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SPEAKER_03: One of the people I've wanted to interview for This Week in Startups for a really long time is Daniel Eck, the founder of Spotify. We all use Spotify. We all love Spotify. They've got over 20 million paying members now. That's starting to get into, hey, HBO territory, Netflix territory. It's a tremendous company. But it was one of those companies that's extremely hard to get to scale, and Daniel is a tremendous founder, but he doesn't do a lot of interviews. He's pretty quiet. And we really, we had a connection during this talk, which took place at the Stockholm Tech Fest that Tyler Crowley, Insights from Tyler, hosts every year. And I was really privileged to be able to sit down with him. And listen, Spotify, every year, somebody tells me Spotify is going to die and they're going to be killed by YouTube's music product, Google's music product, Jay-Z's music product, title, Apple's going to release this Beats product. It's going to kill Spotify. And Spotify keeps growing. There's something magical about this startup. And in this exclusive interview with Daniel, we really get to the heart of his entrepreneurial story and how they've made Spotify into a juggernaut. You're going to love this episode. Stick with us.

SPEAKER_11: I'm really excited about our next guest because I've been trying to sit down with you for an

SPEAKER_17: interview. You're busy. You're busy building. I've got small kids. You have kids now.

SPEAKER_19: Now you're in Stockholm, then it's much easier. It's easier because you live around here.

SPEAKER_17: Yes. And you started Spotify here. Yeah.

SPEAKER_23: When you, what year did you start? So we started in 2006, but we launched the service end of 2008. Oh, just right during the financial crisis.

SPEAKER_24: Yes. So that's when we thought this is perfect timing. Yeah.

SPEAKER_21: If you start at the bottom, it makes it that much easier to get to the top. Actually, there's a lot of successful businesses that were sort of the same. Like you have the

SPEAKER_17: Google and so on. Absolutely. Well, I mean, you start at the bottom as an entrepreneur in terms of the market. Right. There's not as much competition for talent. Right. Or office space. Right. It's just everything gets easier. Yeah.

SPEAKER_30: Except for your valuation. Yeah. I mean, that's tough. But you're right. I mean, right now, I think in many parts of the world, like the just competition for talent, it's insane. You know, we, we see in the Bay Area, we see salary increases with more than a hundred percent, like year over year. A hundred percent year over year. Yeah. And just, so, so we're, we're clearly at like unheard levels in terms of just equity participation and so on for employees.

SPEAKER_17: I mean, you have companies like Google, which are paying people double or triple the market rate of a salary. Right. And they don't actually have jobs there. They just kind of go and they don't

SPEAKER_40: actually have like a, a lot of goals, let's say. Yeah. A lot of work to do. Yeah. That's not Spotify,

SPEAKER_21: by the way. So if you come to Spotify, you don't just eat the free food. No, we don't even have free

SPEAKER_23: food. So has that not hit here yet in Sweden? No, because you get like taxed, um, three times as much what the meal actually costs. Oh, cause they counted as compensation. Yes. So if, if you're

SPEAKER_30: supposed to offset that benefit that the employee is getting, like the, the fees ends up getting

SPEAKER_46: crazy. Ah, yes. Socialism thing is crazy. Yes. Yes. So what I do actually, when we have politicians

SPEAKER_30: over, because we're allowed to give them like really, um, um, you know, we're allowed to give

SPEAKER_31: them sandwiches that have been in the fridge for a couple of days. So I say, Hey, a cheese sandwich

SPEAKER_30: is okay. Yeah. Well, preferably that has been in the fridge, like the longer it's been in the fridge, if it was actually fresh made, then probably not. Probably not. But if it's packaged a couple of days, then it, then it works. So usually I invite politicians over to the office and kind of say,

SPEAKER_31: Hey, do you want to go for lunch? And then I have them pick up in the fridge, this like greasy looking sandwich. And they're like, Ooh, this doesn't look good. But it's not one of those

SPEAKER_52: like tasty schmorenberg, like brown bread sandwiches. No, no, nothing tasty. No,

SPEAKER_17: definitely not tasty. When you decided to start a music company, did all of your friends tell you

SPEAKER_57: how insane that was and try to stop you? Because we have a lot of friends in common and all of our friends have lost years of their lives, hundreds of millions, billions of dollars trying to do music. In fact, Nicholas, who's going to be on later for Centrum, he had Kaza, Napster, Sean Fanning, Sean Parker. I mean, the, a number of entrepreneurs who have absolutely failed brutally and been sued for billions of dollars is a long list. Yeah. When you started this, did they tell you you're an idiot? Yeah. But you did it anyway. Yeah. So what was it that you knew at that time that led you to believe you could actually pull this off? Nothing. That's the thing. So it was completely,

SPEAKER_66: you were just completely naive or stupid? Yeah. Completely. Well, I guess a bit of both.

SPEAKER_30: A little bit. Yeah. Um, but you know, it, it's, um, uh, it, you know, when, when, when you're 22, 23 and have had like a successful company before you kind of feel like you're on top of the world, you feel like this. Yeah. You know, this, what was your first company? Um, so my first company was when I was 14, it was just some web design company. It was like, when I think back of it today, it's, it's really just fantastic because you have had at the time, like this is 97. So it was in the movement where everyone needed a homepage and, uh, you had this really big, expensive consultancy companies who were charging like $50,000 to make the simplest webpage. Um, I didn't care that much about any of that. And then one day someone came to me and said, Hey, can you build a webpage? And I'm like, no, I'm not really interested. Um, and then the person said, well, I'll pay you. And I was 14 at the time. So I said, well, I'm not really interested. Well, name your price. And I just said, well, uh, $5,000, just something that sounded absurd. Um, and the person just for the record, $5,000 for a 14 year old is

SPEAKER_73: absurd. Yeah. Um, um, so, um, yeah, so I, I, I just said that number and, uh, the person

SPEAKER_30: said, fine, uh, sometimes shit, I, I get to learn how to create web pages and, uh, that's can't be that hard. Yeah. That, that's, that was my attitude. And, uh, next time, um, you know, someone came on and say, Hey, can you create another webpage? Because you did this first one really well. And I said, no, I don't really want to do it. I'll name your price. I said, $10,000. And then all of a sudden I got $10,000. So, so this business thing actually came pretty easily to me. Uh, you know? Yeah. It really is that simple. You just name the price and

SPEAKER_24: keep doubling it. Yeah. Yeah. So who's the schmuck who paid a million dollars to a 15 year old? I mean, where did this top add out? Uh, it's, it's built a company eventually out

SPEAKER_40: of that. Yeah, I, I, I sort of did. Um, but, but it was like pretty much by accident. Yeah.

