Daniel Ek revolutionizes audio consumption

Think:Act Magazine “The Unknown”
Daniel Ek revolutionizes audio consumption

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Think:Act Magazine

Munich Office, Central Europe
August 2, 2021

Daniel Ek on moonshots and his idea of the "European Dream"

Interview

by David Rowan
Photos by Wesley Mann

Read more about the topic "The Unknown"

Pioneering music streaming mogul Daniel Ek has transformed the music business. Now he is focusing on changing how people consume audio. Spotify's CEO unpacks his idea of "the European dream," how creatives might benefit more from the platform and why innovation is everything.

Spotify founder Daniel Ek isn't fazed by a tough challenge. Back in 2006, the Swedish entrepreneur was repeatedly rebuffed when he told the record labels that they should stop selling expensive plastic discs at huge margins and instead give away their music for frictionless digital streaming. Eventually Ek persuaded almost all the main labels to work with Spotify – which ended its first day as a public company in April 2018, valued at $26.5 billion.

Daniel Ek is the co-founder and CEO of Spotify. Before starting the company in 2006 at the age of 22, he had already created a web development empire out of his parents' house, starting at just 13 years old. At one point he was reportedly earning $50,000 a month through the enterprise and had hired a team of 25 by the time he was 18.

Since then, Spotify has become the world's largest music streaming service, with 155 million subscribers and 345 million users in 170 markets. And it's still growing at 30% a year. But Ek, who is now 38, isn't ready to stop pursuing his own agenda. No wonder he hung a George Bernard Shaw quotation on the wall above his desk in his Stockholm office, alongside a Fender Stratocaster, the iconic archetypal electric guitar: "The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man."

Today, Ek's unreasonable side is focused on raising European companies' ambitions. He's famous in tech circles for railing at Europe's entrepreneurs for selling out too early or, worse, relocating to the United States. Now he's putting his own hard cash to work by fighting what he sees as the continent's lack of drive to build the world-class companies of tomorrow. He recently committed $1.2 billion of his personal wealth to funding "moonshot" projects in Europe that use deep technologies such as artificial intelligence to build the next "super-companies." These businesses will work with governments, scientists, universities and investors to make a significant positive dent in solving "the infinitely complex problems" that confront us, whether in health or in climate.

The Spotify founder and CEO, Daniel EK, sits on the floor in front of a chair, holding an album cover in his hands and looking up. (c) Wesley Mann/AUGUST
Digital thinker: Daniel Ek looks to philosophy as a guide for answers to today's issues.

Could Spotify have become the success it is had you been born in the United States?

You know, I don't think so. And for two reasons. First, back in 1997 I already had access to fiberoptic internet, 100 megabits downstream and 100 megabits upstream, funded by the Swedish government. They wanted everyone to have a PC in their home with broadband access, and for me that was a glimpse at the future. It was just the Nordics and South Korea then. There was no Netflix, no YouTube – nothing where you could consume content. The only thing that existed besides text and images was Napster and piracy, which the internet used to distribute almost everything you can imagine. It was kind of awesome.

And that links to the second reason – because of that shift, piracy had eradicated the Swedish music industry completely. No one bought CDs, and buying downloads from iTunes was just not something that a lot of consumers did. So the music industry really didn't have a lot to lose when Spotify came around, because the alternative was to pack up and go home. Not only did we offer a solution to what would eventually become a bigger and bigger problem in the rest of the world, but we also did it at a time when the music industry had nothing to lose. I don't think we would have succeeded if we had first launched in the US – that market had more than 10 times the number of competitors and the music industry had a lot more to lose, so they'd stifle innovation.

Your $1.2 billion commitment to investing in European "moonshots" is hugely ambitious. How, apart from in financial returns, will you judge whether you've succeeded a decade from now?

The real success for me will be a whole lot more supercompanies in Europe – and ideally ones that make a positive dent in the world by tackling some of the big challenges. Whether it's climate change or educational access or a better health care system, there are many areas where we need to move fast, to invest, and do it with great urgency.

Do you think that Europe is changing in terms of entrepreneurial ambition?

Yeah, I think it is. In Sweden in particular, we have this word lagom, which means "just about right": you don't want to achieve too much, nor too little. But that's shifting. When I started, entrepreneurship wasn't something that you did. I remember when I started the company – I was 22 – explaining to people at parties and a lot of people said: "OK, great, but what's your day job?" It was just not thought of that you could launch your own company. But there's been a big shift in the last decade in Europe. It's become not only socially acceptable to become an entrepreneur, but it's become maybe the thing to try. So we have more people than ever trying their hand at entrepreneurship, which is fantastic. But we still need to do more to get the snowball to move even faster, because with more supercompanies we can provide more inspiration to talent and investors. We're two decades behind mature ecosystems like Silicon Valley and Seattle. A lot of catching up is about daring to go for the long haul.

