CEOInterviews.AIDaniel Ek, Spotify

I

Interviewer0:00

You have such an interesting early story about how you first got into computers, building websites at 13 years old in Stockholm. I mean, you know, this is definitely something we hear over and over again from people who've built some of the biggest companies in Silicon Valley. You know, they were kind of these rogue kids making money and kind of getting into trouble at a young age. What was it for you that really drew you to technology?

D

Daniel Ek0:24

Well, there's actually a story before starting web pages. I think like many others, early on I had two things that drove me. The first thing that happened in my life when I was four years old is I got handed a guitar, and in my family it was like, you have to play an instrument. There was nothing else. And about a year later I got my first computer, and it was a Vic 20. At the time I didn't know how it worked. I thought it was kind of boring to be honest.

I think a year after that I got a C64, which is, you know, we're talking like when memory was in kilobytes instead of megabytes or gigabytes or terabytes or whatever we're talking about now. And what was really cool about this computer is that it had about 200 games on it. So all of a sudden I'm like, oh, computers are like game machines. That's kind of interesting. Um, so the way I played games was that I had, at the time, you had like tape recorders. Now, I'm going to sound really old.

I

Interviewer1:28

Well, let's just say, by the way, I had a Commodore 64. Actually, my parents were teachers and I was younger than five, so we had no computers, but my next door neighbor had a Commodore 64, and I'm like 10 years older than you. So, like either Sweden didn't get good computers or like you had a f***ing computer as a kid. I sort of had a f***ing computer as a kid. I also loved, by the way, that your parents balanced this out. They were like, 'Here's a guitar. This will get you laid. Here's a computer. This will not.'

D

Daniel Ek1:55

Yeah. That was pretty much what happened, too. So different stages in my life, one had the upper hand over the other one.

I

Interviewer2:06

How is it faring now?

D

Daniel Ek2:08

Well, I've got my girlfriend here, so I'm...

I

Interviewer2:11

Wow, look at that. All right. But sorry to interrupt.

D

Daniel Ek2:15

So it was sort of funny, and this is, you know, I was playing games and I think it's interesting today to kind of look back. So when I played a game, I had a tape recorder that you press play and 20 minutes later the game started. It was really at that level. But eventually I got bored of all the games and I figured, you know, what's now? And I found this book. So I started reading.

And I was incredibly lucky because the first example in the book was how to write a game. So I figured, okay, I'm bored with all these games, so I might just as well try to write my own game. So I did that.

I

Interviewer2:51

And what kind of game was it?

D

Daniel Ek2:52

I think it was like more of a Pac-Man kind of game. And then it sort of later evolved into sort of a flight simulator kind of game, but it's really hard doing that with just one pixel that moves left and right. But hey, I tried.

I

Interviewer3:07

It's like Pong of flight simulators.

D

Daniel Ek3:08

Yeah, something like that. And it just kind of evolved and then one day I sort of asked a friend of the family, like what's the hardest thing you can learn in computers, and the person at the time said well C++ is really hard because it takes like 40 pages of code even to get a mouse moving. And at that point I was sort of hooked. So I was like, okay, well I'm gonna learn this because it seems hard. And I was driven by challenges. So it sort of really started there and it sort of propelled into always doing new things when it was hard.

I

Interviewer3:46

You picked an appropriate field for that. I mean, you picked the field where pretty much no company save Pandora has survived. So, I see this has stuck with you.

D

Daniel Ek3:56

Yeah. Well, I've always done sort of impossible things. So when you fast forward to 1999 I think it was when I discovered Google, I was amazed by it because I was like, wow, this is some really cool technology. So I applied for a job but because I didn't have a university degree they turned me down. And they probably still would because I still don't have a university degree. And I just said, okay, well screw them. I'm going to make my own search engine, and it can't be that hard. And it turned out that it was actually really, really, really hard. So don't try that folks if you ever want to compete. But I think I've always been that way. I think I'm naive enough to think that things will always work out and that I don't really fully understand how hard certain things are. So I kind of get into these almost impossible things. And I think that's kind of one of my big drivers.

I

Interviewer5:04

So is it that, I mean, because it sounds like you're kind of saying two things. The first is that you don't necessarily internalize how hard something's going to be, but the other is when someone tells you you can't do it, it's like, well, f*** you.

D

Daniel Ek5:16

Well, put it in f*** you terms. Um, is this going to get censored after?

I

Interviewer5:23

Oh, no. We've had Ben Horowitz. No, no, no, no, no. Good. In fact, so Reuters was writing up something news from the Chris Sacca one last week and they said like in an exploitative ridden interview, so you can... All right.

D

Daniel Ek5:35

The stage, the bar is set high. That's good. Well, yeah, I mean I just refuse to believe that anything is impossible. I still haven't met, you know, I still haven't walked through life and found that really anything is impossible. And I think, you know, what's amazing is that we have all these companies now in our lifetime that are pushing the envelope. Like, who would have thought a few years ago that we'd have self-driving cars, but we sort of do. Who would have thought that, you know, we had private enterprises trying to send people to the moon. There's a lot of things that people said that was impossible that are now fully possible. And I think you have to be a bit far-reaching in order to truly do something that makes a difference in the world.

I

Interviewer6:24

Um, when you were, you know, early on building all of these websites and, you know, starting your career sort of this, you know, young ballsy entrepreneur, what did your parents think about that? What did your neighbors think about that? I mean, was that very common in Swedish culture?

D

Daniel Ek6:39

No. It was like no one we knew was doing anything entrepreneurial at all. My parents thought it was like a fun hobby and they sort of said, 'Well, that's great, but you should go back to your studies and do that instead.' And my neighbors, I don't know. They didn't say much. I lived in this kind of pretty rough neighborhood. So mostly there was like some black sheets on the window and they were probably growing weed in the apartments and stuff. So they didn't say much about it. I don't think that they even knew what computers were. So I was sort of by myself.

I

Interviewer7:19

Mhm. I've, you know, as you know, I've traveled a lot to emerging markets and interviewed a lot of entrepreneurs who sort of, you know, just had this thing inside of them the way you did. You know, didn't necessarily see other people doing it. And a lot of people have argued that, you know, we take in this country for granted how much entrepreneurship is sort of fundamentally encouraged and people have argued that in other countries you need someone to encourage it, whether it's a family member, whether it's education, or whether it's society. And I'm curious who encouraged that in you?

D

Daniel Ek7:55

Well, I had friends of the family that were always encouraging me and I think I also had my sort of immediate family. While they didn't understand what I did or the fact that you can even someday make a living doing it, they always encouraged me to follow my dreams and do what I wanted to do. So I think I quickly realized that if you do something that you truly love, you'll put the hours and the effort into it into becoming really good at it. And if that's the case, you almost always will figure out a way to make a living doing it.

Um, so I figured that out pretty early on and I don't think I was ever afraid of failure. For me, I was just seeing it as an opportunity and I figured that like if plan A failed, I could always do plan B and start studying or take a job or do that. And I just think that's always been my guiding beacon. Let's figure out how to have fun. And if you have fun in the process, you will put the effort and the time into it. Doing your own company and being an entrepreneur, it's so much more than a job. It's kind of like a lifestyle. It's something you've chosen to do. So you got to pick a problem that you're really interested in, because we're going to be spending, you know, hundreds and hundreds of hours, at least a hundred hours a week, but you're going to spend hundreds and hundreds of hours just sort of starting to figure out what that problem is and trying to define it and defining what the value is that you're trying to solve. So you better be passionate about it.

I

Interviewer9:36

Let's talk about your passion about music specifically. You know, I mean, you wound up sort of very literally merging the guitar and the shitty computer. Now, I mean you and I, in addition to both having Commodore 64s, also sort of share something in like this sort of visceral memory of first seeing Napster. And you know, I grew up in Memphis, Tennessee, which was not a particular tech hotbed. And I mean I just vividly remember like that week we, I was, you know, super young in my career and my now husband and I both like took off work to just, you know, cuz the injunction was coming down and we had like 12 hours to like get as much music off of like a shitty connection as we possibly could. And like everyone we knew, like half of my newsroom and half of his publishing company, called in sick and it was like a gold rush. It was like reminds me like rioting footage where you just see people like, oh f*** the cops are coming, let's grab as many TVs as possible. And I was covering finance at the time and I think that was probably one of the things that like made me really pay attention to the internet in a different way and so many entrepreneurs my age, Napster, not necessarily Netscape, but Napster was that seminal moment because it was the moment when computers, you know, weren't about academics, it was about pop culture and it was like that was kind of the moment when computers and the internet became like our generation's Rolling Stone, MTV. So I'm curious of how you first came across it, what you first downloaded, like what that whole experience was like for you.