SPEAKER_30: Um, I, I never thought I, I, um, you know, wanted to build a company, um, and, and I didn't set out to do that. It was just more or less like, okay, well, this seems like an interesting challenge. This did that. Once the challenge was accomplished, I sort of wanted to do something else. Uh, and certain locations people wanted me to still help out and do things. So I, um,

SPEAKER_23: what inspired Spotify then? What was the challenge there? Um, well, the challenge was so, uh, actually

SPEAKER_30: if you kind of fast forward, I'm, I ended up accidentally starting a few of those companies, like a web hosting company following the web design company, uh, at a time I thought, um, you know, this company, Google sounded pretty cool. This is back in 1998. So I applied for a job there and they kind of said, Hey, come back when you have a college degree. So I said, screw them. I'm going to build a better search engine. Uh, can't be that hard. Right. Um, that actually did turn out to be really hard. Yeah. Um, so, um, and I took a lot of the money I had in this web design thing and try to pour it into that and lost it all. Got it. Um, what happened

SPEAKER_24: when you started the rocket ship company? Uh, yeah. Yeah. Difficult. Yes. It is. But it falls into that same category, which is, I think Elon didn't actually know fully exactly how hard the rocket ship company would be. Right. Um, until he started putting them up.

SPEAKER_30: Right. And, and I think that there's something like if, if people would know all the, you know, there's something said about that the entrepreneurs that are successful in an industry or sell them to people with the best knowledge about it. It's usually, um, either outsiders or people that have somewhat of an insight, but, but aren't like full deep in, into the weeds of why things are working the way they are, because then most people just wouldn't be doing what

SPEAKER_17: they're doing. And it's, it can become too daunting because you've heard all the reasons why it wouldn't work. I mean, let's face it. Spotify was not the first. Right. Online streaming service

SPEAKER_95: or online music service. Right. I guess Pandora was or, and then before that Rhapsody, maybe Rhapsody was actually way before, way before. Yeah. They kind of took a lot of arrows. Yeah.

SPEAKER_17: Uh, coming up the hill. Yeah. When did you come up with the idea of Spotify? Was there a specific moment where you said like, or have the PR people constructed a founder story? Uh, the PR people

SPEAKER_30: definitely constructed the founder story by now. Um, you know, but, but the truth. What's the real story? Yeah. Yeah. Uh, the, the truth story is, um, you know, I, I, I, I, I came to the point where I, um, ended up selling some companies in the end, almost going into bankruptcy, but then managed to turn things around and then sold the company ended up, um, you know, thinking about what I wanted to do with my life. Um, and my co-founder Martin actually ended up, um, selling or IPO in his company, which, uh, is trade doubler, uh, roughly at the same time. So we were sitting in my, uh, apartment in the suburb and Southern Stockholm and we're just brainstorming what we wanted to do and what was important to us. Um, and actually ever since Napster, the first, um, thing that was what got me into that. I knew that I wanted to be working with the internet. Oh, really? You downloaded Napster and you were like, this

SPEAKER_23: thing is phenomenal. Yeah. It's just phenomenal because I mean, back then the web was really

SPEAKER_30: just text. Right. At best, there was some GIF animation of, uh, like a funny rabbit or something, but it's a blue dot. It passed around from Razorfish. Yeah, exactly. But, but, you know, it just wasn't very exciting. Um, and then all of a sudden with, with Napster, it was really the first service that the show that the internet was for more than just text and images. Um, it was really like a multimedia thing. Hey everybody, let me stop for a moment

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SPEAKER_30: Uh, so for me, I, I, I just realized at that moment, like, holy shit, this is what I want to do. This is, this is, uh, going to be the next big thing. Um, and so I came back to that, um, um, you know, really thinking about it. If Napster was the first thing that got me into the internet, how is it that music just hasn't been solved? And we started talking about it because it was so obvious that from the consumer end point, this is how people wanted to consume music. They wanted to listen to more music than ever before. They wanted to discover new artists, um, integrated mass. They loved having it, um, you know, on demand in the sense of, I mean, back then it took a few minutes to download the song, but it still felt a lot better than, um, going out, driving in your car, going to Tower Records, picking out the, this stuff. Um, so, you know, it, it was just a really, really, really, um, fundamentally broken thing because for the first thing you had the consumer thing and the consumer thing was actually working, but it was the business model that ended

SPEAKER_17: up being the problem. It wasn't that people didn't love Napster or Kazaa. Right. Uh, or even Travis's first company, Scour. Yeah. I mean, it is very interesting when you think about it. Travis did Scour. Yep. Red Swoosh, Uber. Yep. And then you have Nicholas who did Kazaa. Yep. Um, the video service in between and then Skype. What was the video service in between? It was going to be really big

SPEAKER_91: and it didn't work. Yeah. We'll ask him about it. Yeah. When it comes out. I forget it. Nicholas,

SPEAKER_45: what was that failure that you had between Skype and Kazaa? It was like the one that got you sued. And then it was the one that failed. And then there was one that was huge hit. Yeah. We'll ask him.

SPEAKER_17: Yeah. Our projectors always appreciate that. Yeah. Always. Focus in on the failure. Um, so you

SPEAKER_24: decide you want to go for Spotify. Yeah. And what's next? Did you just build a prototype or an interface or did you? Yeah, we started building the product. Oh, really? That's, that's always what

SPEAKER_30: came first for us. It's just like, and, and the original vision was like, imagine, um, you know, we were iTunes users. So imagine having iTunes, but, but having all the world's music in your music library. Um, and, um, it, and I was really sort of attached to this emotional sense. What would that do to your behavior? Uh, if you had all of the world's music on your hard drive and today we take that thing for granted, but back then, you know, as I said, it took a couple of minutes for you to download just one song. Um, so we needed to create that feeling about, um, you know, immediacy of, uh, no buffering, no nothing. It just needed to be lightning fast so that it felt like you had all

SPEAKER_57: the world's music on your hard drive. And in fact, in that timeframe, people talked about the digital jukebox in the sky before the term cloud existed. Right. And people said, you know, really the holy grail is this digital jukebox in the sky where you can have anything you want at any time. Right.

