Around the same time, Taylor Swift published an open letter with the headline “To Apple, Love Taylor” on her Tumblr page. In it, she explained why she had chosen to withhold her album 1989 from Apple Music, too. She wrote that Apple was set to skip royalty payments during their free trial period of three months. The letter implied that Apple had struck a much more favorable deal with the labels than Spotify, which had to pay every time a free user streamed a song.
“I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company,” Taylor Swift wrote.
What followed was an amicable dispute, in full public view, so formulaic in structure and tone that it appeared choreographed. Apple backed down the very same day. A few days later, just as Apple Music was about to go live, the parties had sealed the deal. Artists and songwriters would get paid, and Taylor Swift agreed to license the rights to 1989, which neither Daniel Ek nor Jay-Z was allowed to stream.
“This is simply the first time it’s felt right in my gut to stream my album. Thank you, Apple, for your change of heart,” Taylor Swift wrote, this time on Twitter.
Later, Jimmy Iovine would tell the press about his efforts to get Apple executives to side with music creators.
New Rules
A couple of days after Jimmy Iovine had presented Apple Music, Daniel Ek took a short morning walk to Stureplan in central Stockholm. It was the beginning of summer and the Spotify founder wore a green polo shirt, jeans, and white Air Force One sneakers.
Earlier that year, on Valentine’s Day, Daniel and Sofia had gotten engaged. A few weeks later, their second daughter, Colinne, was born.
As he stepped into the lobby of the Swedish telco Telia, Daniel appeared calm and reflective. He was there to meet three journalists from the Swedish financial newspaper Dagens industri. The Spotify CEO seemed happy to chat off the record, but appeared more guarded when the recording began. To one of the journalists present, he seemed to weigh his words carefully, eager to tone down the fact that Apple had just raised the stakes in music streaming.
“I don’t think you have to be number one to succeed. For me, it would be enough to be one of the top three,” Daniel said, showing a humility that many of his close coworkers and friends would not take at face value.
That morning, the financial press was awash with details of Spotify’s latest round of funding. The company had raised more than $500 million. A significant part of the money came from Telia, which led to the interview alongside Telia’s CEO. However, Daniel wasn’t very interested in talking about the money he had just raised.
“I don’t put too much weight on valuations,” Daniel said when asked about Spotify’s new price tag of $8.5 billion, which would be nearly four times as much as his loss-making company’s revenue that year.
The sheer magnitude of Spotify’s operation belied its CEO’s humble talk during interviews. It was now a darling of the venture capital world, where being on top was the only game in town. Later in the interview, Daniel began to sound a little more confrontational. He expressed surprise at the fact that Apple’s shift to streaming had taken so long and stressed that Apple Music was a sign that music streaming had finally become a household phenomenon in the US.
“It is a big validation of what we really have been saying for seven years, that the future is in streaming. Now the biggest company in the world is saying that they agree,” Daniel said.
For many, Apple Music would initially prove a disappointment. About a week after the launch, The Verge reviewed the app, noting that the interface was messy and the loading times long. Jimmy Iovine would remain dissatisfied with the product for months, one person would recall. He would consider the first six months in the market a waste of precious time.
Meanwhile, Spotify launched two new batches of features over the summer of 2015. One of them—containing the more advanced parts of the Moments update—would turn out to be a flop. The other would become Spotify’s most successful product launch to date.
Dressed for Success
After a few frustrating months, Spotify’s recommendations team in New York was finally able to test their AI-powered playlist on a larger group of listeners. In April 2015, they released Discover Weekly to nearly one million listeners around the world, and a few of them tweeted about the accuracy of the curation.
“Best 3 weeks of music I’ve ever had. Feel free to come back any time,” one user tweeted after their three-week test run ended.
Daniel Ek, however, remained skeptical. He initially questioned the format of a curated playlist, and he was reluctant to allot more resources to the project team. But his doubts weren’t enough to stop the wider launch. A few weeks into the summer, Spotify presented Discover Weekly to the world. It soon became a user favorite in Sweden and the US.
“It’s scary how well Spotify Discover Weekly playlists know me,” as one listener wrote on Twitter.
Within ten weeks, the new playlist had generated a billion individual streams. In the fall of 2015, Spotify surpassed Pandora in active users. After several years of experimentation, technology-powered music curation had paved the way for a new era in Spotify’s history. Daniel Ek would soon celebrate the playlist on his quarterly call to investors.
Data from playlists created by users had once again proven their worth to Spotify. Discover Weekly ushered in a new era in which Spotify began to program an increasing share of the music listening on the platform. The following year, Spotify unveiled Release Radar, a playlist that sampled new releases tailored to the user’s taste every Friday.
Several others would follow. Rap Caviar and Today’s Top Hits would soon become Spotify brands in the music world, with the power to breathe new life into the careers of established artists and catapult newcomers to stardom. These were not the themed playlists intended specifically for “the gym” or “dinner parties,” for which Spotify had previously been known. They were curated playlists, put together in part by algorithms and in part by Spotify’s music editors around the globe. An outside observer would have to credit Beats for inspiring this development but—crucially, and true to Spotify’s DNA—much of the work was done through automation.