D

Daniel Ek11:09

Well, for me it was like I grew up with a single mom who was working in a child care center. So we didn't have a lot of money. I didn't even remember how I first discovered Napster. What I do remember, however, is I was actually not one of those people with a shitty connection because the amazing thing with Sweden is like we got broadband, fixed broadband, like 10 megabits I think in 1998. So I've had it like for years, or even more than a decade now. And what was amazing about it is all of a sudden you have this experience where you could search for any song in the world and they got it. And what I did was that I then, if the person had a fast connection, I browsed all the other stuff that that person had, which sort of became like a filter for more things that I wanted to check out. So, you know, many of the truly great bands I didn't trust what my parents said about what was great music or what other people that were adults thought about music. So weirdly enough, I trusted these total random strangers who had this one song that I was looking for and if they had a fast enough connection, I kind of trusted that there was all these other great music that they also had. So I just ended up like listening to all these amazing, amazing artists. Weirdly enough, a lot of it is like really old school stuff like Led Zeppelin, The Beatles. I kind of had my music education through Napster. And I think that like really shaped what kind of music I'm into at the moment as well, more so than anything else.

But I think the biggest thing that people misunderstand with Napster is that I think Napster was really, if you think about it today, people listen to more music now than ever before and by a bigger diversity of artists. We can no longer, if we go back in time to the 70s or the 80s, we identified ourselves with a certain music taste. But post-Napster, we don't. Because people aren't just into hip-hop. People aren't just into rock music. The truth is, we're probably into a bit of everything. And I really think that Napster cemented that thing.

And over long periods of time, that's what got me into Spotify. I do think that that's something that's inherently good for culture and therefore inherently good for people.

Well, I mean, I keep discovering probably 20, 30 new artists a week. And it's not because like some label sends it to me. It's because of people that I know or that I'm interested in, the kind of music that they listen to, and I just sample it and within 10, 15 seconds I'm like, 'Okay, this is pretty cool. I might, you know, listen a bit more to this.' And that poses new interesting problems. Especially like if you think about it in a world like Spotify, if you got 20 million songs, how do you know which song you're going to listen to? But again, I do think that it's something that's inherently good for culture and thereby inherently good for people.

I

Interviewer15:10

Why do you think it's so inherently good for culture?

D

Daniel Ek15:11

Well, I mean, again, I think any type of, first and foremost, I'm one of those who believe music is something that really does good for people in general. So if you start thinking about it, like if we're sad, we often listen to a song and I at least feel a lot better after doing it.

I

Interviewer15:31

Or sometimes you want to wallow. Sometimes you just want to like feel awful.

D

Daniel Ek15:34

Yeah. But or if I'm pissed off, you know, at a label or someone, I listen to Rage Against the Machine and all of a sudden it's like, yeah.

I

Interviewer15:43

I think that's what everyone does. I was going to say Rage Against the Machine, too.

D

Daniel Ek15:46

Yeah. Well, Rage Against the Machine are good for that.

I

Interviewer15:51

What would be like your, like if you were to do like your first date mix, what would be on it?

D

Daniel Ek15:57

Oh, that's a tough one. I know this is going to sound really cheesy. I probably shouldn't even say this.

I

Interviewer16:05

Well, as long as you played it for her, like if you're playing it for other women, there would be an issue.

D

Daniel Ek16:10

It's true, that's true. Um, well, I think that's kind of funny, too.

I

Interviewer16:16

Kenny G, you were going to say Kenny G.

D

Daniel Ek16:18

Not not Kenny G. Uh, we actually played some, no, I think that was the latest, you know, some sort of cheesy R&B stuff. This is going to get really awkward pretty fast.

I

Interviewer16:30

It would not be a PandoMonthly without embarrassing confessions.

D

Daniel Ek16:36

Yeah. So there's a lot of like R&B stuff on that list. Slow dance.

I

Interviewer16:41

Yeah. And some Barry White, some Marvin Gaye, you know, setting the right mood.

D

Daniel Ek16:48

Um.

I

Interviewer16:48

Do you put like a red handkerchief over the lamp?

D

Daniel Ek16:51

Yeah. Or at least dim the lights, you know? Put some candles on. I'm basically describing my...

I

Interviewer16:59

She's bright red.

D

Daniel Ek17:01

Yeah.

I

Interviewer17:02

Is this the time when you want to leave?

D

Daniel Ek17:07

Yes.

I

Interviewer17:08

You're right. Music is good for culture.

D

Daniel Ek17:10

Yes, it is. It gets us to share.

I

Interviewer17:12

Not have reproduction is what you're describing. Yeah. So you obviously had this passion and Napster was the seminal thing for you. I want to get more to this explicitly later, but, you know, you haven't taken this attitude of, you know, f*** you labels. You've taken this at least outward-facing attitude of we want to save the labels and, you know, you clearly think music is important for culture. Back in the Napster days did you think what you were doing was wrong?

D

Daniel Ek17:40

No. I didn't understand it. I didn't, in all honesty, I didn't even understand it was illegal because there wasn't that kind of debate. I assumed at some point that the artist would get paid for what I did so I thought it was fine. But I also think, you know, over time, what I've realized is that convenience quite often wins. And it's not like people don't want to pay for music. It's just that if the option of stealing, what I don't get is, you know, for so long with music we had buying music was actually a much worse option than stealing it, in every direction. Because if I paid for something, in the digital product at least, if I bought something on iTunes back in the day when we started Spotify, what I paid for was a DRM song that I couldn't play on anything other than Apple's devices. And by the way, I could only play it on three. So if I for whatever reason was a good customer buying many iPods, I was screwed. The sound quality was pretty lousy. It was 160 kilobits. And it of course cost them money whereas the product I stole, I could get it lossless quality. No restrictions on what to do with it. And I think the only point in time, it's really the only point in time when the stolen product has been much, much, much better than the one you legally acquire. So for me, it was a pretty big given why we ended up where we ended up in the music industry because, you know, again, the illegal product was so much better than the legal one.

So that was the thing that we were trying to tackle with Spotify to sort of even out the odds, right?

I

Interviewer19:35

So in between that sort of love affair with Napster and Spotify, you worked on some other companies. So what I want to get to is I know that you and your partner put a lot of your own money into Spotify. How did you make the money to put into Spotify?

D

Daniel Ek19:56

Right. Well, so the story is this. I started when I was 14 just by pure accident, discovering that, you know, by the time I was 14 I was a pretty skilled C++ programmer, I taught myself at least. And then I had taught myself HTML, CGI programming, which was really big at the time, and people started asking me. Local people asked me if I could help them do their homepage. This was the big buzzword at the time. Everyone needed a homepage. And in Sweden at least, most of the firms that were doing it charge you like 50 grand to create a simple two-page homepage. So people started asking me, so I said, 'Well, I'll do it for 100 bucks just to see if I can get it.' Then the person said, 'Yeah, sure.' So that was great. Okay, I made the homepage. Then next time someone else came back and said, 'Can you create a homepage?' I said, 'Yeah, sure, 200 bucks,' and the person said yes. And it kept evolving up until I was charging five grand per homepage. And at that point I had so many people knocking at my door wanting me to create homepages and I was still in elementary school.

I

Interviewer21:20

So they'd be like, is Daniel home?

D

Daniel Ek21:23

Sort of like that. My parents didn't know who was calling and I even snuck out and bought a cell phone so like people don't know that I had like a secret business number that people could reach me on. So I went to school and I taught myself Photoshop because I figured it can't be that hard to be a designer. Today it's much harder. But back then, you know, you had these glowing things on the pictures and you had like...

I

Interviewer21:53

Dancing Jesus.

D

Daniel Ek21:54

Dancing Jesus, and you could do a bit of all of that.

I

Interviewer21:57

Was that your specialty? Dancing Jesus is everywhere.

D

Daniel Ek22:00

Yeah. Or at least, you know, guest counters and color-changing web pages and things like that. I wasn't a very talented designer by the way, but what I realized was that, you know, I'm not that good at design but maybe I can teach people how to do Photoshop because it's a tool. So I taught the people in my elementary school that was really good at drawing and stuff. I taught them how to do this.

I

Interviewer22:23

Now, why did they go along with this at 14?

D

Daniel Ek22:25

Well, I bribed them, too. So it was kind of like a simple way. It was actually funny because what I realized was stuff was more valuable than cash because when you're 14, you sort of realize money is good, but more effective is actually giving them stuff.

I

Interviewer22:43

Like what?

D

Daniel Ek22:44

Well, you know, iPads and cell phones and, you know, things like that. Games was huge. Or, you know, if you create this really fast, I'll give you a PlayStation that you can play around with. I often gave them my own stuff.

I

Interviewer22:58

Like, I have to picture a 13-year-old Daniel Ek, and by the way, you're so bald in this middle image, going to his friends and saying, and like going on the playground and like opening a trench coat with games and cell phones and saying, 'Want to learn Photoshop?'

D

Daniel Ek23:14

Well, I mean, now you get my trick with Google. I mean, it's not too different. Same game. I've been doing it all my life.

I

Interviewer23:22

Yeah. Friday massages. Yeah. Come up.