SPEAKER_23: Isn't it amazing? And it's here now. Yes, it is amazing. Um, but you know, what's interesting

SPEAKER_30: about Sweden is, um, it, it was here for a long time. Um, not just because of Spotify, but the truth is we had these broadband connections that, um, enabled us like, you know, actually yesterday I got gigabit fiber pulled into my house. I hate you. Yes. Thank you. Uh, I knew

SPEAKER_24: that from before. On behalf of all Americans, we hate all of you. Yeah. Um, for your gigabyte and also everybody in South Korea, we hate as well. And let me guess, you're paying $30 a

SPEAKER_31: month for this. So I am 149 Swedish crowns, which is less than 20 bucks a month. Now I

SPEAKER_35: might punch you in the face. Yeah. You're paying $20 for a gigabit. Yeah. I mean, what

SPEAKER_57: are you paying for in Brooklyn? I think you get three megabit for $85 from time Warner. Yeah. Yeah. Yeah. It's basically like you pay your rent, then you pay for your internet and then your car and your kid's tuition. Yeah. Yeah. Something like that. So, um, when did you, what

SPEAKER_17: was your plan to deal with the licensing? Cause you did mention like, Hey, the interface kind of worked and that Napster wasn't perfect, but they did kind of get close. Yeah. Well, so

SPEAKER_27: I wasn't very sophisticated in terms of what the plan was to tackle that. So the original plan

SPEAKER_30: was like, well, I guess it will take about six months to get the licensing done. Yeah. You know, there's somebody in Hollywood in charge. Yeah. And, and sure we'll have to pay some money, but I mean, uh, there are businesses going like this anyway. So I'm sure that they'll just want to get the music out there to as many people as possible. And we'll figure out a way

SPEAKER_23: to deal with it later. Once we get to scale, either through advertising or getting people to pay somehow. We truly were naive. Yes. Hey everybody. Hey everybody. Let me stop for

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SPEAKER_30: This Week in Startups. Bye-bye. And I recall because I was reading up about this myself on the internet and there's these like collecting societies that claim that they could license this. And I didn't even realize that actually for music, there was like multiple parts that you needed to go to. So I read on the internet that, hey, you could get this license and it was like 5% of your revenue for doing what we were doing. Sounds reasonable. Yeah. This

SPEAKER_52: seems really reasonable. Maybe it's mechanical license or something. Yeah. Yeah. Performing

SPEAKER_30: rights. But I thought that was the whole thing. So I'm like, shit, this will take six months.

SPEAKER_67: This is going to be super easy. Plug and play. Yeah. Um, and then I got introduced to, um, someone who

SPEAKER_30: was in the music industry and I kind of said, well, maybe you can help us just get this done. And I guess it will take just a few months and then it will be. Who was this? Like some American or?

SPEAKER_143: Yeah. Uh, Fred Davis. Oh, Fred Davis. Yeah. Sure. Fred or Fred Wilson. Yep. New Yorker. Yep. Yep.

SPEAKER_73: So, um, Fred, um, and just said, well, uh, I need to sit you down and I'm like, yeah, sure. It's like,

SPEAKER_30: well, it's not really going to be as easy as you think because you actually need to go and do deals with people individually. Um, but I'll, I'll introduce you to them. And I'm like, okay, fine. That's totally fair. So I got on a plane to New York, sat down with all the major labels, um, and some of the biggest, bigger, bigger indies. Uh, and everyone was super supportive. Yeah. You know, this seems, seems really interesting. It seems really great. You know, um, come, you know, if you can come back in a few weeks, we'll try to figure something out. So, um, I remember walking out, calling my co-founder Martin and sort of saying, well, you know, this seems totally reasonable. We'll, we'll do it in about six months. Uh, and about two and a half years later,

SPEAKER_57: we launched. And what was the nature of those negotiations? I mean, did, because now the music industry seems to have a love, love, hate, love, love relationship with you guys. They seem to love you most of the time. Once in a while, there's a flare up. Um, at that time, did they look at you as just like a bunch of dumb kids from Stockholm they could take money from, like just get some big advanced payment from, or did they actually think that this would

SPEAKER_35: become a transformative company like it has? Yeah. You're, you're, you should have asked

SPEAKER_40: the guy that was on the stage earlier, I think, uh, Perry, who was from one of the labels,

SPEAKER_30: uh, that question. Um, I, I don't know, to be honest, I, I think one of the things that we did that was amazing was, um, we, um, we were really, really adamant about people trying our product. So during this process, the two and a half years, like we, we did all sorts of things to get them to use it. And in the cases where they didn't want to use it, we managed to figure out ways where their kids went to school and infiltrated their schools so that everyone on the school was using the product. Um, cause you know, that's by the way, a great marketing tactic. If you're want to reach parents is go through their kids. Um, so, um, you know, we, we, we just got everyone around them to start using this and eventually started building a peer pressure about this product is truly amazing. So I think half of it was, Hey, we'll get some money. Um, this probably will never fly, but it didn't matter because what's some money. And the other half was, uh, a real belief, like, holy

SPEAKER_21: shit, this may actually work. Um, and, um, yeah, I mean the rest of the, what was the investor

SPEAKER_57: reaction to it in the early days, you know, before you launched, who was the first investor or the first group of investors? What was the first valuation? How much did you raise back

SPEAKER_30: in 2007, eight? Yeah. So we were a little bit of an odd duck in the sense that we bootstrapped this, uh, ourself and we had money, uh, from before. So we ended up investing almost $10

SPEAKER_21: million of our own money. Oh, wow. Um, and that's a good sign. Uh, when you're an investor

SPEAKER_91: and you see the founders have put that much money to work. Yeah. So we were both like serial

SPEAKER_30: entrepreneurs, um, which, um, back at the time, you know, there weren't too many serial entrepreneurs, uh, in the Swedish ecosystem that had a couple of successes, um, or had enough money to invest in your own thing. We never obviously thought that we'd have to invest as much money as we ended up, uh, having to do kind of similar to the Elon example in the end. Yeah. Uh,

