The Spotify Play

by Sven Carlsson

  Martin Lorentzon was fired up about the launch, one person would recall. The co-founder realized that Tidal’s business model might become an existential threat to Spotify. If artists suddenly started demanding a stake in their distributors, and started releasing music exclusively, the market would change. Perhaps music catalogues would scatter across various streaming alliances, like the fragmented world of online video.

  Things began to look even more contentious when—later the same year—the rock legend Neil Young, a friend of Daniel Ek’s, pulled his music from Spotify but kept it available on Tidal, citing the inferior sound quality. Skeptics, however, figured Neil Young was only out to market his own service, PonoPlayer, which offered high-fidelity audio and music files for download.

  Daniel also worried about the state of the rapidly changing market. He had always resisted a strategy based on artist relations and exclusive releases, yet that was precisely where both Apple and Tidal were now headed. The Swede thought that such a model would never scale. But he needed to find a way to distinguish Spotify from its growing number of US competitors.

  Big Data

  THE “WINTER” THAT SPOTIFY HAD long been anticipating arrived in the spring of 2015. Competition was now coming at them from all angles. Amazon and Google had expanded their streaming services, and while Tidal’s subscriber base was well below the one million mark, its strong ties to genre-defining artists rendered it a constant threat.

  In addition, a forthcoming launch from Apple—some sort of revamp of Beats Music—loomed on the horizon. The iTunes Store already had around eight hundred million customers, most of them with registered credit cards. While Spotify was the market leader in streaming, iTunes dwarfed their roughly twenty million paying subscribers.

  Yet with size came scrutiny. Apple’s ties to the major labels now faced more criticism than ever before. Four years after Spotify’s dramatic entry into the United States, the tech giant was still suspected of counteracting streaming services. During the spring, the European Commission, the US Department of Justice, and the Federal Trade Commission were all reportedly looking into whether Apple had joined forces with the music industry to counteract offerings such as Spotify’s free tier.

  Meanwhile, Daniel Ek was busy sharpening Spotify’s product. His latest pitch to users and investors was not only to serve up “music for every moment,” but also for every mood.

  “If we notice that you’re driving faster than usual to work, we’ll adjust the music to that mood,” he told a group of investors visiting Jarla House in the spring of 2015, according to one person.

  To achieve this, Spotify needed to know where their users were and whether they were standing still, running, or traveling by car. One of the latest catchphrases in the tech industry was “big data,” and Spotify was about to start gathering more information from their users’ phones than ever before. Daniel understood the value in knowing more about the listeners. Spotify’s extended data collection would form part of a big product launch, scheduled a few weeks before Apple was due to unveil its new streaming service.

  While the vision for the revamp belonged to Daniel Ek, the execution largely rested on Gustav Söderström. Fully aware of the high stakes, the duo’s aim was to offer their user base an entirely new way of using Spotify.

  “This is do or die,” Gustav told his team as the launch date approached.

  You Don’t Know Me

  The pending transformation of Spotify, where the interface would truly let the user lean back, had the working title “Moments.” Whether users were partying, relaxing at home, or hosting a dinner, the new features were designed as a soundtrack to life’s every moment. The idea was to cover as much of the listener’s day as possible, with playlists like “Deep Sleep” and a brand-new catalogue of podcasts intended to secure user engagement outside of regular music hours.

  The product team had strived to target their recommendations using location data. A user who appeared to be on vacation in Los Angeles might want to hear “Going Back to Cali” by Notorious B.I.G. For that to work, Spotify needed to ask users to hand over their GPS coordinates. One especially bold idea was to let Spotify play its recommended track instantly, as soon as the user opened the app. The product team was confident their music recommendations would hit precisely the right note.

  The athletic Gustav Söderström was particularly excited about a new feature called Spotify Running. To develop it, his staff had turned a nondescript room in Jarla House into a test lab. A visitor peeking in would recall seeing a Spotify coworker running on a treadmill, wearing headphones, while colleagues studied a computer screen nearby. The employees were testing software that matched the music to the pace of the jog within a few seconds. Spotify Running, which was being developed together with Nike, fed off of sensor data showing how fast the user’s smartphone was moving.

  The wide-ranging update of the Spotify app, due to be presented at a dimly lit studio in Manhattan, was partly the company’s answer to the music curation Beats Music had brought to the forefront. Beyond that, it was a way of thwarting whatever Apple was about to present after their acquisition of Beats one year prior. The final component in the “Moments” revamp was an integration of video into the app. Shiva Rajaraman—who had shuttered the Spotify TV project only a few months earlier—had licensed video content in both Sweden and the US.

  While planning its most ambitious product launch to date, Spotify CFO Peter Sterky had been instructed to secure new funding for the company. Spotify was growing at a healthy pace, and Apple’s acquisition of Beats had confirmed that streaming was the future of the industry. Investors were easier to come by than during Spotify’s early years, but Peter approached them with a big ask: He wanted to double the company’s valuation to a whopping $8 billion.