D

Daniel Ek23:26

So I was giving them some stuff and the people that were good at math, I figured there has to be some correlation of people who are good at math and programming. So I taught them how to program. I could even use the school's equipment to do all this on. So basically after school I told my teachers that I was educating others but I was actually sort of doing my own sort of child labor factory at the time.

I

Interviewer23:54

I think this would be illegal in the US.

D

Daniel Ek23:56

Probably, and it probably was illegal in Sweden too. But you know what, so I built it sort of from nothing, too. At some point, I was almost making 50 grand a month, sort of not really knowing what I was going to do with all.

I

Interviewer24:15

When did your parents find out you were doing this?

D

Daniel Ek24:17

It took them a while. They started asking once, you know, the huge TVs started entering the house and all the video games and, you know...

I

Interviewer24:27

So you were like the mob wife who goes out and buys the fur right after the big score.

D

Daniel Ek24:31

Yeah. So I started doing that. I started buying really expensive guitars and things like that. They didn't understand the value of that though, so I could still do that. But I don't think there was many 13-year-olds that had a 1957 Fender Stratocaster like in original condition and things like that. But I sort of did. But after you bought all the stuff you want, I started thinking about what do I really want now?

I

Interviewer25:03

But to go back to your parents busting you, like I want to hear that they were like, 'We need to sit down. Are you dealing drugs?'

D

Daniel Ek25:10

No, I just have an illegal ring of children building websites. Exactly. Well, they were getting a bit like, 'I don't really know what's going on here.' So they started calling up all the teachers and said like, 'What is he actually up to and what is he doing?' But the teachers thought I was teaching people Photoshop and HTML. So they were kind of like, 'Yeah, well, you know, he's educating all these other kids.' So they really thought I was a responsible humanitarian.

I

Interviewer25:35

Yeah. Humanitarian that did some work after school, but they didn't realize that like most of my school life then at this point was already...

D

Daniel Ek25:42

So, you know, in Sweden you have carpentry classes and things like that because, you know, you want to be well versed. So I bribed someone to do my carpentry classes and all my work there, and while longer I bribed another guy to do all my exams when it came to Swedish classes.

I

Interviewer26:06

Basically, everyone in the seventh grade was a varying level of your assistant.

D

Daniel Ek26:11

Well, you know, I quite quickly figured out the way of like getting people to be incentivized.

I

Interviewer26:20

Yeah, I think that's the way. Something that would be harder with the labels.

D

Daniel Ek26:24

Yeah. But we'll get to that later. But you know, so I got to that position and then...

I

Interviewer26:32

So your parents called the teachers.

D

Daniel Ek26:34

My parents called the teachers. The teachers like, 'No, no, no, he's a great, he's like straight A students.' What they didn't realize was I probably wouldn't have been a straight A student but I again picked the right people carefully to do my homework and kind of told them to make it seem like I did it. Which worked pretty well.

I

Interviewer26:53

Right.

D

Daniel Ek26:54

Which worked pretty well. But once you sort of bought all the stuff, I started like thinking about what else to do.

I

Interviewer27:05

Mhm.

D

Daniel Ek27:06

So I started, you know, buying servers because I figured that that was kind of interesting and, you know, would be fun to play around with a bunch of infrastructure as well.

I

Interviewer27:17

Was that because you wanted to just do bigger things?

D

Daniel Ek27:19

No, not really. I just thought it was cool to have a bunch of servers.

I

Interviewer27:24

So it started out...

D

Daniel Ek27:25

Everyone does. It started by me having them in my wardrobe for the first part.

I

Interviewer27:32

It works really well, by the way, if you want to dry your clothes. If you have a couple of servers and hang in some wet clothes, it dries up in about 30 minutes. So it's pretty good.

D

Daniel Ek27:43

So you outsource the laundry as well.

Yeah, to the servers. So we sort of did that, and was building, building, building more things to the point where I actually, I didn't keep track of like paying taxes and, you know, what you were supposed to do. So I was building all these companies and we're now past year 2000, and I built like an SEO/SEM business because I learned from search that the way to make money was like getting high up in search engines.

I

Interviewer28:17

And how old were you by this point?

D

Daniel Ek28:20

So I'm probably like 18, 19 by now. So I learned that. So I sort of started a business that did that. I figured out that I was still into search, so wanted to create some sort of search. So I had a product searching company. I figured out that I could understand contextual relevancy. That was big at the time with Google AdSense. Again, I was pretty much copying what Google was trying to do and because I thought it was cool. So I built all these things and then one day I got a letter from the Swedish version of IRS, the tax man, saying that I owe them a couple of hundred grand worth of taxes. And I had no idea that I did that and I didn't know how to pay for that. So I actually thought I would go in personal bankruptcy.

I

Interviewer29:15

Mhm.

D

Daniel Ek29:16

And we're now in 2000.

I

Interviewer29:17

So you were like spending as much money as your, you weren't, tucking money away?

D

Daniel Ek29:19

Yeah. Well, no, not at all. Because, you know, I was 19, 20, 21 and like enjoying life. But I also, you know, bought servers and hired programmers. I didn't know what to do with them, but I figured we could figure fun interesting projects to do. So I had probably 25, 30 employees doing projects that I thought was interesting.

I

Interviewer29:44

Uh-huh. I assume you were out of your bedroom in your parents' house by this point.

D

Daniel Ek29:48

Yeah. Oh well, I got them to move actually so I could keep my...

I

Interviewer29:52

Took over the house.

D

Daniel Ek29:53

Yeah, I took over the house. So, you know, I was running things there and what I realized was, you know, I was almost going personal bankruptcy and it was pretty tough. It was actually mostly tough because I realized that I was going to have to lay off people and I was thinking, you know, not so much about the fact that I didn't know how to support myself because my philosophy was, you know, I can always take a job, but it was kind of painful that all these people might lose their livelihood. So I was depressed there for a while, but in a series of lucky things changed in 2005. Actually, I think the defining moment in Europe was when Skype sold to eBay.

I

Interviewer30:40

Mhm.

D

Daniel Ek30:41

Because what happened was the market just like opened up. So within really just six months I sold four companies. So I went from like having virtually no money at all, not even knowing how I would support my own livelihood, to selling all the companies.

I

Interviewer30:58

How did that happen? Were people just...

D

Daniel Ek31:00

I think it was the time when the markets sort of opened up so people started looking much more and, well, we should acquire companies too because that's what eBay did. And eBay actually continued to acquire, I was working on a Nordic auction company called Tradera that then got acquired by eBay as one of them. And then it sort of just kept going on. So within a couple of months really I was going from personal bankruptcy to having a few million dollars in the bank.

I

Interviewer31:31

And...

D

Daniel Ek31:33

That was f*** off money for me. And it's kind of a weird situation when you go from something monetary that limit I had which was like having a few million dollars in the bank, I had already reached. I thought I was going to reach it or was hoping or aspiring to reach it when I was 30, but I reached it when I was 22.

I

Interviewer31:55

So that was kind of weird.

D

Daniel Ek31:58

So what then happened is I got really depressed. Because I was out partying for a while and, you know, trying to meet women. I was not that successful by the way. I thought everything would be much better with money, but it turns out that it gets you in the club, but it doesn't help you that much further. You still have to actually talk to someone in the end. I was really disappointed.

I

Interviewer32:24

And what was like your pickup line back in those days? Would it be like, 'Excuse me,' and like throw out a...

D

Daniel Ek32:30

Well, excuse me. And like probably push someone over. I don't know.

I

Interviewer32:34

Yeah, that's not very smooth.

D

Daniel Ek32:35

No, it's not very smooth. I didn't have much game. I'll tell you that. I still don't have much game, by the way. But, you know, so the things that I thought I wanted, if you're a geek growing up, all I wanted was really to be accepted and really to belong. And what I realized was none of that money mattered. It didn't make me happier. In fact, it was kind of sad to think that the thing that I strive for didn't actually mean anything in the end. So I started thinking about what truly mattered to me and I'd realized that there was two things in my life that had always been really present which was music and technology.

I

Interviewer33:18

Mhm.

D

Daniel Ek33:19

And I then sort of realized that all these companies that I was doing was a lot of fun but I also never felt like I belonged in them. And I started thinking about why that was. And I realized that I didn't apply myself to one problem. I didn't apply myself to one thing. So I was always like the guy who wasn't part of the group because I never had time. I was always the outsider to like, okay, we should do like this and then sort of went over to the next project.

I

Interviewer33:48

Uh-huh.

D

Daniel Ek33:49

So I started thinking to myself, and it's really interesting to see if you start thinking more long term what decisions you end up making. So constraining yourself is actually something that's hugely powerful and focusing your effort on something. So I started saying, you know, if I was going to spend five years of my life on just one thing, what would that be? And what kind of environment would I want to create in order to do that? And I came up basically with the fact that I wanted to have an environment where I could have fun. It shouldn't feel like it was work. It should feel like it was fun.