SPEAKER_23: Elon went broke. Yes. He literally went to negative. Yeah. Uh, we didn't go that far,

SPEAKER_21: but, but in fact, he was living on a loan according to what he said publicly. Uh, did you lend in the money or I actually offered to all right? That could have been an interesting

SPEAKER_155: one. I could, I could, I was at dinner with him and he was broke and I said, I could loan you a million or $2 million. I don't have that much money, but I can loan you a couple of million. I said, don't worry about it. Yeah. I've got a loan for a couple of hundred, whatever it was. He had a loan from somebody very famous, I think. And he's talked about

SPEAKER_82: it publicly, but he went through $300 million to get space as a Tesla there. Yeah. I said, what happened to the 300 million? Yeah. And he said, you see the two rockets that blew up. I said, yeah. He goes, that's, that's a big portion of it. Yeah. Yeah. Were you broke

SPEAKER_24: at the time? Would you still have a little bit left? How close did you get to the, to

SPEAKER_23: the wire? Um, we were not in that position and we didn't blow up the 300 million and not

SPEAKER_21: that we had 300 million to blow up, but yeah, but, but, uh, was it, were you nervous that this wasn't going to work and you had blown so much money of your own? No, I wasn't, um,

SPEAKER_30: um, again, I, I, I'd never really been motivated by money. That's not why I started stuff. So I didn't care too much about that. I cared a lot about our employees because at the time as we were building the product as, as you do, um, like you find other great engineers or product people or people you want to bring them board, uh, in your company. And so by the time, you know, when we started doing the licensing, actually trying to get finalized and we were about 40, 50 people working, that's a lot

SPEAKER_17: of mouths to feed. Yeah. So I, it's a lot of weight, isn't it? As an entrepreneur to know that they all came to work on your vision. Yeah. Yeah. It's a lot of responsibility. That, that was, to be honest,

SPEAKER_30: the toughest thing, like for us, um, all throughout, just, uh, there was so much belief. Everyone knew this was the product. Um, and, and I kind of made the mistake. I mean, we, we got incredibly lucky that everything got sorted out, but I did a mistake, which I wouldn't do today again, which was, I kind of shielded everyone from the whole licensing thing. And I think there was a pro and a con with that. The pro with it was that there was so many back and forths like that, you know, I started having hair and then in the end of the process, I didn't have any hair. Um, so I, I, I hate to burden someone else with that. Um, but the downside was, um, if things would have gone

SPEAKER_23: south, people, you know, had no idea that we were even, yeah, they could have felt betrayed that you

SPEAKER_94: didn't tell them. Yeah, totally. It is. This is one of the most challenging things as an entrepreneur

SPEAKER_17: is that almost every company is on the verge of crashing and burning, even the big ones, because our industry moves so quick and so violently. Yeah. And if you tell, if you're totally transparent, which you want to be, you can make everybody, I don't just not be able to sleep

SPEAKER_57: at night and that's unfair too. Yeah. It's a hard decision to make. Yeah. You got to find the right

SPEAKER_30: balance, but I clearly erred on the side of not being very transparent. Um, you let them also work, right? You let them do the work. Yeah. Um, but you know, in, in, in hindsight, I realized that I got incredibly lucky because, you know, things turn out okay. So the things I had said for two years ended up happening. Um, but I felt for a while that I was kind of repeating the same thing. Yeah. Yeah. We'll figure out the licensing soon. Um, yeah, it's obviously we kept

SPEAKER_82: pushing the time. There was a reputation at one point in time that Spotify was like not going to work because of the licensing. How close was it in your estimation percentage wise to working at its worst, like to not working at the darkest day. What did you think your chances were?

SPEAKER_67: Um, the darkest days, um, you know, we, we had, um, serious, a meeting in New York. It was about a week

SPEAKER_30: where it was pretty evident. Like everyone just said, no, um, this isn't going to happen. Like, um, and don't come back. That was essentially, you know, yeah. Um, so, uh, I called Martin up and I'm like, Hey, you know, what's going on. And for those that don't know Martin, I will say that he's, um, he, you know, the guy just, um, he, um, it doesn't bother him at all. Like none of that does. So he's just going to be, okay, well, that's totally fine. Let's go and do something else. Um, so for him, um, he just listened to what I said and it's like, okay, well, you know, that sounds stupid. Um, but if that's the case, let's go and do something else. Give it another couple of weeks and then we'll figure it out. Um, and, and that was incredibly reassuring for me because, you know, I, I just felt like we had both invested so much of our time, money, uh, had all these employees and, um, and he was just totally unfazed by the situation.

SPEAKER_23: What happened in those three or four weeks that made it turn around? That's a very good question that I still, uh, wonder sometimes. Um, you know, what,

SPEAKER_30: what I ended up doing is I just canceled my trip back home to Stockholm. You ripped up the return ticket. Yeah. And ended up camping out, um, in front of their offices coming back. I had to like tweak my messaging a little bit and twist things around, pay them a little bit more money and figure things around. Um, but it just really turned. And then the other thing that I did, um, which really saved the company was we wanted to launch worldwide day one. Um, and I said, okay, screw, uh, screw it. Let's not do the U S let's start in a territory where this doesn't matter as much to you. And let me

SPEAKER_166: prove the model. That was brilliant. That took the pressure off. Yeah. And then everything

SPEAKER_21: turned around. Um, that was great. Cause I had acquired an account and I had a VPN and I'm a big

SPEAKER_155: Bob Dylan fan and had no idea that so many French people loved Bob Dylan enough to cover every song

SPEAKER_57: and holy fuck the French can do Dylan. Yeah. I don't know if you've ever heard this. And then

SPEAKER_95: I bought the U S Spotify and I couldn't get the French Dylan anymore. Can you get it now? I had no comment. Yeah. I don't know who's in the audience here. I'm more cameras here and stuff like that. I mean, can I, but tell me, but, but on the U S account, can you get the French?

