with nearly 700 million monthly users and more than 100 million tracks, far ahead of Apple Music's roughly 90 million subscribers. 

But it faces competition from YouTube Music's vast video-integrated catalog and Amazon Music's Prime-linked offerings, which give rivals distinct advantages in certain markets.

Despite Spotify's ( SPOT ) dominance, pressure on profit margins have persisted as artists push for higher payouts and the ad-supported tier expands.

Global revenue from recorded music rose 4.8% to $29.6 billion in 2024. Streaming exceeded $20 billion for the first time and subscription streaming accounted for more than half of it, according to IFPI's Global Music Report.

FROM STARTUP TO GIANT

Founded in 2006, Stockholm-based Spotify ( SPOT ) helped transform a music industry that had been shrinking for years due to piracy and falling CD sales. Its U.S. debut in 2011 came as industry revenue had slumped.

Still, the company reported its first annual profit only in 2024, after a slew of price increases and cost-cutting efforts.

Billionaire Ek is often cited as a champion of Europe's ability to produce companies that can compete with U.S. and Asian tech giants.

Soderstrom, currently chief product and technology officer, oversees global tech strategy and product development, while Norstrom, as chief business officer, manages subscriber and advertising businesses along with music, podcast and audiobook operations. 

They will report to Ek who also serves on the board. The three executives have worked together for a decade and a half.

"Norstrom is deeply interested in knowledge about product, and I'm very interested in business," Soderstrom said. "So we run this as a single team.

Several high-profile firms such as Oracle and Netflix ( NFLX ) have adopted a co-CEO model to better manage their operations as they become more complex and globally diversified.

"The big unknown is why Spotify ( SPOT ) needs an executive chairman and two chief executives as that conjures up the idea that too many cooks spoil the broth," said Dan Coatsworth, investment analyst at AJ Bell.

(Reporting by Supantha Mukherjee in Stockholm and Jaspreet Singh and Akash Sriram in Bengaluru; Editing by Arun Koyyur)