I

Interviewer34:29

Mhm.

D

Daniel Ek34:30

And I wanted to have an environment where you could learn from other people. And I wanted to have an environment where even if it was a small way, that the problem was big enough that you had the potential impact of changing the entire world. So that's what I set up. So I sort of said, okay, that's what it requires for me to focus five years of my life. And then the fact that it was going to be music was sort of obvious both for me and my co-founder.

I

Interviewer35:00

Mhm.

D

Daniel Ek35:01

And he had at the time, he had a company called Trade Doubler which had IPOed by that time and just a couple of months before got like a bid from AOL for I think $1.2 billion or something. So it was pretty big company, right? So we just said look, this is what we want to do, and took our own money, and because no one wanted to bet on a music company.

I

Interviewer35:33

Yeah.

D

Daniel Ek35:34

So we knew that we had to sort of bootstrap the company with our own money and we ended up doing that actually for close to almost two and a half years before we could actually launch the service.

I

Interviewer35:47

And that two and a half years, was that largely spent trying to get sort of your first European deals?

D

Daniel Ek35:53

Yeah.

I

Interviewer35:56

Because I mean it sounds like you wanted to, you know, again, unlike Napster and, you know, frankly, unlike a lot of the companies that we see coming out of the valley sort of waving the disruption flag, your tact wasn't I'm going to change the laws by breaking all of them. I'm going to break this industry and bring it to its knees until they need me. It was you wanted to work within it, right?

D

Daniel Ek36:14

Yeah. Well, I mean the way I looked at it was the problem that we had before was exactly that we tried to disrupt it without the industry's participation. So I wanted to do something where in the end the artists and the labels and everyone in the ecosystem was a part of the development. And that ended up, I thought naively enough, I didn't know much about licensing, but I thought that can't be too hard because there's all these illegal options out there. So surely they must be ready to embrace a legal option. And it turned out that they were, but it took two and a half years to get them to that point.

I

Interviewer36:55

What was the stumbling block? Because I think people in the valley always, always struggle with that same issue. And it's like we have for more than a decade now. I mean, Mark Pincus talked about the same thing with Tribe where he thought, well, the newspapers have no other choice but to embrace us. And he said, you know, I didn't realize their other choice was to go out of business. You know, Sean Parker said their view with Napster was they'll go to them and say, 'Look what we have, and if you close us down, it'll shatter into a million little pieces, and they'll have to come up with us for a legal solution.' And he also didn't realize they had the choice of just wrecking their industry and suing their customers. I mean, over and over again, people seem to make the assumption that these people are going to be logical. You see the same thing with the up roar over Game of Thrones, and why won't HBO just give it to us? The reason why is these guys aren't thinking long term because they're people running public companies and the bulk of their revenue will get killed if they embrace these new things. So how did you, what was the range of attitudes you heard from the labels towards this and how did you get some of them over that hump?

D

Daniel Ek38:05

Well, I think the biggest fear, and to your point, it's not that they don't want to think long term. I think what the problem is is that they've heard too many sunshine stories in the past where there's been people coming to them and saying, 'Look, we're going to disrupt your entire industry and you're going to be in a much better place.' But no one's been able to tell them what that better place means. Does that mean that the industry is going to grow and how would it grow? And what are the steps there? So I think there's been a healthy amount of skepticism from any content company by the way on trying, they sort of want to dip their toe in the water and then sort of start moving more and more stuff over there rather than the approach of sort of just jumping.

I

Interviewer38:54

Mhm.

D

Daniel Ek38:55

And so the range of attitudes when we spoke to the labels were actually mostly about cannibalization. And it was incredibly frustrating because as an end user you see it so clearly, like of course it should work this way, but what ended up happening, but this was really helpful for me is because I didn't know anything about the music industry, it sort of almost went as a sort of mental and intellectual debate about how we could reach the end goal. So what ended up happening is we kept adjusting all the time to the feedback we got.

I

Interviewer39:34

Mhm.

D

Daniel Ek39:36

So, you know, we came in and said, 'Look, we think all music should be free, period. No ads.' 'Well, how are we going to make money?' Okay, that's a good problem. Let's go back. And then sort of approach... We did figure that part out. But getting to the point where, you know, there was a lot of assumptions. For instance, in our case we were pretty much one of the first companies to try audio advertising. Most investors when we tried to pitch that was like, 'Audio advertising doesn't work. It's never going to work. There's no market for that. Display is the thing.' So we were like, 'Okay, well, here's the model if we built it on display. Here's the model if we built it on audio. But we still think over time our bet is going to be on something that fits the format a lot more than just display.' So that was a big assumption. So we had to model that and we had to show the labels like, 'This is what we actually believe.'

I

Interviewer40:36

And you just kept having to iterate that.

D

Daniel Ek40:38

But then of course there was the ones at the labels that also just like, 'Look, you know, we just want to do what we used to do.' The music industry is a funny place because there's, it attracts, I don't know a single space that have had so many talented entrepreneurs give a go at it. So you've had obviously Parker and Fanning doing Napster. You've had Niklas Zennström and Janus Friis who then went on to do Skype and, yeah, who did Kazaa. You've had Zuckerberg.

I

Interviewer41:16

Mhm.

D

Daniel Ek41:17

Most people don't know that at the early days of Facebook, what Mark really did, it wasn't a sure bet that he was going to do the Facebook, he also wanted to do Wirehog, which was this file sharing service for music. So I think there's been a lot of really, really talented entrepreneurs, the IME guys, the MySpace guys, there's been a whole ton of them who tried to do music. And I think the problem is, you know, over time the technology entrepreneurs that have tried to do it have been a bit too disruptive. And I just think when it comes to content in general that one has to have, you know, a more show them the path to get there, more than, okay, well, it's this way because, you know, again, they're not going to bet their lives on that. And the artists aren't going to bet their lives on that either. If you can't show them the path to get there...

I

Interviewer42:18

Right. So it's interesting because as you're describing this and thinking about how entrepreneurs raise money and there it's always this thing of like, okay, you know, just go build something, you'll figure it out later. Go build something, you'll figure it out later. And I feel like that was a lot of these guys' pitch to the labels was like, we just got to give it all away and then we'll figure it out, and it's sort of that Silicon Valley mentality. But part of that is because it's sort of, you know, no one exactly knows and it's a very hard thing to track how discovery leads to sales. So how were you able to like build out this argument before the company was even launched?

D

Daniel Ek42:55

Well, it was incredibly tough and that's why it eventually took two and a half years to convince people to do it. But I think in the end there was a healthy number of arguments that I think certain people bought. But then there's something that we did that I don't think many people know, which is that we actually took a good bunch of our own money in the end and just said, 'Well, we believe in this so much that we're going to put our own money in there.' And it's really hard then for a media company if you're saying, 'Look, we're really worried that you guys are going to just instantly flip this company or that you're just trying to make a quick buck,' if you yourself are putting sort of your balls on the table kind of thing. So I just felt that that was like a huge driver in the end because every argument that they had we countered with, 'Well, what if we do this?'

I

Interviewer43:56

Mhm.

D

Daniel Ek43:57

And eventually we gave them enough reasons and they stopped having any counterarguments.

I

Interviewer44:03

Right.

D

Daniel Ek44:04

Because we simply just took care of argument by argument until...

I

Interviewer44:08

Meeting with you.

D

Daniel Ek44:11

That's a really good question. In all honesty, I learned something in one of the prior businesses that I was working on. And that was that I was literally like sleeping outside an office for about two months in order to get the meeting that I wanted.

I

Interviewer44:31

Mhm.

D

Daniel Ek44:32

Like in a van?

I

Interviewer44:33

Um, no. Like literally like sleeping outside of the office.

D

Daniel Ek44:37

Like a homeless person?

Yeah. Like a homeless person. And I just believe that, again, you win a lot by being super passionate and have a lot of persistence. And what really worked was that it didn't matter what week it was. I always ended the conversation. We could have been screaming at each other and I always said, 'So, are we meeting next week again?' And there's something disarming about that whole approach. And even if we sort of didn't end up, I was just always there.

I

Interviewer45:16

You must have been so annoying.

D

Daniel Ek45:18

Oh, yeah. I was really annoying.

I

Interviewer45:20

Like you would, I bet you would call and the receptionist would be like, 'It's that E guy again.'

D

Daniel Ek45:25

Yep. That was me. But look, when the person refused to meet me, I just went and met someone else. So I usually joke and say, 'Look, I met everyone from the janitor to the CEO,' but it's probably true.

The other part is I used to have hair before I started this and at the end of the process, I didn't. It's a lot easier now, by the way. You don't have to like cut your hair or do anything. It's...

I

Interviewer45:52

That's why I cut mine.

D

Daniel Ek45:54

Yeah. Well.

I

Interviewer45:55

Not quite as short.

D

Daniel Ek45:57

No.

I

Interviewer45:57

So, two and a half years, you finally got the deals. Do you think had you launched in the United States, you ever would have gotten that far? Were the European rights easier to get as an experiment?