SPEAKER_184: I don't know. Can I, you should be, you should be able to get all of it. I thought some of it wasn't allowed. No, I, is it all global now? Like all the global stuff can go anywhere. Uh, it's,

SPEAKER_30: it's not all global, but it has really changed. So most of the time, like one of the really cool things now about Spotify is that like when we launched in Hong Kong, for instance, we saw a spike on the West coast in the U S because there's can't large Canto, um, population. Sure. So that sort of happened when we launched Turkey, Germany started spiking. Fascinating. And so all the expats get on

SPEAKER_31: the service. Yeah. But, but the, for the local labels, it's even more interesting because in many cases they, they're just focusing on their own home market. So we're opening up an additional

SPEAKER_30: revenue stream for them, um, in all the other markets, um, where they, you know, honestly didn't

SPEAKER_95: even think that there was an audience. Yeah. And so today 20 million members, how many is it now?

SPEAKER_17: 15, 20, 20 million paid subscribers. And you release your numbers almost like you're a public company. I noticed like you put out quarterly numbers. What's the thinking there? Um, it, it,

SPEAKER_30: it, it sort of ends up happening anyway. So, um, because the numbers leak, you mean, or no, it's not that it leaks. So one of the things that we do is we try to build as much transparency as we can in the platform. So all of our partners, labels and artists that try to upload their stuff, we want to show them, you know, the numbers, the number of streams, the number of users, the amount of revenue that we're paying out. So we might just as well, um, share that to everyone. So, um, for about a year and a half, we're actually for about two years, we've kind of run, run this as a public company. And, you know, I do quarterly earnings, uh, reports with my investors, just talking through what happened in the quarter and so on and so forth. So it's, it's, it just ended up making things

SPEAKER_195: a lot easier for us. And everybody pays about 10 bucks a month, eight bucks a month. What is it

SPEAKER_30: average? Um, in the Western world, it's like around $10 a month. But if you're in like some

SPEAKER_31: developing market, then the fees actually lower. Got it. So just back of the envelope,

SPEAKER_155: a couple of hundred million a month in revenue, a couple of billion dollars a year in revenue.

SPEAKER_146: Yeah. Ballpark. I mean, those, those numbers released or no, uh, they're not released.

SPEAKER_30: What we have said is we've paid out more than $3 billion in total where, um, you know, we've,

SPEAKER_57: yeah, we're, we're, and you get fine 20, 30% of the overall revenue. Yeah. We, we, we pay

SPEAKER_24: out 70% and we keep 30% of our steps. And how often do you have to renegotiate that percentage?

SPEAKER_57: And does that, does that make you not sleep at night knowing like every five years or every whatever number of years, you got to go back to New York and beg and plead and where do you

SPEAKER_36: not at this point? Um, I, I think it's a very different discussion at this point. Now, um,

SPEAKER_30: now it's really not a point where they're streaming is a business that they want to be in. Uh, they know it's the business that they want to be in and they want to transition as much as possible to that business. They do want to transition to it. Yeah. Cause it's in, in many cases, it's a much easier business and, and, you know, instead of having to count

SPEAKER_31: on you paying for an album, uh, once a year, it's the annuity of it and there's a fixed income. It's easy for them to calculate on. They know how much they can invest in and supporting

SPEAKER_30: new artists. It's a much more predictable business. Yeah. So for them, it's actually

SPEAKER_21: like, it has tons of benefits. It seems like it's the dream business for them. Have they

SPEAKER_23: realized that yet? Oh yeah. Um, I definitely think so. I mean, uh, if you look at this market

SPEAKER_30: as an example, um, 70 plus percent of all revenues, um, physical, digital, et cetera, is streaming. Um, it's, it's really remarkable. Um, so when you think about what that has meant for this business is it's really at an all time high in terms of signing new artists, um, in terms

SPEAKER_42: of, you know, um, health of the ecosystem of labels and artists and so on. How has it changed

SPEAKER_57: how music is made? Because we did have this phenomenon of people wanted to work really hard to make an album and an album, you know, how to cover and, you know, liner notes and, uh, and some of them, you know, had a theme, right. Um, and some of the double albums and they were released on a certain schedule and a lot of marketing went into them. How has it changed now on an artistic level? Has it changed? Um, and are the labels embracing that? Um, I would

SPEAKER_30: say it is changing. Um, it's not obvious yet if there's like one de facto way it has changed. I think it differs for different artists, but I think the most obvious thing, um, that has changed,

SPEAKER_31: as I said, is the release windows. You used to be able to do a campaign in the U S and then maybe six months later, take the artists to Europe and try to figure it out. It's much more compressed

SPEAKER_30: now. So you release it everywhere. And then you do a short promotional stunt where you travel around the world, like crazy for two months and try to do as much promotion as you can. Exhausting. Yeah. Um, that's why I asked about the sort of French Dylan ones, because that should be a good opportunity for, uh, the French artists. Um, so, so it's a lot more of a global business. Um, but then also you have the rise of EDM where those guys are just releasing so many more tracks, um, and they don't think about it as albums. It's really just track by track, but track that seems to be successful for them. That said, um, you know, we still have enormous amount of people listen to full length albums, uh, which I'm in particular proud of, because if you think about it from an economic standpoint, like what the iTunes model used to do, uh, was that you sort of cherry picked your favorites. But if the additional cost to listen to an entire album is zero, then a lot more people

SPEAKER_139: are, you know, willing to listen and kind of discover the whole thing instead.

SPEAKER_03: Yeah. They'll be more risk taking. Yeah. And it does it, do you find in the, in the data that people are more eclectic in their musical taste because they have access to everything as opposed to,

SPEAKER_57: Hey, when we grew up in the eighties and the nineties, you picked your genre, you were either into goth or pop or whatever rock, um, or heavy metal. And you bought the albums in that and you were loyal to that and you dressed like that. Yeah. It seems like this generation is listening to hip hop and folk and, you know, everybody in it. They all seem to have a very

SPEAKER_23: diverse taste. Is that because of streaming you think? Um, it's not because of streaming, but, um,

SPEAKER_30: I, I will say this. Um, I think, um, people are now listening to more music now than ever before from a bigger diversity of artists. And I am, um, it changes the business model, you know,

SPEAKER_31: dramatically because all of a sudden use the self scarcity. Now you're selling utility. Um, so it's a totally different business model and it means some artists will do better. And it means