  Dancing Machine

  As Spotify rushed to launch Moments, a few of the company’s most gifted coders found themselves without much to do. The tight-knit team, based at the company’s West 18th Street offices in New York City, were specialists in machine learning. Some of them had conducted doctoral-level research before joining Spotify to build music-recommendation tools. Their algorithms powered “Discover,” the section where listeners could find new songs and releases. But their remit had shrunk during the latter part of 2014. Most of the features they had overseen were now being developed outside of Boston, at the offices of Echo Nest, Daniel Ek’s most recent acquisition.

  Yet the AI specialists in New York were gifted and ambitious. They began to skunkwork—the tech world’s term for engineers experimenting on pet projects without clearance from above. Toward the end of 2014, two likable, low-key team members—Edward Newett and Chris Johnson—began to delve deeper into one of the ideas. They wanted to package their usual music recommendations as a playlist. Now, they challenged themselves to test which of their methods would render the best selection of music, resulting in a playlist tailored to the taste of each user.

  At their disposal were a handful of tested ways to recommend music. One way was to pair the user with a listener that shared a similar listening history. Their system, built on massive troves of listening history, in part resembled how Netflix would recommend films and TV shows, or how Amazon would rank all manner of physical goods on its website. Another way to recommend music was to analyze the waveforms of songs to match them with music of a similar tempo, structure, and intensity. But the third way to recommend music yielded superior results.

  Just as when the team had constructed Spotify Radio a few years prior, it relied upon the now approximately 1.5 billion playlists created by Spotify listeners themselves. Most were a collection of music that somehow fit together, whether by sound, theme, or mood. When the recommendation team fed the engine with that data, it came up with a machine-powered selection of songs that somehow felt organic.

  To confirm their findings, Edward and Chris placed a request to test the playlist in-house, on other employees. Their new boss, Matthew Ogle, moved
the new, personalized playlist to the top of the employee-only playlists in the Spotify client. The decision paid off immediately.

  “It’s as if my secret music twin put it together. Everything in it is good,” one of the early testers wrote. The recommendation team and a few product designers decided that the playlist could be released every week, like a personal mixtape. They trimmed it down from about one hundred songs to thirty songs, or around two hours of music, and called it “Discover Weekly.”

  Before launch, they would have to perform a live test on real Spotify users and study its performance. Just a few hundred thousand users scattered over the world would be enough. But the product pipeline appeared clogged, and the higher-ups seemed preoccupied with Moments. The skunkwork playlist would have to wait.

  Moment 4 Life

  Weeks prior to Apple’s unveiling, rumors that Tim Cook was about to lower the price of streaming began to emerge. Several outlets reported that Jimmy Iovine and his team were looking at offering their service at five dollars per month.

  Slashing the price of a streaming subscription in half would certainly be a hard sell on his compatriots in the music industry, but Iovine, the newly minted billionaire, was now working for Apple. Cutting the cost of streaming could boost their user growth and put the loss-making Spotify under even more financial strain. The pressure was mounting in what the tech world had dubbed the streaming wars.

  Meanwhile, Daniel Ek entered a brick building on West 37th Street, a couple of blocks from the Hudson River. The Spotify founder was about to deliver his most important stage performance to date.

  The event, held in a former warehouse that now served as a sleek studio space, occurred right between Tidal’s launch and the forthcoming rebirth of Beats Music in Cupertino. More than six months had passed since Taylor Swift ditched Spotify, and Daniel’s messaging around artist compensation was carefully crafted.

  “Spotify is on a mission to bring all the world’s music to all the world’s music fans, in a way that’s great for them and great for all the amazing artists and songwriters who create it,” he said, after welcoming the scores of journalists present and hundreds of others watching around the world.

  A string of neon lights lined the ceiling and floors of the otherwise dark studio. Daniel Ek, now thirty-two years old, underscored that Spotify was not a gang of hostile technicians from Stockholm, but rather a tech company striving to protect the interests of artists and musicians.

  “We’re a technology company by design, but we’re really a music company at heart,” Daniel said, before bringing a few members of his leadership team out on stage.

  Yet it was the non-music elements of the presentation that stood out. Spotify users would soon be able to find podcasts and video clips from ESPN, MTV, and the young channel VICE News. Ilana Glazer and Abbi Jacobson—the star duo from Comedy Central’s acclaimed TV series Broad City—made an on-stage cameo. Several Swedish media companies, among them Kanal5 and the newspaper Aftonbladet, were also on board.

  The scattered collection of video clips had been costly. Two people familiar with Spotify’s financials would recall that Daniel had to clear a licensing cost of around $50 million with the Spotify board. In addition, Daniel had licensed podcasts from the likes of BBC and NPR in order to capture listeners throughout their day.

  “We want Spotify to help soundtrack your life,” he said on stage.

  As far as the music went, Daniel stressed that data was only a complement to what he might have dubbed Spotify’s “heart and soul”: the company’s curators.

  “Of course, we look at data to help figure out what our listeners like. But another key reason for our success is really that we have some of the most talented music experts working to curate the playlists that matter most to our users,” he said, in what appeared to be a retort at the thinly veiled shots being fired from Jimmy Iovine’s camp.

