The Spotify Play

by Sven Carlsson

  About a third of Spotify’s now four thousand employees worked in Sweden, where the company had new headquarters. The newly constructed building, covered in copper-colored panels, spanned eight floors on Regeringsgatan in central Stockholm.

  A few months after the IPO, Spotify invited members of the Swedish press to an “open house,” to have a look around and meet some of the company’s executives.

  The lavish interiors included rooms for karaoke, pinball, ping pong, and even arts and crafts. It also featured a stage for presentations and performances, as well as a state-of-the-art music studio. Its sprawling roof terrace offered a view of the whole city; from the downtown skyscrapers to church spires in the Old Town and islands far out in the Stockholm archipelago. In the foreground was the Royal Palace and the island of Skeppsholmen, where Daniel Ek had taken countless walks to mull over difficult decisions with Martin Lorentzon and his top-level managers.

  The gray, concrete high rises in Rågsved, where Spotify was given its name, were out of view. But looking northeast, the guests traced the journey from a small startup to a global company. Spotify’s first offices—on Riddargatan, Humlegårdsgatan, and Birger Jarlsgatan 6—were all located in the upscale area of Östermalm. Looking north, they could see the spire from Johannes church in central Stockholm. Right behind it was Jarla House, where Spotify had matured and become the world’s largest music-streaming service.

  A few floors down, on the main stage, Daniel welcomed the visiting journalists. He sat down on a bar stool next to a delegation of his top directors and declared this an opportunity for a presentation followed by open questions. The few dozen journalists saw the moment as a shift for the notoriously secretive company; Daniel was said to dread press events, and rarely seemed satisfied with the published articles.

  “We’ve talked about increasing the transparency within the company and for me, this is a step in that direction,” the Spotify founder said.

  His fluent Swedish bore a faint flavor of American corporate speak. The Spotify press department joked that the company’s official language was “Swenglish,” a peculiar mixture of Swedish with English phrases and syntax mixed in.

  Some in the Swedish business world would argue that Spotify was in fact no longer a Swedish company. Its parent company was based in Luxembourg, Daniel’s holding companies in Malta and Cyprus, and Spotify’s New York offices had recently outgrown the Stockholm headquarters in terms of headcount. And the company’s stock was trading on Wall Street.

  “In general terms, I don’t find that very much has changed since the listing,” Daniel said.

  He explained that Spotify’s IPO was the only viable alternative to selling the company. The early investors had to get their final payout.

  “Ten years after launching, we felt it was time to honor that obligation,” he said.

  The soft-spoken Swede had caused another stir within his industry. A new policy, introduced a few months prior, had stated that music with lyrics containing hate speech did not belong on Spotify’s curated and influential playlists. The policy also covered how artists conducted themselves outside of the studio.

  Tracks by the R&B star R. Kelly, who had long been accused of sexual misconduct, were no longer being included in playlists like Discover Weekly. Another banished artist was XXXTentacion, who had been accused of assault, and Tay-K, a seventeen-year-old rapper from Texas who stood accused of two murders. It was not an issue of outright censorship. Their music could still be found in the Spotify catalogue.

  To much of the hip-hop world, the policy made Daniel Ek appear culturally tone deaf. The label executive Anthony Tiffith—known within the industry as “Top”—would call the Swedish CEO and threaten to have his artists, among them the popular Compton rapper Kendrick Lamar, boycott Spotify.

  The feud created fault lines between some of Spotify’s executives. Troy Carter, its global head of creator services, an African American who had been molded by hip-hop culture, felt ready to leave the company if they didn’t rescind the new rules. He was challenged by Spotify’s public policy director, Jonathan Prince, a white Georgetown grad who had once worked at the State Department under Barack Obama.

  A few days after the flare up, Daniel Ek dropped the part of the new policy that regulated conduct and artist behavior. One of XXXTentacion’s songs made a comeback on the playlist Rap Caviar. But Spotify stuck to its decision not to promote music that contained hate speech.