SPEAKER_30: some artists will do worse, um, in this, uh, new economy, but, um, for culture and for humanity, um, you know, I think it's tremendous. I think it's amazing that we have people now listening to more

SPEAKER_31: music than before. And from a bigger diversity of artists. What do you think of, um, services like

SPEAKER_57: distro kid, Phil Kaplan's company that allow people to, you know, amateurs pay a flat fee for a year to publish unlimited into the, into the ecosystem that seems to be like the input has been opened where it used to be a very narrow window. You had to pay 20 bucks or 200 bucks to put a CD on iTunes. Yeah. Now you can pay 30 bucks a year. I think on distro kid. Yeah. And published like

SPEAKER_67: crazy. Yeah. Well, that's the thing too. I mean, uh, if, if you think about the barrier, if you were

SPEAKER_30: an artist before, so for you to even record your album, um, and you had to, you wanted a string, string orchestra, we would be talking hundreds of thousands of dollars in just recording fees

SPEAKER_31: with all the sound engineers, the actual orchestra coming in and so on. That was the first thing.

SPEAKER_30: Now, if you wanted to get distributed, um, in a lot of stores, then we were talking hundreds of thousands, if not millions of dollars more. Um, and then you need a promotion. So all of a sudden you needed to go to all the radio stations and unless you had leverage, um, there was no way the radio station would play your stuff. So again, either you had to pay them, which eventually became illegal or, um, you ended up getting assigned to someone. So the, the truth is that there were a lot of gatekeepers in the old model today. There are no gatekeepers. Like anyone can self publish be on any platform for virtually no fee whatsoever. Um, and the irony now is like, you know, you, you'd think that that should lead to more people discovering you, but since there's more choices, uh, out there to discoveries also in many ends, much harder, right? But at least there are, there's like no one telling you that, Hey, you can't do this or your music, you know, I don't think it's good enough. So therefore you can't record it. You can record your stuff. And if you're truly an amazing artists, people will discover it. Uh, we should make the discovery thing a lot more efficient so that more

SPEAKER_31: gets, um, the chance to be discovered, but I would still say that it's a totally different mindset from

SPEAKER_57: 20 years ago. And Taylor Swift recently was like, I don't want my album on the streaming services. I want to sell albums. And that seems logical to me. I mean, if you want to sell albums, having it only available, did she make the right decision for her since she wanted to sell complete albums to do it that way? Do you think, I mean, I know it's the wrong decision for Spotify and you're philosophically

SPEAKER_21: it's not right for you, but was that the right decision for her? I don't know, to be honest. Um,

SPEAKER_30: so I think the fallacy with that argument is, um, I mean, she's doing tremendously fine anyway. So, um,

SPEAKER_27: um, we're, we're talking really about the margins here of doing 10%, 20% better. Um, but, um,

SPEAKER_30: what I would say is like the, um, the argument was sort of, Hey, you withheld it from this so that you can benefit from all this. The truth is though, she didn't, I mean, the stuff was on YouTube. Uh, it was on all other digital platforms that don't respect. Um, why do people do the,

SPEAKER_95: do the YouTube like that? I mean, is, are they getting paid some amazing number that vivo service

SPEAKER_30: seems to have YouTube over a barrel? No, it's because they want to get promoted. Uh, so they view it more as promotion than, um, anything else. But, um, you know, what we saw very clearly is like the people who were listening to Taylor Swift, you could see an immediate spike, you know, the next day from when we removed her catalog to, uh, YouTube streams. It was almost a one-to-one correlation because kids are smart. Yeah. And I mean, it doesn't take them 50 minutes to get the album.

SPEAKER_03: It takes them three seconds. Um, and I noticed a lot of kids will make playlists on YouTube and they'll use YouTube as their Spotify essentially and put an ad blocker on or ad remover. Yeah.

SPEAKER_57: Um, what, what do you think of that as a competitor? Is that your big competitor these

SPEAKER_67: days? People go into YouTube? Um, yeah. I mean, YouTube is the largest music service in the world.

SPEAKER_30: Um, but you know, there, there's the legal side of YouTube. Then there's what people do with YouTube. So one of the largest things that people do is, um, stream repping. You know, just, if you look in the, um, app stores, both the Apple and, and, um, Google, uh, app stores, you see in the top 10 apps, um, almost exclusively always, there's some sort of stream ripper where

SPEAKER_31: you can download the stuff off of YouTube or SoundCloud or any of those platforms and put it

SPEAKER_30: in your local library. Um, and, and so it's obviously a huge thing. Um, and the way for us

SPEAKER_23: to compete with that is just making our service better and better. Um, and it seems like Google

SPEAKER_57: would be able to police that better. They don't seem to police it all that much in the Chrome store. I know for video downloads, you can get a video download a ripper all the time. They don't seem

SPEAKER_82: to take them out of there. And on Android, they don't seem to police them there. What is your theory

SPEAKER_57: about why the smartest company in the internet space with the most intelligent employees can't take

SPEAKER_82: down? I can't police a store. It doesn't make sense that a bunch of Mensa people over at Google

SPEAKER_67: can't take these things down. Yeah. Um, I, I, you know, I think they have fundamentally different

SPEAKER_30: approaches, uh, Apple and Google. So Apple starts with closed and then on a case by case basis, they will open it up. Um, Google has the opposite view, which is we start with open and on a case by case basis will close things down. But I, I think that's the ethos that really is the huge difference between those two companies. So Google's approach to this is if someone tells us it's illegal, i.e. a government of some sort, we will take it down. But, um, until that moment, it's not our role to police the platform. We want to have as many things out there to support as much innovation as possible. So I just think it's, um, I don't think it's malice. I just think it's, um, it's, it is how their platform works. Um, and they take a very similar approach in search as you know as well. Um, so it's really just consistently across the Google ecosystem that they do that where Apple do

SPEAKER_57: consistently the other way around. Let's talk about competitors. Um, every year the Spotify

SPEAKER_82: killer is launched and every year you add millions of more subscribers, the latest, uh, Spotify killer, of course, iTunes music. Um, I tried to use it. I couldn't find it inside of iTunes. Everybody uniformly hates the iTunes app. Um, how much did you guys laugh and high five when you saw that product?