D

Daniel Ek46:09

Yeah. A lot of our success came from the fact that we started in Europe. Most of media companies are really driven out of US, which means that there's a lot more attention to the homegrown markets.

I

Interviewer46:25

Mhm.

D

Daniel Ek46:26

It also means if you're working in media that the check sizes you have to write is a lot bigger. So starting it out in Sweden, no one really cared about that market. It was sort of seen as a Mickey Mouse market, like, okay, well, huge piracy. Who cares what happens there? These guys could try it out and see what happens. So we started there and just kind of expanded from there up until the point where we convinced them that going to the states was a good thing.

I

Interviewer46:58

And that took quite a while.

D

Daniel Ek47:00

That took another two years.

I

Interviewer47:01

So you and I met during this process and I constantly harangued you because you guys would call us up and be like, 'No, really, we're coming next week. It's going to be a huge announcement. Write something saying we're going to come.' And then journalists would be like, 'No, really, they're coming next week.' And then you wouldn't. And like it went on for years and years and years. I mean, how much of that was, and I'll just ask a rude question because I haven't really done that yet, except sort of the thing about getting laid that was a little rude, but how much of that was you trying to sort of work the press to get more hype about you? And how much of that was or being naive or how much of it was you really did think you had these deals coming this quickly?

D

Daniel Ek47:41

So it's a bit of both. It wasn't working the press because I still don't know how to do that. So it was more from the aspect like we were naive. We actually figured that like okay, it took us two years to get the licenses so surely it can't take that long to get them as an extension for the US, especially as we were willing to pay a lot of money to get there, too.

I

Interviewer48:05

Mhm.

D

Daniel Ek48:06

So it's definitely part of that. The other part of the equation was we actually were super close a number of different times.

I

Interviewer48:16

Can you walk us through like the whole timeline?

D

Daniel Ek48:19

Yeah. Well, I mean we pretty much a couple of months after we launched in Europe we started the discussions about launching in the US.

I

Interviewer48:27

And were those with the same people? Were they with US companies? Did they introduce you? Like how did you get into that?

D

Daniel Ek48:33

It's the same companies. This is the interesting thing. So, you know, again, if you want to do a deal with a major label, it's probably around 10 people who does the deals in total. There's not a whole lot of people.

I

Interviewer48:48

So you're really dealing with the same people.

D

Daniel Ek48:51

So we obviously knew the people we were dealing with at the time. And I think that was part of the reason why I also was naive because I figured if I convince them once, surely it can't be that hard convincing them for just another market.

I

Interviewer49:08

Mhm.

D

Daniel Ek49:10

And so the discussion pretty much started after about six months and people were pretty positive about us getting over. But there's a lot of stuff that happens in the end, as I said, there's 10 people who does the digital deals but they're also run by, you know, CEOs and somewhere along that line we went from sort of being under the radar and just another deal to being the thing that everyone talked about.

I

Interviewer49:40

Mhm.

D

Daniel Ek49:40

So the perception changed. So while the first deals the CEO really sort of, we were just one out of many, many other companies that they did deals with, we sort of became one of the deals that attracted the most attention because we went in with a model of saying, 'Hey, we think you're going to give away your music for free and then we're going to convert them later on.' So I think that had a huge amount of impact on some pretty big partners of the labels like Apple, like Google, like Amazon and many, many, many others. So I think that attracted a different type of attention to the company as a whole.

I

Interviewer50:22

And I mean negative attention, it sounds like, people who thought, well, we got to look at this closer.

D

Daniel Ek50:28

Well, negative in the sense that it took longer times because the decision process wasn't anymore just a budget decision. It was a political decision and it was a decision about, you know, are we comfortable letting these guys in and what happens to our iTunes business and what happens to our CD business? What happens to, maybe we'll have a deal with one of the carriers. Are they going to be willing to do a deal if we let Spotify in? So it just became a lot more complicated.

I

Interviewer51:01

Mhm.

D

Daniel Ek51:01

And for a number of times we got it up until like last signature and then it sort of fell through.

I

Interviewer51:10

And what, usually why would it fall through? Was it political stuff within the organization? Did it have to do with you guys specifically? Was it the same old fears?

D

Daniel Ek51:18

I think there was a number of different things. And by the way, I still think that there's a lot of these are not 100% predictable experiences that you have. You end up in situations where it could be one individual that tries to weigh in in the end and say, 'No, I'm not sure. Okay, we'll wait another two weeks.' These guys are not, they want to make the right decision, which if you're a digital entrepreneur is incredibly frustrating because, you know, for us decisions are mostly sort of binary. Either they make sense or they don't. And we try to make it like that and then we'll try things and then we'll revert back. That's not how it happens.

I

Interviewer51:54

And there's usually the view that it's like it's better to make a quick decision even if it's a bad decision.

D

Daniel Ek51:58

Sure. That's not the case at music industry, for that that's a process. So even if you have convinced the sort of digital business development guy that this is a great thing to do, then all the individual labels within the sort of bigger label wants to weigh in. Then the digital business guy that you didn't even think existed in one of the labels wants to weigh in, right? And then the CEO themselves want to weigh in. And then they sort of, well maybe we should call some partners to ask them what they think too, which of course they're never going to say anything positive. So it just becomes a lot more complicated where when we were just another company and just a small company we didn't have that kind of attention. It was just really the digital business development person that decided whether this makes sense, you know, this is a good deal for us, we'll make our numbers right, instead of being holy s***, does this impact my long-term business, etc., which we later ended up facing.

I

Interviewer53:00

Right. Now, you know, a lot of music startups from the valley had raised venture capital and then had done these deals with labels and they just, they felt it was so necessary to get some kind of deal that they sort of took whatever the labels gave them and they, you know, wound up basically continually bleeding these companies dry and then they would kind of die. One thing I heard about you guys, that even before, you know, I got to know you, you know, sort of made me like you, even though you kept lying to us about your US launch, was that, you know, I heard over and over again that you were just like really ballsy with the labels and just like, 'No, we're not going to do those terms.' No. And it's like you guys were kind of going in and dictating like, 'No, it's got to be free. It's got to be this. It's got to be this.' Was that an accurate representation?

D

Daniel Ek53:46

Yeah, it was. I mean, again, I didn't always get my way. It sounds like you're portraying it as if I went in and they, you know, listened.

I

Interviewer53:57

No, no, I think that, no. On the contrary, I think that's what was so surprising about it is like I'm sitting here and hearing over and over again that these guys keep coming to like the 11th hour and having a deal fall through and yet you're going around and being really ballsy and making demands and not compromising.

D

Daniel Ek54:11

Well, when it comes to digital music, I think that's what you have to do eventually. You have to lead by your conviction of the product because what ended up happening I think with a lot of these valley companies is ultimately either they compromised on economic terms which meant that they eventually had to compromise on the product. Or they straight away compromised on the product and thereby didn't fully do the product they wanted to do.

I

Interviewer54:34

Mhm.

D

Daniel Ek54:35

So, you know, in our case we just refused to do that because there was no point in doing something that we didn't believe in. And that also meant that it took us two and a half years to launch. It took us another two years to reach the US. It wouldn't have been that hard to launch in the US if all we wanted to do was a subscription service or all we wanted to do was another download service. But we wanted to launch a product that the user felt was free. That meant that they could share tracks with their friends. That meant that they could, you know, again, try out the full experience before they decided to later convert.

I

Interviewer55:22

So.

D

Daniel Ek55:24

I think that's the real reason why it took so much time because again we could have done something a lot simpler. But coming to think of it, there's other companies that act that way, too. And, you know, Apple is one of them, have many, many times throughout the years stopped those in the last minute even though they built the product, right? Because they couldn't get the deal that they wanted in order to preserve the user experience or keep the user experience in the same way. So I think for me it's super important to never compromise on what you believe is a great user experience because the moment you do that it will deteriorate. The question is only whether you fool yourself that you can do it for another three months, six months or even a year.

I

Interviewer56:15

Now even before launching in the US you'd raised a fair bit of money at very high valuations particular in being in such a risky industry and I know particularly when I talked to your European investors at the time of one of your earliest sort of outside fundraisings, they all, one of the big reasons they said they went for these terms was because, you know, again, you guys had put in your own money which, you know, you just didn't see as much in Europe even as you do here. But in this period where it was taking so much longer than expected in the US, were your investors at all like advising you like maybe you should compromise? I mean, what were sort of a lot of those boardroom dynamics like because it had to be a little bit tense.

D

Daniel Ek56:56

It wasn't, you'd be surprised. I mean again we kept them updated on what was going on. And we kept evolving the product and I don't know whether we just had great investors but they really just backed us the whole way. But another point that me and my co-founder have always believed in a lot is the control over the company and the company's destiny. So we fairly quickly on, and I think everyone that invested in this business sort of knew that this was going to be our vision. And while we were open for feedback and improvement, it's not like we were going to turn around and say, 'Okay, well, we're going to pivot,' which seems to be the buzzword of the day.