  When the issue came up at the press briefing in Stockholm, Daniel questioned whether he was the right person to decide what might be offensive to African Americans or other groups. He mentioned that Spotify had begun consulting organizations like the Southern Poverty Law Center, a US nonprofit known for its human rights work.

  “My nirvana would be to take a concept that exists in Sweden, more like an ombudsman, and have an ethics board, and distribute the decision making so it’s not just Spotify, but actually a broader group,” the CEO said, adding that the issue was high on his agenda.

  The A Team

  The conflict-averse Daniel Ek was now both a Wall Street CEO and one of the most powerful people in the music world. Criticism and controversy followed his every decision. The same applied internally, within a company that had once been dominated by engineers and small enough to fit in an apartment on Riddargatan.

  As CEO, Daniel had been forced to evolve with his company. Conflicts came with the territory, particularly in a fast-growing, culturally impactful startup like the one he had co-founded. A number of sources interviewed for this book would describe how Daniel had a hard time knowing how to handle dustups among his lieutenants. Nearly a decade after Spotify started making big-name hires, many continued to recount how Daniel would let conflicts fester until the warring parties found their own solution. It was, still, a kind of natural selection in a corporate setting.

  “The atmosphere is toxic at times. Daniel tends to give people overlapping responsibilities, then he lets them fight over who gets to do the work,” as one person would recall.

  Employees further down the hierarchy would sometimes post scathing reviews of Spotify on the employment portal Glassdoor.

  ”No one is actually accountable for anything because virtually all decisions must take place though a bewildering process of group consensus, where people who are ignorant of the topic at hand somehow have just as much of a say as the experts,” one former employee at the New York office would post in November of 2019.

  A handful of executives would depart Spotify following the IPO, among them Troy Carter, Jonathan Prince, Chief Marketing Officer Seth Farbman, and the long-serving communications director Angela Watts.

  Yet many of the old guard remained at the company. Three of them—the chief R&D officer, Gustav Söderström; the head of premium, Alex Norström; and the HR boss, Katarina Berg—were present for the “open house” at the Stockholm headquarters that morning in August 2018. The host of the event was Dustee Jenkins, the company’s new head of communications. She had roots in Texas and had previously worked for the retail giant Target, and for a Republican congresswoman in Washington, DC.

  The number of female executives at Spotify had grown over the past few years. The global head of markets, Cecilia Qvist, was in attendance, as was the managing director for the Nordics, Jenny Hermanson.

  Their message to the journalists questioning the company’s constant losses was the same as it had always been: Spotify would keep burning cash in order to grow and retain its lead over Apple, Amazon, and Google’s recently launched service, YouTube Music.

  Spotify’s free service had gone from berated to tolerated within the music industry, but relations were still tense. Touting Spotify’s ability to convert users from free to paid, Gustav Söderström repeated the company mantra: “The more you play, the more you pay.”

  Then he did something that Daniel would normally avoid: Söderström mentioned several rivals by name.

  “There’s a competitor
in the US called Pandora, which has its own challenges. You can’t put YouTube Music in your pocket. As soon as the screen shuts down, it stops playing the music if you’re a free user. Apple Music has no free tier whatsoever.”

  The Nod

  Three months after Spotify’s “open house,” Daniel Ek had his people set up a meeting that would kickstart the company’s push into podcasting.

  It was late November, the week of Thanksgiving, and two American entrepreneurs had rearranged their holiday plans to fly to Stockholm. The Swedish CEO began by showing the founders of the Brooklyn-based podcasting startup Gimlet Media around the new headquarters.

  The Gimlet founders, Matt Lieber and Alex Blumberg, were two middle-aged finance and radio veterans. They were welcomed by Daniel—dressed casually in sneakers, jeans, and a black t-shirt—and shown into his office for an open conversation about Gimlet’s business.