SPEAKER_46: Yeah. Um, I mean, it was kind of comical. I mean, yeah. Um, well, I, I didn't even release

SPEAKER_67: their own app. I made a tweet that I later had to remove, so I'm not going to say much more

SPEAKER_95: about that, which was like, wow, this is terrible. Something. It was, it's kind of shocking. Isn't

SPEAKER_57: it? How bad it was? It wasn't very good. I do say I like the beats one radio station. I like the

SPEAKER_95: content on that a lot, but it's a fundamental mistake for them to, what do you think the

SPEAKER_67: fundamental mistakes were? So look, um, I, I, I don't want to talk about what their mistakes was

SPEAKER_30: or isn't. Um, I, I will say that this, I think both Apple and Google are serious in music and will keep on investing in trying to make it. Uh, we had this discussion before we're, we're specialized. We don't do anything other than our own service. Um, Apple and Google does this and about 10,000 other things. I think there's, um, something huge, um, in, in terms of that focus because it brings clarity. It brings, you know, this is all I do every day. I don't even invest in other companies. I just focus on building this company. Um, and you know, we think by that focus and the thousands, if not millions of hours that we produce in just creating that experience, we will win. Um, so, you know, but do we expect to be alone in a space like music where there's a billion plus people around the world that listen to it pretty much on an everyday basis? No, of course not. Um, and obviously the biggest companies in the world is interested in the most accessible

SPEAKER_57: art form in the world. Um, so you have to stay paranoid because, you know, Apple is not happy

SPEAKER_155: about how music turned out and they are going to come back and they're going to get it right

SPEAKER_30: at some point. Yeah. I think they're, they're going to keep investing, as I said, and trying to make their product better. It makes sense. They have a deep heritage in music, um, which they obviously care about. I think on my end though, like, as I said, we have our entire company, like the way you win in this fast moving world where honestly it's moving faster

SPEAKER_31: and faster by the day. And there's so much innovation around the world. The only way you

SPEAKER_30: can win is by being, you know, super focused on solving one problem better than anyone else and by moving faster than everyone else and solving that problem. It's really simple if you think about it like that. Um, and I, I, I like to think that it doesn't matter how many smart Mensa people you have in your company. Sooner or later, you're going to get defocused if you do a thousand things and you can't do all thousand things super well.

SPEAKER_57: So let's talk about you adding features and verticals. Um, business is starting to look an awful, like an HBO in terms of the profile, right? You've 20 million subs. They have 30

SPEAKER_82: million paid, I think. Um, and now you've added podcasting and you guys are doing, um, a lot

SPEAKER_91: in that area. I know this week in startups, my podcast is now going to be featured in that. We signed some paperwork just yesterday. Yeah. Thank you. Appreciate it. Yeah. No,

SPEAKER_36: the paperwork wasn't such a bad negotiation this time around now. Uh, no, I, you know,

SPEAKER_57: I, I always say no to almost everybody with these things because what happens is they sell

SPEAKER_82: into our advertisers and that just creates confusion with yours. It was like, we're not doing that. So don't worry about it for now. Um, so if we're kicking it down the road, that's fine. Um, but talk to me about podcasting and why that's a focus because you seem like you want to stay extremely focused. You just gave the big lecture on, Hey, focus

SPEAKER_57: wins. Well, podcasting is not music. So now you're defocusing yourself or are you, it's an adjacency clearly. So why podcasting and how much effort are you putting into it?

SPEAKER_30: Yeah. Um, so the way we're thinking about this is really through the lens of music. Um, and one of the things that we discovered is when you look at, um, you know, the fundamental thing that we ask ourselves at Spotify is like, how can we bring music into every moment of someone's life? Cause our, our, our view is really, I can't think of a single moment, which wouldn't be better if we had music to it, which is why, you know, we have music here, um, and so on. So, um, with that lens, like we keep looking at the things that people are doing today, where music is a huge part. One of those things is people commuting, uh, whether it's by being in the car, like the average American spends like an hour and a half in the car every day, if not more, um, the average European commutes, um, for 30 minutes plus on a bus or subway or whatever it is. Bicycle. Bicycle. Um, so there's a lot of, uh, time there, which today people are, uh, doing, uh, listening to music that's honestly Spotify hasn't been a big part of. Um, and it struck us as surprising because in the beginning in the car, we thought, well, it's because our car integrations aren't that big. Um, and you know, we need to be on the dashboards and when the internet connectivity in the car will be there. So eventually we'll be there. But, um, then we actually started like one of our engineers doing a hack week decided that it was an interesting thing to kind of figure out how, uh, how many people were already today using, uh, Spotify in the car. So he figured that Bluetooth was a great proxy for this, um, and looked at sort of, uh, if he could find car models. And it turns out that we had more than tens of millions of users already connected to Spotify in the car. So we were like, shit, this is really big. But, but when you looked at the times when people were commuting, uh, we didn't actually see all that usage. Hmm. So then we asked people, well, um, you know, you've clearly connected Spotify here, um, but you don't seem to be using it much. Don't you like the service? And it's like, yeah, the service is fantastic. Okay. But what are you doing instead? Well, I'm listening to the radio. Okay. Why do you prefer the radio? Well, because, you know, as much as I like music, I also want to know what the weather forecast is. I want to know the traffic report and I want to use politics opinion. So all of the things here that we were talking about. So all of a sudden it kind of struck us in order to do music in that moment, we also needed to do more. Um, so for us, uh, you know, the benefit of us is we're not a broadcast station. I.E. this is the time slot that we have to send the same thing to all, everyone in the world, but we have this platform that enables people to customize their experience. So if I'm into tech, I may want to listen to your podcast, whereas someone else may want to listen to BBC news instead. So for us, um, it's really that this opportunity that we think, um, that we're actually going to get people to listen to more music by also enabling this. Uh, and what will the deal be

SPEAKER_82: with podcasters? Ultimately, you think you'll start putting ads in between and splitting revenue,

SPEAKER_57: get a little bit of a check from you, or you're just going to outright pay us by stream like you

SPEAKER_23: do with music companies. What's your vision there? I don't know what the ultimate business model will be. What I will say is that a dollar a play sounds good to me. Sounds good. Yeah, I know. Um, well,

SPEAKER_67: I mean, what I will say though, is like what strikes me, um, is that there's a huge amount of

SPEAKER_30: distribution in podcasting. We were talking about that hundreds of thousands of people listening to just your show. And then, you know, if you think about all the others, there's millions and millions.