  Spotify’s curators had assembled playlists such as “Workout,” “Party,” and “Gaming” in order for the app to stay relevant in every context. After the presentation, Gustav Söderström told Wired that his team had targeted every slot in the average user’s day.

  “I’d like for users to start Spotify in the morning and not really pause it until they go to sleep,” he said.

  The market leader in streaming was now a music company offering video clips, podcasts, music curation, and a running feature. Afterward, industry journalists surmised that Spotify had tried hard to differentiate itself from Tidal and whatever was coming at Apple.

  “Here are all the new features packed inside Spotify,” the Wired headline read.

  To fully launch all the new features, Spotify would soon request access to more user data than ever. Before that happened, Daniel Ek would watch as Apple unveiled its billion-dollar foray into music streaming.

  Release Me

  Two weeks after Daniel Ek pitched the future of Spotify to journalists and investors worldwide, Tim Cook took to the stage in San Francisco—and he saved his best news for last.

  “We do have one more thing,” the Apple CEO said, quoting his predecessor’s signature line to the audience’s cheers.

  Cook then cued a lavishly produced video chronicling the history of recorded music, from gramophone recordings to radios, and later to LPs, 8-tracks, cassettes, iPods, and iPhones. The viewer was then transported to the current year, 2015, and the Apple Music logo, prompting Cook to invite another speaker onto the stage.

  “He has worked with fantastic artists, from Bruce Springsteen to John Lennon and countless others. We are happy to have him as a part of Apple’s team. Please join me in welcoming Jimmy Iovine!”

  The sixty-two-year-old Beats founder—sporting his signature blue-tinted glasses, a dark suit jacket, jeans, and dark sneakers—stepped onto the stage to cheers.

  “Thanks, Tim,” he said.

  Iovine pointed out that he was a part of the iTunes Media Store launch in 2003, and that he now hoped to transform the industry one more time. Another artistic film promoting Apple Music, with shots from concerts and young people listening to music on their phones, was beamed from the projectors.

  “There is a need for a place where music can be treated, not like digital bits, but more like the art it is,” the narrator’s voice said. “With feeling and respect and the desire to explore.”

  The voice belonged to Trent Reznor, who suddenly appeared on screen.

  “This is what we will do with Apple Music,” he said.

  The new streaming service offered a complete catalogue, specially composed playlists and recommendations, and a new radio channel, Beats One. It would broadcast twenty-four hours a day and be hosted by DJs in Los Angeles, New York, and London. The heart of Apple Music was declared to be something called “Connect,” where artists would be able to share remixes, photos, song texts, and other content with their fans. Apple’s new service appeared to include a social network. The price was ten dollars per month, but there was also a free trial period of three months. Apple had not lowered the price point for streaming.

  “At Apple Music we will give you the right tune, on the right playlist, at the right moment,” Iovine said, outlining what every streaming service was aiming to do in 2015.

  The price of Apple Music was on par with Spotify’s paid service, although Spotify users who upgraded through the iPhone’s App Store would have to pay three dollars more to make up for Apple’s surcharge. A standing joke at the office was that Apple had made more off of Spotify’s streaming than the company itself.

  At Jarla House, it was long past dinner time on a Monday night. The sun was setting on Stockholm, yet many employees had stayed at work to follow the presentation. This was a moment they had been anticipating for years. Apple Music was only free for trial users, meaning Spotify had maintained its unique advantage of retaining users indefinitely without asking them to pay. During the presentation, Daniel Ek could not help but share how underwhelmed he felt on Twitter.

>   “Oh ok,” he wrote, garnering thousands of retweets before he deleted the swipe at Apple’s new service.

  One thing that gave the Spotify team confidence was that Apple’s software rarely made it big outside of the company’s own devices. Spotify, on the other hand, was built to be ubiquitous.

  “Still, we were nervous. The US market was important for the IPO,” as one source would recall.

  The Spotify staffer with the strongest ties to Apple’s project, Fredric Vinnå, had recently left the company. A year later, he would be recruited to Apple by his former boss, Jimmy Iovine. That made “the Swede,” as Iovine called him, the only person to move from Beats to Spotify and then back to his old gang, now at Spotify’s arch rival, Apple.

  In Cupertino, Vinnå would become Tim Cook’s head of design for music, TV, and podcasts.

  Look What You Made Me Do

  The launch of Apple Music also drew the attention of regulators in Europe and the United States. Apple—which controlled the App Store, the sole distribution platform for apps designed for iPhones and iPads—now offered a competing service in the music space. And the company’s ties to the music industry were still under scrutiny.

  Soon after the launch event in San Francisco, the New York Times reported that the Attorneys General in New York and Connecticut were investigating whether Apple had broken antitrust laws in the US. Some of the investigating legal teams had previously brought the case against Apple that led to fines for colluding with book publishers to drive up the price of e-books, undercutting Amazon.

  The suspicion was now that Apple may have put pressure on, or conspired with, the major record companies to counter “freemium” services such as Spotify. The new antitrust investigation bore similarities to those already underway in the EU and with US federal authorities. In a response to the reports, Universal Music’s representatives commented that they had no deals in place with Apple, or any other record company, which would limit the availability of ad-funded music services.