  Lieber and Blumberg told him about the company, which had been founded in 2014 and had since built a catalogue of popular, expertly produced podcasts such as StartUp, ReplyAll, and The Nod. Gimlet had built a strong brand but was struggling with its finances and pressure from shareholders to drive up its valuation. The founders hoped that Daniel might be able to solve their problems.

  Toward the end of the two hours, Daniel asked a question that caught his American counterparts off-guard.

  “I just have one more question for you,” he said. “What would you do if I gave you a billion dollars?”

  The Gimlet founders were stunned, as they would recall in an episode of StartUp. They struggled to come up with strong ideas on the spot. Their boldest proposition, put forth by Alex Blumberg, was to get into the news industry and build an organization like the New York Times, but for audio.

  Daniel clarified what he meant by the question.

  “I want you to start thinking at that scale,” Daniel said. “Because that’s the scale that we play at.”

  A few months later, Daniel Ek announced the $230 million acquisition of Gimlet. It marked the beginning of an aggressive push into the US podcasting market, in which Spotify would spend a total of $600 million over the course of a year.

  The strategy, laid out by Daniel in an open letter, was to make Spotify an “audio first” platform while competitors such as Apple and Amazon were expanding rapidly into video.

  In 2019, Spotify would acquire the digital podcasting platform Anchor, the true-crime production studio Parcast, and, in February 2020, the ESPN veteran Bill Simmons’ lauded sports and entertainment network, The Ringer.

  Exit

  With the IPO fading from memory, Barry McCarthy’s time at Spotify had begun to wind down. Toward the end of his tenure, in late 2019, the normally outspoken CFO started making statements that were even more bold than usual.

  Now in his mid-sixties, Barry used his final months to talk up Spotify’s underperforming share price and speak freely about his industry’s dynamics. He revealed that Spotify aimed to double its share of ad revenues from ten to twenty percent. He also praised a beta version of a forthcoming streaming service being built by ByteDance, the parent company of the wildly successful social network TikTok. In a surprising admission, he said he had seen screenshots of the app ahead of Spotify’s launch in India.

  Barry presided over seven public quarterly reports as CFO. When the seasoned executive eventually stepped down in early 2020, Daniel Ek sounded fully comfortable on conference calls with Wall Street analysts. In fact, he sounded as calm and collected as the Netflix veteran who had schooled him.

  The House That Daniel Built

  THE FIFTH EDITION OF BRILLIANT Minds was the most star-studded to date. On the first day, press photographers captured Daniel Ek, wearing a bomber jacket and sneakers, walking up the street toward the back entrance of Stockholm’s Grand Hotel. It was June 2019, and the Spotify founder was now thirty-six years old, whipped into shape from all the hours at the gym, and nearly $3 billion richer than when he founded his company in a small office just a few blocks away.

  A few paces ahead of him was Shakil Khan, the man who had once made Daniel his protégé. Despite any turbulence in his private life, Shak had remained one of Daniel’s true friends. The Brit had shown him the glamorous world beyond Sweden at a time when Spotify’s servers still hummed in an overheated closet. He had served as the trusted adviser who saw early potential in the Swede, becoming rich in the process. Shak’s many years of air travel, business meetings, and partying had culminated in a heart attack two years prior. He had now recovered and was living a healthier life.

  Daniel, too, had paid a price for his success. He was living under protected identity, a service that Swedish authorities offer to people subjected to personal threats. A year had now passed since Spotify’s much-publicized listing in New York. The share price had gone up during the first few months, only to fall back down as the stock markets began a general slide. Eventually, Spotify was forced to start buying back its own stock to stabilize the price. Since then, Daniel had delivered the company’s first-ever profitable quarter. On any given day, Spotify’s market value remained well above $20 billion, a level that had once been unthinkable.

  Daniel Ek arrives at Brilliant Minds in June of 2019.

  Ahead of him to the left is his friend Shakil Khan. (Alex Ljungdahl / EXP / TT)

  Yet Spotify executives remained frustrated with their greatest competitor. A few months prior to Brilliant Minds, Daniel had initiated his first public campaign against Apple. He and the Spotify management had called out how the tech giant tilted the playing field to disadvantage smaller rivals. In February, they had filed a formal antitrust complaint against Apple with the European Commission in Brussels, and launched a campaign website called timetoplayfair.com.