SPEAKER_91: Adam Carolla and Mark Maron get over a million and you know, it's pretty amazing.

SPEAKER_139: But in order for any platform to be successful, you got to solve a couple of things. You got to

SPEAKER_30: solve distribution. You got to solve monetization. You got to solve for a way for people to figure out how to handle it with your customers. And one of the things that we think we can help with is the monetization aspect for podcasters. If that means that we will let you sell advertising yourself, but sell it on our platform, which brings you a bunch of other tools, or if it means that, Hey, you know, we have a subscriber base here and we can pay you because of that. Um, you know, all of that will hopefully enable you, um, to bring a different level of monetization, which in turn will hopefully mean that you can invest more in creating a better experience.

SPEAKER_82: Hey, so let's talk about another, um, Spotify killer. Um, Jay-Z, the most powerful recording artist alive, I guess, tied with Taylor Swift. So Taylor Swift pulled her catalog, a little bit of a,

SPEAKER_57: um, a big deal for you, but you seem to have smoothed that over. And then Jay-Z in the same year says, you know what, we are going to declare our independence and we are going to have a press release with everybody. Madonna's going to put her leg on a table. And I don't know what that was

SPEAKER_155: about exactly. It was kind of like your aunt, like doing it at Thanksgiving or something. It was like, it was like, Oh, a crazy and put her leg on the table and signed a document. What's going on?

SPEAKER_57: Um, but when you saw that press conference, did you laugh more or less than when you saw the Apple product? Uh, cause it was pretty insane. A bunch of artists saying they were going to declare independence by charging over twice as much as Spotify. Yeah. I mean, I, I don't know what the

SPEAKER_30: independence they were declaring was exactly. Yeah. Um, well, I, I think again, um, I, I, I think we live in a world where we're, we're in this huge transition from this business where everyone knew what, what it was, you know, you knew that if you sold X units that would equate to X or Y. Um, so it was very clear what everyone had to do. And all of a sudden, like, you know, I have people coming up to me and saying, well, I got a million place here. That's huge. So I ought to be given, given a million dollars, um, like the dollar a plate. Yeah, exactly. But they don't realize that every day on Spotify, they're generating billions of, of place. Yeah. Um, and so the currency is different, totally different. And the behavior is totally different too. So it's, it's just a lot of confusion, um, in the marketplace of what that means. Um, you know, and there's this fear of, Hey, there's no transparency. Like, I don't know what I'm getting in the end. Um, you know, someone ripping me off and so on, which creates this uncertainty in the artist community. Um, but I would say it's very natural and it's something that, uh, happens when you see huge changes. I mean, it's certainly happening in Uber and like Airbnb and all of these places as well,

SPEAKER_31: that the ecosystem is just going through this massive transition, but it's been a complete

SPEAKER_17: failure title. Is that, why is it a complete failure? Cause people won't pay for high bit

SPEAKER_40: songs. No, I mean, I, I think that it's a bad product. No, it's a totally okay product. I think a fail, you know, failure, it's completely okay. Yes, it's completely okay. Um, no, but I think

SPEAKER_30: this is the way I think about it. Um, the truth is, uh, that very, very few music services like we talked about have gone into scale and material traction. It's really, really hard. Yeah. So coming in quite late into the game, um, with a product that's okay, but not fantastic. Yeah. It's not going to cut it. Um, and I think what, what the tech world has shown time and time again is if you're coming into the market, leveraging distribution or some other mechanics, um, that's not the hard thing to solve for. What you need to solve for as an entrepreneur is you need to make your product 10 times better than number two, then you've got a real chance. Anything else,

SPEAKER_76: um, and you're likely not going to get very successful at all. Now, what about high bit rate

SPEAKER_82: music? I mean, um, I downloaded some flax to see what I was missing. I got a nice speaker

SPEAKER_57: system for my thing. I could tell the difference. I was like, Hey, this flax stuff sounds pretty good. Yeah. Um, do you think the average consumer cares? Do you think we're going to live at a certain point in time, given your gigabit at home for $6 a month and unlimited storage in the cloud? Yeah. Are we going to actually be listening to gorgeous, beautiful, rich, huge, you know, 500 meg songs at some point or gig songs? I like to think so. Like I'm an audio file myself.

SPEAKER_30: Um, so I, I certainly like to think so, but I think it's like very similar to what happened with Blu-ray or even like HDTV versus not. It starts out as this premium offering. It starts out super expensive. It's like a very, very small niche population that gets it. Then it gets priced at like 20% more than it starts getting the masses. And then eventually it just gets priced the same as the old technology before. Um, and that's when you get the mass. How soon are we out from that?

SPEAKER_23: Five years, you think? 10 years? Um, well, it's certainly not because it's technically not possible

SPEAKER_30: to do this today. So, um, I think the largest problem is just that I would like for us to take one step further than just lossless, which is the same CD file. I would like to see if there's a way for us to go back to the original masters and recall them. And, and, which is what Neil Young

SPEAKER_82: is doing, which is amazing. Yeah. He wants to have 50 plus track songs. That would be a gig each or something. Yep. Yep. I mean, he played them for me in his car and it was amazing. Yep. You can tell

SPEAKER_99: the difference. Yeah. That's a pretty cool experience, by the way. One of my great ones. He drove you around in the car. Yeah. He picked me up at the airport and drove me around in his car and we were listening to music. That was, yeah. He drove me around his like ranch and I was like, I'm in a

SPEAKER_95: car with Neil Young. Yeah. And he's playing me music. That sounds awesome. Yeah. My life is pretty

SPEAKER_292: good right now. Yeah. That's exactly how I felt too. Right. You're just like, wow, this is surreal.

SPEAKER_82: Yeah. Um, well, listen, continued success with it. Thank you for being so open and honest and telling your story here and congratulations on, you know, all of our friends have failed at this and you've succeeded. And I think for that, you know, I think we all admire, you know, your wherewithal and your partner's wherewithal and making a product that we all just love. I know everybody here loves the products. A big round of applause for Daniel, please. Thank you guys.