Fast Company has published the first in depth interview with Daniel Ek in three years and the first behind the scenes look at the world's biggest streaming service since it went public. While there are no big reveals, it offers a well sourced portrait of a company deeply committed to and quite capable of truly transforming the music business.
6 major takeaways from the Fast Company
Sweden is the key to Spotify's success and its corporate ethos.
Asked if he could build a playlist for me of Spotify’s history, Ek answered:“The first song would have to be something from ABBA,” he says, because “the roots of Sweden have influenced a lot of the decisions that we make.” The article continues: In fact, the only reason Ek got a chance to prove out his original theory was that in his home country, record companies basically had nothing to lose in licensing their libraries for streaming. Piracy had obliterated CD sales and decimated revenues. File-sharing services like Pirate Bay were so popular in the country that citizens formed an actual Pirate Party, which won 7% of the vote in one parliamentary election."
Free music is the drug Spotify knowingly uses to attract new users and keep the music industry dependent.
Today, 60% of Spotify’s paying customers have been sourced from its free product, an unquestionable success. Every time the company expands what it offers for free, though, the red flags go back up as artists and labels fear that Spotify is devaluing their work. “
“My challenge is still the free tier,” says Scott Borchetta, CEO of country music label Big Machine, which distributes Taylor Swift’s music (among others). Swift famously pulled her songs from Spotify in 2014, in perhaps the highest-profile protest against Ek’s model.
Now: “It doesn’t matter what we felt two or three years ago,” Borchetta says. As consumers have committed to streaming, the music industry has had no choice but to go along. “What we have now is what we have to make work.”
Ek is a planner and he's got big plans for Spotify:
Each evening, he reviews a list of goals for the day, the week, and the month. “And then I just over-allocate time to [addressing] those goals.”
“... Success for us will be determined by our ability to move faster than everyone else in this space."
Broadcast radio is has a target on its back.
“Billions of people listen to radio, and most of that today isn’t monetized very efficiently,” Ek says as we chat on the couch in his Stockholm office. “Commercial radio, that’s conservatively a $50 billion industry globally... Ninety percent of Spotify’s current revenues come from subscriptions, but if the free product expands, so can Spotify’s radiolike advertising business. As Ek notes, with typical understatement, “We still have a lot of room to grow.”
Ek & Company are promising to transform how musicians earn a living.
So far, Ek has been focused on changing how creators get paid; in streaming, an artist is compensated every time a song is played, creating lifetime revenue (albeit a fraction of a penny at a time), whereas in the old model they got paid (sometimes) after selling a CD or download.
But that’s only the beginning. “Spotify’s first eight to 10 years were focused on consumers,” says R&D chief Soderstrom. “The next eight to 10 will be focused on artists.”
What's next for artists?
“Daniel and I were at the Soho House in L.A. the week of Coachella, and we began talking philosophically about the idea of creator services,” said departing Spotify exec Troy Carter. “I said my dream is for Spotify not to be a means to an end for artists but to be the end.”
“The major-label system was built out for the 5,000 biggest artists in the world,” Carter notes. “If we’re going to [enable] a million artists to make a living, that’s going to require an entirely different ecosystem.” In this world, “an artist might be happy making $50,000 a year, supplementing income from other work to help pay their mortgage, raise their kids, by doing what they love. I’m just as committed to that kind of artist. How do we make it so there are a lot more winners,” Carter says, “to redefine what it means to be a winner?”
While Ek and others at Spotify share Carter's commitment to artists, his exit calls into question how well the streamer will be able to implement this vision. But given the stremer's massive success so far, it would be foolish to bet against it
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