I

Interviewer57:46

Um.

D

Daniel Ek57:47

We just had really strong expectations and we've said to everyone, 'This is a company that's either going to fly or it's going to crash and burn. It's not going to be an okay one, right?' So, you know, funnily enough, when it comes to VCs, they kind of like those businesses actually more than they like the middle ones. And I think if you're clear about that, there's a greater chance that you'll either get funded or that they will shy away. But the ones that shy away, you'll know already from the start.

I

Interviewer58:17

It's a way to select the people who really want to go for the home run or at a minimum they say they do and you can say, 'Hey, you remember when we sat and talked about this?'

D

Daniel Ek58:25

Sure.

I

Interviewer58:27

We talked a good deal about the difference between Spotify and Napster in terms of approach and certainly the market was very different. I'm interested in talking about the difference between you and Sean Parker because, you know, you guys have obviously been sort of cosmically linked between these companies. I'm sure it was somewhat surreal when he contacted you about investing. First of all, tell us about that.

D

Daniel Ek58:49

Well, by now I think the email he sent me is fairly public. You can probably Google it. It somehow ended up on like Forbes' homepage, I think. So, it was actually funny because I'd forgotten about the email and I read it like in an article instead. But what was interesting about it is that you had a person who I greatly admired for what he built and probably someone who spent more time than me even contemplating and thinking about how digital music was supposed to be consumed. So I got this really, really long email and I sort of read it as it was. I didn't agree with all the comments. So I wrote back a fairly lengthy response and I got like 12 A4 pages response back and I was like, 'Holy s***, I'm not a big emailer. So this is going to be really hard time.' But it turned out that I was in New York just a week after and Sean was here, too. So we sort of ended up meeting up and it's one of those surreal things where you just know when you meet someone that this is a person who's been thinking exactly the same thing as you. Who's been spending so much time thinking and pondering about this idea that we pretty much instantly took two minutes like, 'Hey, I'm Sean Parker. Hey, I'm Daniel.' And then, you know, instantly you had these ideas getting exchanged. And anyone that met Sean knows that when it gets in the zone, it could be an hour or it could be 36 hours later. You just don't know. So we were sitting there and I was expecting it 30 minutes because that was what his assistant told me at the time and we ended up sitting for six hours and there was like people sitting outside and waiting on him and things like that, but he just ended up in the zone and I remember leaving exhausted but also...

I

Interviewer1:00:27

It's never an hour.

D

Daniel Ek1:00:28

Yeah. But also really inspired because there he has something that's just really different in how he approaches ideas and how he thinks about it and he thinks much bigger than most people.

I

Interviewer1:01:06

Mhm.

D

Daniel Ek1:01:06

And for me coming from Sweden it was probably one of the first times I'd ever met a person with that kind of mindset.

I

Interviewer1:01:16

Yeah. You know, I'm interested in your take knowing him very well on Sean as an investor or entrepreneur. You know, he's one of those people that the world thinks they know because they saw Justin Timberlake ostensibly play him. But, you know, I've covered him since he very first launched Plaxo. And there was a long time when everyone in the valley just hated Sean and he was just seen as like the worst thing that could be in venture capital. Like Peter Thiel got so much flack when he hired him for Founders Fund. I was actually working on a story about Sean for Fortune and several investors called the magazine and told them to drop the story because they did not want him written about. I mean there was like this level of anger towards him that I've frankly never seen towards anyone to that degree in the valley. And I always thought that was a little bit unfair. By the same token, he then after Justin Timberlake plays him in a movie becomes called this guy with the Midas touch, which he has never actually sort of launched his own commercially successful company. And that's what I would think of the Midas touch as being. I mean, brilliant at spotting product, the things you're talking about, but like is not an operator. And that kind of seems unfair, too. So I sort of feel like both on the upside and downside, Sean has always...

Been very misrepresented by the press and by investors and everyone else. So, I'm curious how you would describe him, how you think about his strengths and weaknesses.

D

Daniel Ek1:02:42

Well, you know, I think anyone that has spent any amount of time with Sean don't — I mean, the guy is just purely brilliant. That's what I would say. And you always leave thinking about the world in a slightly different way after you've met him. At the same time, he's also very erratic, meaning, you know, if you say that you're going to meet at 12:00, you might end up meeting 2:00 a.m. in the morning instead. You just never know. You might end up leaving 6:00 a.m. in the morning despite thinking that you were going to meet at noon. So that obviously rubs people the wrong way.

I

Interviewer1:03:25

That's difficult in a board member and investor.

D

Daniel Ek1:03:27

Oh yeah. Not to say that, but he's also really hard to reach, which means that it can be super frustrating because people assume that he's not reliable just by virtue of not conforming to things such as keeping deadlines or showing up on time like most normal people do.

I

Interviewer1:03:49

And like not within 12-hour windows. I mean, we're not talking about it being 30 minutes late habitually.

D

Daniel Ek1:03:53

No, it can literally be a 12-hour window. I've actually tried to figure out whether there's a certain offset on his clock, you know, whether he's —

I

Interviewer1:04:03

Sean Parker time zone.

D

Daniel Ek1:04:04

Yeah, exactly. You know, whether he's like just always on a certain time zone. It turns out that's not the case either. I've tried like — I figured for a while that he was always up at 5:00 a.m. So, I figured, okay, well, 5:00 a.m. Eastern time. Okay, I'm going to remember that. It turns out that he's up 5:00 a.m. London time as well as 5:00 a.m. Australian time. So it's just something that's always a bit off. I still haven't figured out what the time zone is.

So I think that can be really off-putting. And he's also extremely direct in conversations. He'll have incredibly — we have arguments about things and people think that we hate each other or that we fight just because we're arguing about a nuance in a product or that this thing should be that way or that, you know, not that way. But what he's really trying to do is he's trying to get you to think differently.

So I think again the strength that he has is he's truly a brilliant guy. Anyone here in the room, if you met him, you would just know what I mean. But if you're an operator of a company, you also — and people depend on you and the input you have, you can't show up 12 hours late, right? It doesn't function if you're also going to act as a role model, right?

But I think the most brilliant trait of all that Sean has, and I'm not even sure he himself realizes that, is he's a great partner. The guy is just so great at finding these really unique and brilliant people.

I

Interviewer1:05:52

He's a great spotter of talent.

D

Daniel Ek1:05:54

Yeah. And that's really all throughout the company in like every position, but maybe so more than anything else in finding the founder.

I

Interviewer1:06:05

Yeah. Well, I mean, this is why Peter hired him. I mean, Peter's view, even though he had a very ugly exit from Facebook, was, you know, if he ever finds me one more Facebook, he will be worth anything he puts me through.

D

Daniel Ek1:06:20

Yeah.

I

Interviewer1:06:21

Maybe you were — you were a Founders Fund investment.

D

Daniel Ek1:06:23

Yeah.

I

Interviewer1:06:24

No pressure.

D

Daniel Ek1:06:25

Exactly. Well, who knows? But I think you're right and I just think there's something unique about Sean and just finding — he's just really good at spotting founders.

I

Interviewer1:06:42

What about — well, oh, before we leave Sean Parker I have to ask you about Airtime. We've just talked about how he's an awful operator and here he is building a company.

D

Daniel Ek1:06:50

Well, to be fair on Airtime there's a lot of other people involved in it as well. And I haven't spent too much time lately checking in on it, but I think they relocated to New York, so I think they're making a sort of new, more focused effort on it than maybe they did early on. I'm not the right person to sort of judge.

I

Interviewer1:07:14

Do you use it? I mean, do you have any sense? I mean, you have a very keen product sense. Even when people doubted your business, what's always sort of saved Spotify — it's similar to Twitter — was always how much users loved the product. I mean, the issue with Airtime was there was a lot of other things but people just didn't love the product.

D

Daniel Ek1:07:33

Well, I also think that when you look at that, the first iteration of the Spotify product wasn't that great either, to be honest. I think any product becomes great when you have feedback and you improve through feedback cycles. If I'm going to criticize anything about Airtime, I think in hindsight the biggest problem they had was their secrecy in the early days, just sort of being afraid of what people would say or like the comment or input instead of maybe being more transparent and open with what they did. And then also kind of almost to the point of underestimating the impact the press would have on them coming out with the product that they kept secret and the attention that would create instead of just sort of being more upfront with, hey, look, we don't know whether this is going to be the product, but we're going to keep evolving it. So it just became like one of these massive launches that got everyone's attention on it, where I think it's way too early to judge where it will end up. All I know is that they will keep iterating on it and that's what they should do.

