Speaking on the Freakonomics Podcast (which handily also transcribed the interview), Daniel Ek, Spotify’s co-founder and CEO, spoke at length about the streaming service’s history, its future plans and its relationship with both musicians and music industry.
He talked about his past and why growing up in Sweden in the 1990s – and the country’s backing of broadband for all – was pivotal in shaping his worldview. He also discussed his Damascene moment with Napster. “It brought me this weird sense of very broad music education and quite eclectic taste, which in turn got me even further into music,” he said.
He talked about how the record business before digital was massively underachieving in terms of its global reach and fumbled the ball when Napster came along. “My view is that the music industry has always been excluding the vast majority of its potential,” he argued. “And what do I mean by that? Well, at the peak of the recorded-music industry, 2001, it was about 200m people who were participating in the economy, who bought records. So was it 200m people who were listening to music? No, of course not. That number was in the billions. So what the music industry did fairly well was they priced a product at a premium for an audience that was willing to pay for it. But it only captured a very, very small portion of the revenues.”
In terms of where the industry is now, he repeated the line that it’s never been easier to get your music out there, but it’s also never been harder to get it heard. “Spotify has turned out to be a life-saver for labels,” he claimed. “Spotify has been great for Spotify, and for you. And it’s been great for some musicians. But then there are others who feel that they’re worse off than they would have been.”
He estimated that at the very peak of the record business at the turn of the millennium, only 20-30,000 artists could survive on recorded music income alone; but he felt that streaming is democratising that as the manufacturing and distribution costs have become negligible for many. When asked how many acts can now sustain themselves on streaming income compared to the CD days, he dodged it slightly. “I don’t know what the number is now but it’s far greater,” he said. “Even on Spotify itself, it’s far greater than that.”
Here he is on competing with free and trying to build a paid subscription model. “We think $10 a month is a very, very cheap and an amazing proposition. But the amount of people who wake up in the morning thinking, Hey, I want to pay $10 a month for music isn’t as great as most people would believe. And we believe that is because not only did piracy exist in a big way just a few years ago, but there are all of these other sources where you can access music very cheaply. Mostly free. So you can go on radio and listen to it, but you can also go on YouTube and you can find the entire archive of music, including all the bootlegs and videos and you can listen to that entirely for free.”
He had this to say about India, where Spotify has only recently launched. “It’s not well-monetised. But the music industry is essentially a byproduct to the film industry, which for me tells a very interesting story, that there’s so much development left to do. What would happen if the ecosystem there was healthy? Then people wouldn’t think about making music just for movies.”
There is more to get your teeth into such as the move into podcasting and audio books (“It played really well into our strategy of ubiquity.”), data and privacy (“We’ve taken the stance that we don’t monetise the data itself at all. We don’t sell the data.”) and how, when he started the company, he had a five-year commitment that was slowly extended and he’s now two years into a new 10-year commitment (“What does the company have to look like for me to be interested to do this for another 10 years?”).
The podcast was (we can only presume) recorded before the publication of an open letter to Ek by a collective of songwriters asking him to “do the right thing” and get Spotify to drop its appeal of the royalty rates set recently by the Copyright Royalty Board in the US. So this is not addressed here. But there is still plenty to read (or listen to) in the whole interview, so clear some time today to do just that.