By 2016, Spotify had become the preeminent tastemaker in digital music. Millions of listeners grew closer to the brand, feeling like Spotify understood their taste. In many cases, they no longer had to scavenge for the best songs. The best songs would now find them.
Spotify’s product division drew valuable insights from the data that Discover Weekly generated. The machine-made selections carried a bias: The playlist tended to contain music from independent labels, rendering the major labels underrepresented compared to Spotify’s catalogue as a whole. That meant that the product arm of the company had the power to greatly, and over the long term, influence outcomes within the industry. Not least, Discover Weekly could kickstart careers for unproven artists. Spotify could even use this power to replace the talent scouting that had traditionally been done by record labels.
The insights garnered from the new playlist machine would form a central part of Spotify’s business strategy. But the coders in New York who had initiated the project in late 2014 felt they never received recognition, as one person would recall.
In the months that followed the launch, neither Daniel Ek nor Gustav Söderström reached out to the coders who had created the playlist. Over the next couple of years, the architects behind Discover Weekly would move on to other companies like Amazon and Google’s artificial intelligence unit DeepMind. They left Spotify feeling like they hadn’t been given credit for their work.
Creep
Moments’ collection of features was not fully launched until mid-August 2015. Spotify now went public with its new privacy policy, requesting access to photos, GPS coordinates, and contacts on the users’ phones. In addition, sensor data would tell Spotify how fast the device was moving, and thus if the user was walking, running, or traveling on the subway.
Spotify’s expanded data collection quickly garnered criticism in the media, with many users and experts viewing the new terms as intrusive. It was one thing, they would argue, to share one’s location with Google Maps to navigate while driving. The necessity of sharing the same information with a music-streaming app was not nearly as apparent. Wired called the new policy “eerie,” while Forbes’ judgement was “real creepy.”
The Swedish billionaire Markus “Notch” Persson, creator of the wildly successful Minecraft computer game, addressed his compatriot Daniel Ek directly on Twitter.
“As a consumer, I’ve always loved your service. You’re the reason I stopped pirating music. Please consider not being evil,” Notch wrote, referencing the infamous “Don’t be evil” phrase found in Google’s code of conduct.
Daniel had failed to gauge how sensitive the privacy issue was becoming. Concerns over aggressive data collection would not peak until after the 2016 US presidential election. Even so, the Spotify founder felt compelled to correct the misstep by publishing a post on the company’s blog. He emphasized that the online furor over Spotify’s new policy largely failed to understand that the company merely was asking for access, not demanding it. Spotify would only collect photos, contacts, and location data, he wrote, if the users expressly asked them to. The purpose, Daniel wrote, was for users to be able to customize the cover art for their playlists or find music that people nearby were listening to. The sensor data was intended to power Spotify Running.
During the fall, the product team began to roll out the Moments features that had been lavishly unveiled a few months prior. They started, as usual, by trying them out on about one percent of Spotify’s now seventy million users. This test group could now view videos and use the app as their running companion. Members of the product team noticed two alarming signals in the incoming data: the users exposed to Moments were spending less time in the Spotify app, and tended not to return to it to the same extent as ordinary users. According to one person, users appeared to balk at Spotify instantly playing a song as soon as they opened the app.
“It’s like the app starts playing something people didn’t even want to hear,” that person would recall.
In the end, only a small part of the Moments package reached Spotify’s entire user base. The features that survived were Spotify Running and the themed playlists. The video clips, a $50 million outlay, appeared briefly for some users but soon disappeared completely. In Sweden, content from the popular TV duo Filip & Fredrik was only streamed a few thousand times, according to a person familiar with the figures. Many years later, the product department would scrap Spotify Running once and for all.
The botched revamp of the app did, however, mark the beginning of a new content strategy. Spotify’s content team had, since late 2014, been talking about how to develop original material. Several early productions from Netflix—including House of Cards and Orange is the New Black—were showing significant promise. Netflix’s stock had soared on Wall Street since they first began to air.
The head of Spotify’s content team was now Swede Stefan Blom, who had taken over when Ken Parks left the company. Blom’s team was mulling what kind of content Spotify might start to develop on their own. Betting big on exclusive music seemed like a dead end, and long-form video had its own limitations, as the failed Spotify TV project had proven. By late 2015, they also noted how the short-form videos included in the Moments update largely failed to gain traction.
There was, however, a growing media space that seemed appealing. Podcasts had been around for over ten years, but the medium had only recently begun to gain mainstream appeal. Serial—a pioneering title in the true-crime genre, which launched in 2014 by producers at This American Life—was the prime example. Another producer who had worked for This American Life, Alex Blumberg, was building the Brooklyn-based production company Gimlet Media. Suddenly, startups were popping up in the podcast space.
It would be years before Spotify began to pursue this opportunity with any urgency. Daniel Ek’s ambitious but failed bets on video had forced him to focus on getting his core business in shape for the IPO. But once that was out of the way, Spotify would begin to add more podcast titles and start experimenting with exclusive launches. The idea was partly to distinguish the service from competitors, but also to start building a catalogue that could become more lucrative than music licensed from major record labels.
