Creative Entrepreneurs: Founders of Spotify

Developed 13 years ago in Sweden, the world’s biggest streaming platform, Spotify, gives access to more than 40 million songs today. It boasts 200 million active users in 78 countries, including 87 million paying subscribers, and has turned its founders into billionaires in the 11 years since its launch in 2008.

The founders of the business, 35-year-old Daniel Ek and Martin Lorentzon, 49, have an estimated net worth of $2.2 billion and $3.7 billion respectively. However, it wasn’t all plain sailing for the two entrepreneurs, who had to work hard to get where they are today.

What does Spotify offer?
Users of Spotify can benefit from a digital music, podcast and video streaming service, providing access to millions of songs and additional content from artists across the globe. The basic function of playing music is free of charge, but users can upgrade to paid-for Spotify Premium for additional services.

Customers can use “browse and search” to choose what they wish to listen to, build collections of music and receive recommendations from personalised features, such as Release Radar, Discover Weekly and Daily Mix. They can also see what their friends, celebrities and artists listen to and even create their own radio station.

Available throughout most of Europe, Australia, most of the Americas, New Zealand and parts of Asia and Africa, it’s compatible with just about every modern device, including Android smartphones, Windows, Linux and macOS computers, Windows phones and tablets, PlayStation and Xbox One consoles and Amazon Fire television devices.

Users can browse the music, or search using parameters such as genre, artist, record label, album or playlist. You can share playlists on social media or make playlists with other users.

Spotify Premium enables subscribers to download music and listen anywhere, play any song (even on a mobile device), enjoy unlimited skips and listen to non-stop music with no ad interruptions. The paid-for, ad-free subscription is the preferred choice of some 87 million users across the world.

Music playlists have been created that appeal to a wide range of audiences – with more than 40 million songs, there really is something for everyone.

How did Spotify start?
Ek had revealed his head for business from an early age – at 13, he launched his own business from home, making websites for clients. Initially, he charged $100 per website, then raised his fee to $200. He was soon commanding $5,000 per website.

At 18, he was recruiting fellow students from his class to work on the websites in the school’s computer lab, eventually managing a team of 25 people and reportedly earning $50,000 per month.

Lorentzon had co-founded the Stockholm-based digital marketing company Tradedoubler in 1999 after completing his degree at the Chalmers University of Technology in Gothenburg and studying economics at the Stockholm School of Economics. As a result of the success of Tradedoubler, he won the 2001 Guldmusen IT-Rookie of the Year prize.

Ek and Lorentzon joined forces in 2006 to work on the Spotify concept. The name came from a combination of “spot” and “identify”, although Ek later said it was an accident, as Lorentzon had shouted out a name which he had misheard.

The duo developed the platform in response to the piracy problems facing the music industry, in an era when controversial file-sharing sites such as Napster were attracting users. These sites were costing the music industry millions of pounds each year because users weren’t paying for the songs.

In an interview two years after the launch, Ek said he believed the only way forward was to create a service that was better than piracy, that would compensate the music industry at the same time.

Rival companies
When Spotify’s success began to grow, other companies attempted to get in on the trend for streaming, setting up their own rival platforms. The main contender was Apple Music, which was launched in 2015, securing exclusive deals with major stars such as Taylor Swift, Drake and Frank Ocean to stream their music first.

While Apple’s iTunes had always enabled users to pay per song or album download, Apple Music introduced monthly paid-for subscriptions, giving service-users unlimited access to a large library of music.

Other platforms have adapted their original business model in a similar way to introduce streaming, with SoundCloud launching SoundCloud Go in 2016. Previously, it had been a platform for new and unsigned musicians and was a popular means for DJs to share their tracks. SoundCloud Go hasn’t yet taken off in such a big way as Spotify, probably because it has only half of the major label artists found on Spotify.

Rapper, songwriter and record producer Jay Z became another rival to Spotify in 2016, when he launched Tidal – his own music streaming service. Most of the music released by Jay Z and his wife Beyonce is available exclusively on Tidal.

Rivalry from Amazon
In November 2018, it was reported that Amazon was poised to launch its debut TV campaign for its music streaming service, Amazon Music Unlimited. The e-commerce giant already has millions of users, but it aims to increase its market share further by persuading Spotify and Apple Music users to switch to its streaming services instead.

Amazon was reportedly aiming to offer a cheaper monthly price for unlimited streamed music. Prior to this, Amazon’s primary business model had focused not on making money from streamed music, but on its retail, web and logistics services, in addition to its Alexa-enabled smart devices.

The company recognises that building any competitive product will support its other business arms, encouraging consumers to use Prime services. Amazon has envisaged that linking its music streaming service to Prime will achieve this goal.

Controversy
In spite of its rise to success, Spotify has endured a few blips on its journey – most notably, it has been involved in public discord with singer Taylor Swift.

Spotify gets its content from major record labels and from independent artists – paying the songwriters, artists and labels royalties for the streamed music. Swift publicly spoke out against Spotify, calling it an “experiment” that she felt didn’t “fairly compensate” the writers, producers and artists.

However, Spotify remained diplomatic, saying they were hopeful she’d be back one day to join them in “building a new music economy” that would work for everyone involved. The singer finally ended her stand-off with Spotify in 2017, after three years, putting all her songs back on the platform.

Future plans
Following its initial launch with digital music, Spotify has been focusing on putting on live events in recent years – something that Apple has also been doing. With hip hop becoming one of the most popular music genres in the world, Spotify is also employing a team to work on live events solely for urban and Latin music.

In addition, Spotify is reportedly making voice-controlled hardware for the car – and it could launch as early as 31st January in India, according to reports in the national press on 18th January. The voice-controlled, in-car music player is being produced in conjunction with international tech company Flex.

It will reportedly provide a Spotify Voice system to rival Amazon’s Alexa, with which the driver and passengers can communicate. The product will cost around $100 and will sync to car stereo systems via Bluetooth. It will house pre-set buttons corresponding to Spotify playlists.

There have been suggestions that the product may be launched on 31st January in India, as a result of an apparently inadvertent announcement on the official India Spotify page. The announcement was subsequently removed, but a report in Variety also suggested Spotify was planning a launch party for its services in Mumbai on that date.

Spotify has announced a global licensing deal with India’s largest home-grown record label, T-Series. India has a population of 1.3 billion people and is the 19th biggest market in the world for recorded music, generating sales of $130.7 million, according to the International Federation of the Phonographic Industry.

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