  Now, nine years after his shadowboxing with Steve Jobs, Daniel finally dared to call the Apple founder out by name.

  “It’s fairly widely known that Steve Jobs initially wanted only Apple content on the App Store,” he said during a conference in Berlin.

  Speaking to several heavyweights in European politics, Spotify’s co-founder outlined his version of how the app economy came to be.

  “What initially felt like a mutually beneficial partnership increasingly felt very one-sided. And it’s now become completely unsustainable,” he said.

  Daniel Ek had unquestionably become a public figure. He nodded confidently and clasped hands with passersby before he and Shak vanished through the heavily guarded entrance, and out of the journalists’ reach. A few hours later, the event’s CEO, Natalia Brzezinski, would interview Barack Obama on stage. The former president was the reason security was extra heavy on this overcast Thursday afternoon.

  The aim of Brilliant Minds—which was now financially supported by influential Swedish business families like the Stenbecks, Wallenbergs, and Olssons—had always been to create an environment similar to the World Economic Forum in Davos, but for people within tech and the creative industries. Yet unlike Davos, Brilliant Minds was now completely shut off to the media. Curious reporters had to rummage through Instagram to find shaky mobile footage capturing how the Swedish teenager and climate activist Greta Thunberg lambasted the participants for not taking global warming more seriously. A few hours later, the Wallenberg cousins hosted an exclusive dinner in their stately home on the royal island of Djurgården in central Stockholm.

  The distinguished guest list led to extensive coverage in the Swedish press. The tabloid Expressen held a live video broadcast outside of the hotel entrance, catching glimpses of celebrities as they hopped into waiting cars. In-depth coverage was largely lacking. Several critics would turn against what they saw as a members-only club for the business elite. The contrarian columnist Johan Hakelius called the attendees “billionaire zombies.”

  Daniel Ek had revived a global industry and built Europe’s greatest tech company. His work continued to inspire a generation of new entrepreneurs. Yet in his home country, the Spotify CEO was not a widely
beloved businessman. His message, that millions of musicians should be able to make a living off of their work, had not taken hold. And his lifestyle often went against the grain of core Swedish values of humility and modesty. In Sweden, the ideal entrepreneur was still IKEA’s late founder Ingvar Kamprad, famous for his “penny saved, penny earned” mentality.

  The Suburbs

  On the same day that Daniel and his friend Shak attended Brilliant Minds, Swedish newspapers were full of reports about the Spotify founder’s new three-story house in Djursholm, the exclusive suburb where his wife had grown up. Recently, Daniel had applied to have the 430 square-meter villa, erected in the late 1800s, torn to the ground. Just before he arrived at Grand Hotel, word had gotten out that local authorities had rejected the application.

  Daniel and Sofia had purchased the house a few months after Spotify was listed on the stock exchange. The price tag of more than $7 million made it one of Sweden’s most expensive residential real-estate deals of 2018. Their arrival in Djursholm—an area comparable to the wealthy parts of Connecticut, outside New York City—would place the young couple right alongside Sweden’s old-money elite. Several of the Swedish tech world’s self-made billionaires would follow suit.

  The house, located on a hill near the water, was crowned with a tower room offering a view in all directions over northern Stockholm. From there, Daniel and Sofia would be able to overlook the golf club to the north and the marina to the east. Looking west, beyond the Djursholm castle, was the area where Sofia grew up. The couple’s daughters would go to school with the children of some of Sweden’s most powerful families, just like Sofia once had. But unlike their mother, the Ek children would belong to one of Djursholm’s wealthiest families.

  News of the Eks’ new home was soon reported in the Swedish press.

  “When I saw the headlines, my first thought was that Sofia was avenging her time in high school,” as one person would recall. “To truly do that, you have to be in the same environment, and play by the same rules.”