I

Interviewer1:08:47

There's three more things I want to talk about sort of broadly and then we can go to some questions for the audience. So start thinking about if you have questions, I think we'll have handheld mics so you don't have to go anywhere, but we'll start brewing on those. So yeah, I want to talk a lot about your experiences between sort of New York, the Valley, and Sweden. You know, I read this amazing Vanity Fair article recently about how Sweden has become this sort of unlikely hub of hip hop culture. I mean, whether it's through Steve Larsson or IKEA or you guys or whatever. And I've always kind of been fascinated with Scandinavia generally, like being the core of open source and Skype and all of these other things. And the Vanity Fair article sort of said that people in Europe were sort of shocked at this because it's kind of like considered the Canada of Europe, and because Canada produced Facebook and Google and Apple and we were like what? Is there something cultural either in Sweden or the world that has sort of made the last couple of years Sweden's moment?

D

Daniel Ek1:09:52

I think so. And in all honesty I don't really understand why. Especially like — it's so funny, like in some countries IKEA is almost seen as something exotic, whereas if you're a Swede you're like, does this person have IKEA furniture? Like that's not good.

I

Interviewer1:10:13

It's like you're Walmart.

D

Daniel Ek1:10:14

Yeah, sort of. We're just brought up like as a toddler like walking into IKEA like being all groomed. But you know, I do think that there's a couple of things about Sweden which is kind of interesting. So one is that we had this now ubiquitous broadband thing. And that was a private entrepreneur in the sort of end of the '90s who said everyone should have fiber broadband. So he started building that company which meant that we had like 10 megabits and 100 megabits connections at the end of the '90s. So if you think about popular culture today, a lot of it is driven by fashion bloggers and most of the fashion bloggers that people here in New York, the sort of fashion center of the world, are inspired by are Swedish bloggers. And I think that's sort of translated loosely to some culture and transference almost. And Sweden as a whole, and I'm sure Matt Mullenweg would agree, is just huge from a blogging perspective. Everyone and their mother and brother are blogging about different things.

And especially young women are doing it a lot. And they're writing about their days and their outfits and things that they want to do. And I think that impacts a lot on the culture. And then of course there's been individual successes of certain things like Steve Aoki that then sort of later ended up — some of the actors now are getting mainstream Hollywood movies and so on and so forth. I'm not saying that I'm understanding it, but I do think that technology and people adapting the technology means that the ideas are spread. And then secondly, we've always been a country where more than 90% of the population are fluent in English, which means that we see a lot of American culture. We get inspired by it. We try to create our own culture. Put it out in English. Most people write and are pretty good at English, so it's pretty easy for us to do that. And we're also a super small country. So when you're talking to an entrepreneur from Sweden, there's really no entrepreneur from Sweden that starts with the sole idea of just doing it in Sweden, right? You're starting out with the notion that the Swedish market is so small that you almost have to go international day one. And whether that's US or UK or Germany or all of them at once sort of doesn't matter, where a lot of the companies, if you look at the German companies, they almost always end up being really big in Germany and then nowhere else. And US companies have the same thing, just the whole market is so big that that's what you put attention to.

I

Interviewer1:13:05

But there are a lot of European countries that have that mindset. I mean, the UK always says that, but yet we don't see that level of creativity. I mean, is there anything in the educational system that makes people particularly either risk-taking or have that certain sort of — I mean, because we're talking about a lot of very creative arts. That's what's surprising about it.

D

Daniel Ek1:13:26

Well, it's something that gets brought up at a very early stage, as I said. We have free music education. Anyone can start playing music. Nowadays, we have Max Martin. He writes most of the popular songs you might hear on radio. So we have a lot of that. I think it stems from music education, free music education. It stems from the fact that being in elementary school, we're taught carpentry and creative arts.

I

Interviewer1:13:56

Well, you weren't. You paid someone to do it.

D

Daniel Ek1:13:58

Yeah, exactly. And that worked out. But I think that's just a small part of it. And I just think design aesthetics — you know, we have great — Hyper Island is now well-renowned in the world. We have design students from all the world coming in there. I just believe that we pay attention to design and it's something that, you know, you're being taught from a very early age to appreciate.

I

Interviewer1:14:29

You must be very proud. I mean, I'm from Memphis and I will take any opportunity to talk about Elvis and barbecue. Like that's the things we have. My one-year-old was Elvis for Halloween. I mean, you must be very proud to be sort of not only from Sweden at this time, but such an ambassador of it. I mean, you're one of the examples people cite.

D

Daniel Ek1:14:58

Yeah. Well, it's actually funny because for the first years of living abroad — I've lived in London now and now more and more spending my time in the US — I didn't want to be seen as a foreigner. I don't. So, I wanted to be more accepted. So, you know, I picked up phrases like 'hitting it out of the park' and things like that.

I

Interviewer1:15:17

Did you even know what that meant?

D

Daniel Ek1:15:19

No, not really. Like, baseball is not big in Sweden, by the way. And I've tried to work on my accent to sound more American, you know, things like that. But what then started happening is a lot of people started coming and visiting me in Sweden. And what I realized was so I had to learn a lot about Swedish history because people asked me questions and I didn't know anything about Sweden.

I

Interviewer1:15:46

Because you had paid a kid to take those tests for you.

D

Daniel Ek1:15:49

Exactly. So I started reading up about Swedish history and it's kind of fascinating that this super small country has created companies like IKEA, Ericsson, H&M, Volvo, Saab — you can just keep going on — that were all super well-respected brands and global brands, on a population of just 9.5 million people. So as I was reading more about the history, then of course you start feeling like, holy, there's a pretty deep heritage that you're a part of and that I may now represent. And of course, that's super humbling and also pretty much fun.

I

Interviewer1:16:37

Yeah, I think it's a fascinating part of the world. One of the only parts of the world I haven't spent time. One of our reporters, Hamish Mackenzie, is going there in the fall and is going to be really covering. Jesus, is it the fall, isn't it? God.

D

Daniel Ek1:16:50

So, you know how this is. You start a company and it's both the longest year of your life and the quickest year of your life at the same time somehow. Like it both feels like I've been doing this for 10 years and like a week. So, yeah, next week apparently. Apparently I'm setting him up with some companies.

I

Interviewer1:17:07

Yeah. Good. So I've always wondered these things. So I really look forward to reading his coverage. So if you're super interested in Scandinavia, pay attention to that. Do Finland and Sweden have a war? Like do you have scrimmages with the Angry Birds guys?

D

Daniel Ek1:17:20

No, not really. But I will tell you this. Now citing some of my new learned Swedish history knowledge: we were all sort of one country up until mid-1900 something. And that's both Norway, Sweden, Finland — not Denmark — but the rest of us, we're all the same country. So there's a lot of Finns, and this manifests when we're playing hockey games against each other. It's kind of like Canada versus the US only that the little brother in this case is Finland, and they're always trying to beat us. So you only see it when we're playing hockey against each other that there's like, you know, big brother, we're going to beat you. But I think more than anything else, we're just trying to learn from each other. And it's so cool to see Rovio and now Supercell from Finland really coming out of there. And it's cool to see so many other Swedish and Scandinavian companies now really kind of exporting their ideas and companies more throughout Europe and the world.

I

Interviewer1:18:27

It's cool. If we talked about why being there was an advantage for you in doing this particular company — in general, if you were to advise an entrepreneur who's doing sort of just a regular consumer web company, do they need to go to the Valley? Do they need to — can they be in New York? I mean, what's your advice?

D

Daniel Ek1:18:46

I don't think so. Actually, I had this discussion not too long ago with Zuck — Mark Zuckerberg — and I'm not even sure he agrees anymore that you need to be in the Valley in order for this to happen. I think you definitely need or want to have a connection to the Valley in the sense that there's a lot of ideas that are originated around there. There's a lot of pretty big platforms and platform ideas that you want to sort of pick up and start understanding. Personally, I'm super long on New York. Like we could have based the US entity of Spotify in San Francisco, but instead we chose New York for a lot of reasons. We chose New York because surrounding New York there's all these great universities where the talent now pretty much goes to the West Coast where they should stay here. But then we chose New York because it's also a pretty fun city. If you're into music, if you're into arts, like New York is the place to be.

And there's — I sort of, while I admire and respect a lot of parts of Silicon Valley, it feels a bit mercenary right now in the sense of like — it feels like once you've vested, you're out of there. And one of the things that I don't think get talked about is how these truly great companies, the Apples and the Amazons — if you just look at their management teams, you have everyone like Eddie Q for instance who runs iTunes and a lot of new stuff since last week, who I think started in the mail room 23 years ago at Apple. And you have similar people at Amazon who started in customer support and now sit in the management team. And I think as we're talking about these quick changes, the truly great companies that I admire and look up to have a certain consistency and a certain philosophy that's not ingrained by quick decisions but actually ingrained by looking more long-term at things.