Soon, Daniel would enlist the help of one of the sharpest content strategists around. In the fall of 2016, Ted Sarandos—Netflix’s long-serving chief content officer and one of the most powerful people in Hollywood—joined the Spotify board.
Brilliant Sweden
WHEN SPOTIFY CELEBRATED TEN YEARS as a company in April 2016, streaming had just become the largest source of revenue for the American music business. Growth had returned to an industry that had been shrinking nearly every year since 1999. Daniel Ek’s promise to the label heads—that he would revive the industry—was now fulfilled. The music service founded in Rågsved in 2006 had thirty million paying customers, nearly three times as many as Apple Music.
Spotify’s origin story often revolved around its celebrated founder Daniel Ek and his coming-of-age in Sweden. He would frequently laud his nation’s public music education—where he learned to play instruments—and muse on how the means of distribution, which would save the music industry, came from the very nation where piracy had been so rampant.
Yet the Spotify CEO had an ambivalent relationship with his home country. He was operating in a global market and struggling to recruit the talent he needed in a country that didn’t always make things easy for him. Stock options, a vital incentive for hirers in the technology industry, were taxed higher in Sweden than in other countries. Stockholm’s persistent housing shortage was another constant problem in trying to lure talented programmers to the Spotify head offices.
Change was already underway. During 2016, Spotify’s new CFO, Barry McCarthy, began to move the company’s finance department to New York—where he planned to execute his still highly secretive plans for a public listing. Representatives for the Stockholm stock exchange, which was owned by Nasdaq, regularly courted Spotify to see if they would be interested in registering there. They even offered a dual listing in Stockholm and New York, but it was clear from the outset that the Spotify leadership had their eyes set elsewhere.
Meanwhile, a tug-of-war was underway inside the company over which cultural norms should be given priority. Two strong advocates for keeping the company’s Swedishness were Martin Lorentzon and Katarina Berg, the head of HR. Katarina was not a typically Swedish, consensus-oriented leader—she often let underperforming employees go—but she was eager to preserve the company’s Swedish heritage. And then there was Barry McCarthy, who ruled with an iron fist, American-style, and rarely held back in expressing controversial views. Daniel seemed to think Spotify could combine the two sets of values and forge its own style.
Changes
In June 2016, staff laid out a black carpet that circled the block of the swanky Grand Hotel on the Blasieholmen peninsula in downtown Stockholm. On it, pictures of a few dozen famous Swedes were imprinted: Greta Garbo, Zlatan Ibrahimović, Max Martin, Alicia Vikander, Hans Rosling, and many others. The carpet ran from the entrance to the hotel, across from the Royal Castle, up to its back entrance, leading into the lush Winter Garden event space, with its glass ceiling and stone pillars.
In a conference room on the first floor, Daniel Ek was about to welcome mostly foreign journalists to a celebration of Sweden’s exalted position within popular culture and technology.
“For me, this is about paying it forward,” the Spotify founder said, seated at the front of a lounge with powder-pink colored walls.
The thirty-three-year-old, by now an icon of the modern Swedish business world, had begun to understand how he might exert his influence. Over the coming years, Brilliant Minds would be his way of positioning Spotify in the socie
tal debate, while promoting Sweden as an exciting place to live and work. “Welcome to the creative capital of the world,” read the banner behind him during this introductory press conference.
Tickets to Brilliant Minds were not freely available. The price, for those who had their applications accepted, was said to be thousands of dollars. But most participants had been specially invited by Daniel or his co-organizer Ash Pournouri, a music manager who rose to fame with Tim “Avicii” Bergling, another superstar of the contemporary Swedish music world. The guest list was handled by Natalia Brzezinski, the chief executive of Symposium, the annual week of events that culminated with two days of the Brilliant Minds conference. The trio had created a forum that brought together the upper echelons of Swedish corporate and cultural life, old and new. The three of them sat at a long table in front of the gathered journalists.
The room listened intently as Daniel spoke. He recounted how people abroad often would ask him how Sweden had managed to produce not only H&M and IKEA, but also a wave of young tech companies with valuations in the billions. He mentioned the Swedish gaming company DICE, which created Battlefield after being acquired by Electronic Arts, and Minecraft, created by Mojang at their offices in Södermalm. Switching to music, he brought up Spotify, SoundCloud, and Tidal.
“It’s something in the culture, more than anything else,” he said, pointing to Sweden’s heritage within technology, tradition of wealth redistribution in politics, and appreciation for the importance of creative industries.
“The only way to experience it is by getting people to come here.”
Attendees at Brilliant Minds 2016 included Google’s former CEO Eric Schmidt, the Swedish actress Noomi Rapace, and Marcus Wallenberg, the chairman of the leading Nordic corporate bank SEB. The conference gave Daniel Ek the chance to showcase the business models of the future. Several Swedish startup founders, such as Zound’s Konrad Bergström and Niklas Adalberth of the fintech unicorn Klarna, were also present. One constant theme was how Sweden’s welfare system worked to encourage risk taking.
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