Spotify in numbers
62

The number of languages Spotify announced it will soon operate in as part of its expansion into 80+ new markets.

$25+ billion

How much revenue Spotify has paid to rights holders since its launch in 2008.

19

How many companies Spotify has acquired in total since its first acquisition, music discovery app Tunigo, in May 2013.

$235 million

The price Spotify paid to acquire podcast advertising and publishing platform Megaphone in November 2020.

You talk a lot about innovation – and a global pandemic that's hit all sorts of business models is forcing leaders to rethink how they do things. What advice would you give leaders on innovating their way out of today's challenges?

Innovation is a continuous process. So I would build an innovation system at your company to see how you can harness ideas from as many places as possible – and then ideate on them. Take one very concrete example here at Spotify. We have something called 'hack weeks.' It's a very simple notion: We put some time aside for people to work on a product they want to exist. We see a lot of bottom-up innovation as a result. Truthfully, many of the greatest innovations at Spotify in the last few years have come from the hack week. Discover Weekly [the personalized music recommendation algorithm] was one. I actually wanted to kill the idea because I didn't like it – and ironically enough it's one of our most successful things. So provide many paths to having ideas circulated, and [for ideas] to bubble up – with more paths to "YES."

"A lot in the industry worried whether streaming could replace download revenue. Now we have the answer: Yes."
CO-FOUNDER, CEO
Spotify

After 14 years of Spotify's journey, I get a sense that you see yourself still at the relatively early stages. When I started using Spotify, I thought it was a music service, but now you're talking about an "audio-first" strategy. You're buying podcast companies, and now I can get access to audiobooks, and a Daily Drive playlist with news. What is Spotify long-term?

Well, the amazing thing is, I'm not even sure I know. If you take audio as an example, we learned by accident that in Germany a lot of record labels were uploading other forms of audio content [such as audiobooks] on Spotify. It was a pretty terrible user experience, yet people were still consuming it. And then we studied why people in the US weren't using Spotify more in the car. One of the big reasons was that they wanted more news, weather and traffic that they get from local radio. And so, if you put those two things together, you start realizing that, even with our vision of music, by adding audio we're going to be better for even the music listeners. So one plus one equals three or four.

You're absolutely right – we're early in our journey and at least half the world's population will be listening to some sort of audio service via the internet. That's almost four billion people – and Spotify is only reaching 300 million so far. We're talking about billions of consumers to reach over the next decade.

Let me ask about the original clientele, the music industry. How well are you getting on with them these days?

A lot in the industry worried whether streaming could replace and even compensate for any shortfall in download revenue. Now we have the answer: Yes, and it keeps on growing by healthy numbers each year. That changed the tone [of the conversation]. It's the classical hype cycle. At the beginning you're met with skepticism, then you start seeing some optimism and then, at the end of that curve, they're like: "Well, yeah, I always believed in this and of course it was going to work." We're at that point now, with everyone streaming, and that's incredibly gratifying for someone like myself who's been working on this problem for 14 years.

You seem to have educated the record companies, but are still meeting resistance from creatives who say your streaming fees make it hard to earn a living wage. How do you respond to concerns that you're now the big company that determines how much or how little they should be earning?

We're still talking about incredibly fast-growing markets. Streaming will continue to grow, which means that there will be even more revenue out there for all creators. Plus, this is an evolving platform. There's going to be more and more offerings, more ways to engage with consumers. Five years ago, we were a music platform. Now we're an audio platform. And we'll evolve to become an even more creator-centric platform over the next decade, when I believe a lot more creators will be able to live off their art than today.

One last question. I know you spend a lot of time reading, thinking, going for conversational walks with people. What ideas are percolating that you haven't quite formed into products?

Oh, wow. Well, it's really eclectic at the moment. I'm really into philosophy and thinking a lot about whether or not we're in a path-dependent world. If you think about society at large, you have this idea of liberalism and democracy and our current iteration of it for the past few hundred years. And obviously now we have fantastic platforms, as well as a lot of things that we, as a society, need to address. Philosophy as a whole is an understated art that is not getting as much attention as it should. I'm thinking about how we can bring it more to the forefront and raise philosophy's stature.

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Munich Office, Central Europe