I think what Jobs said about technology cycles not being as fast as we in the public perceive them — they're actually, you can spot them. I bet even most people in this room would be able to say like in 5 years' time we're going to have more connected devices. That's not a big theme or thinking. Anyone here would understand that. But understanding who's going to win that is something entirely different, of course. But if you start thinking more long-term — Bezos said something at some point to me that I sort of really respect, which is, you know, most companies seem to think that they have a pretty long time horizon, but most public companies have a horizon of one quarter or maybe two quarters because if you add two bad quarters, most CEOs change strategy or start laying off people. And the really good CEOs in public companies, they might change the strategy after not just one quarter or two quarters, but maybe after a year, but most will. But the truly great companies, they invest the most when there are downturns and they keep people on because they're so sure that over long periods of time that this strategy or their philosophy that they have will succeed, that they're willing to kind of make that investment. But it requires you to think more long-term about things.

I

Interviewer1:22:20

Speaking of people going public and still wanting to be long-term, were you surprised by what happened with Facebook?

D

Daniel Ek1:22:28

Surprised about the sort of flip or surprised about —

I

Interviewer1:22:33

I mean surprised about Wall Street's reaction that this went from something that everyone anticipated for so long to now it's very common to turn on CNBC or open financial press and like, 'ah, Zuckerberg should be fired, this company was never that good.'

D

Daniel Ek1:22:47

Well, it seems pretty typical Wall Street to me. It seems like that happens after a bad quarter. Like I even heard when Google now did their miss that people were saying, well, Larry Page should be fired, and two days before they were hailing him as, you know, he's going to win. So I don't pay that much attention to what people talk about in the public markets. I think what surprised me — and what I drew any lessons about it — is just like you probably want to wait for as long as possible going public because it just puts a very different perspective from the outside world about what it is you're doing.

And I think again what was interesting and what I don't think anyone — there's a lot of things that happened here. There was robots trading. It was people holding the shares up, people dumping the shares straight away. There was a lot of things happening at that specific time. But I also feel that this discussion was very biased — the bias here was about Facebook's mobile strategy and if they were ever going to make money off it. Well, if you doubt that, shouldn't then by default any advertising company that's big on mobile — shouldn't you then sell every single one of them? And the last time I checked, Google is a huge mobile business too and a lot of their traffic is moving over mobile too. So the same people — what was interesting is the same people who sold Facebook were long on Google, where actually they had the same problems.

I

Interviewer1:24:38

It's like if you were really concerned about ads monetization on mobile, right? Google has the same issues, right? Right. Interesting. I want to talk about just a couple more things and we'll go to questions. First, let's talk quickly about fundraising. You guys have always been really aggressive on valuations, which certainly a lot of companies in the Valley are right now. Did you weigh the pros and cons of that? I mean, your last valuation was a billion dollars if the press is to be believed. And you still have a lot of significant business risks ahead of you. Was there concern about are we going to grow into this? Could we — I mean, it's a business where you need money. Are we going to be able to raise another round? Is there going to be a down round? What would be the implications? Or was there just a value in getting the biggest valuation possible?

D

Daniel Ek1:25:33

There's never a value in getting the biggest valuation possible because I don't think — it's a very different thing. It might be in the Valley where people are using that as a way of attracting people. We've never really done that. I think again, it's kind of interesting. A lot of people put a lot more science into it than we do. For us it's a pure function of our belief — like if you can get money, you should take it. And then you should always — so that means by proxy, if you have that philosophy, you're always fundraising or you're never fundraising, whichever way you want to look at it. But if by proxy you're always fundraising, then your philosophy should always be at what valuation are you willing to take money.

So I think our philosophy has always been that we've always had a number in mind that we think at this point we think it would make sense to get more money in. And again, this is not to get money to do anything other than really fulfilling our long-term goal, which in our case is — and especially in the way we're doing it by not disrupting it, but actually trying to create a sustainable business model long-term for artists and labels alike — we really just want to put Spotify in front of every single person on the face of this universe who's interested in music, which we think is billions of people potentially.

I

Interviewer1:27:08

Right. Well, in the universe, that could include each other as well. So is there anything you would do differently in terms of fundraising? Do you have any sort of advice or something you learned along the way that you would warn other entrepreneurs about?

D

Daniel Ek1:27:24

There's a lot of things that I've learned over the years. And I didn't — up until this point, I only had one other company that ever taken venture financing, so I didn't know much. But one of the things that I would say, and this probably still matters, like you need to make sure that you're long-term aligned with an investor. And if you have a certain specific idea of how you want to build your company and how you want it to work, you need to make that very clear already from the start. And I think my mistake was — probably more so it's not really about the fundraising. It's more about the partnership. You need to sort of understand and start thinking through what possible implications, especially if you want to build a company for many years, because what ends up happening is you have venture capitalists who can't raise another fund which means that all of a sudden they're in this situation where, holy, I don't know what to do, or there might be other venture capitalists who need to show return of the funds and thereby try to push you to sell your company.

So I would look into what is the past experience of this backer. And a lot of people talk about due diligence on the company. I think you should do a due diligence on the investor, too. I've again been incredibly fortunate, but I've learned over the years that not all people are that fortunate. So I would pay a lot of attention to that. And then secondly, just think it through. Think really hard about the mechanics that you want to achieve long-term. Because things that might seem like simple gives right now over the next couple of years might not.

I

Interviewer1:29:17

Like what's an example?

D

Daniel Ek1:29:19

Well, there's a lot of things around preference, for instance. And there's a lot of people who try to optimize by complicating things like convertible notes and what happens with waterfall mechanics if a certain valuation hits a certain point and in the end no one really understands how the hell to interpret that but a lawyer. So the person who makes money in the end will be a lawyer trying to interpret all of it. So I would just like again go back to being — keep it super simple. Keep it so that you will understand it. Don't like get into semantics about trying to be clever because the clever part never works.

I've made that mistake and what it ended up is me having to go back in really painful discussions trying to simplify things again. The second thing is a lot of people assume that the person who invests should get a board seat. I don't think that you should assume that at all. I think you should take the people who are the best at giving the advice and either if you feel like you know that person and you know that that person is going to add value, that's great, but in three years' time that person might not add value. So you might need a totally different type of skill set. And a lot of people end up in boards long-term by vanity reason and then you need to have really tough discussions too. But then if they have a contractual obligation to be on your board, then it's an even tougher one.

I

Interviewer1:30:50

Have you ousted anyone from your board?

D

Daniel Ek1:30:52

We made changes. I don't call it ousting because then it seems a lot worse.

I

Interviewer1:30:58

Can I call it ousting?

D

Daniel Ek1:30:59

Yeah, sure. We made changes, but it's actually not as painful as it sounds. There's no one on our board that's been horrible. That's not been the case. Actually, all of them have added value over time, but I think as the company matures, much as like you as an entrepreneur — like we have 700 people now, I can promise you that I can't act the way that I did when we were five, right? We did funny pranks and typed the keyboard into the table so that you couldn't lift it or changed the start screen on Google to something else. We did those kind of pranks all the time against each other and while you can still have some of that, there are definitely inappropriate ones that you shouldn't try to do.

I

Interviewer1:31:51

You have HR departments now.

D

Daniel Ek1:31:52

Yeah, you have HR departments. And the same is true with boards. I mean, as the company evolves there's a different set of things that you need to think about and it's a different type of skill set. Like for instance, when you're more mature you might want to bring on someone that has experience of being on public boards because that ends up mattering to you, where if you've just started out then that's not a skill set that you should care about that much.

I

Interviewer1:32:23

So last thing, you guys are in this interesting business where it's like you work for four and a half years to kind of finally get to launch in the US and you're not done with the labels. I mean, this is something you have to — these things expire. You have to continually re-up them. You have to continually renegotiate them. I mean, we've seen recently Pandora still struggles with this and they're sort of one of the only ones that's made it out to the public markets. So, do you find yourself in a situation where you're somewhere in the middle of being the labels' perhaps best hope, but also the labels' nightmare for the rest of your career?

D

Daniel Ek1:33:02

No. I just — we just fundamentally don't look at it like that. We just fundamentally believe that one of our skill sets that we have is being able to understand content and being able to understand their perspective. We didn't have it when we started but I think we built that and I think we built those type of relationships. So while it's been frustrating getting to that point, I understand their perspective and view and I think they respect and understand our point of view too.

So I don't believe — like we were talking about it the other day internally — there's very few companies, technology companies, that understand how to deal with content. You can probably mention them with one hand. Most technology companies have very agitated relationships to content companies, but I don't think we have that and that's one of the core strengths of Spotify. So what many look at as a disadvantage turns out to be an advantage.

And I believe there are strategies of — you know, 'don't be evil,' which is Google's, and think about a European company called Ryanair. It's not like their motto is 'be evil,' but if you've ever dealt with them in Europe — well, it's kind of funny because their CEO in the press says, 'Well, if you don't like us, fuck off.' That's what he says in the press. It's not much better than 'be evil.' No. And they say, 'Well, if a flight attendant got overweight, that's extra luggage and you should pay to be able to ride.' That's like things that they say in the press. The thing is they have another motto — all the press is good press — and they really mean it then. The question you should ask yourself is what happens in a plane crash, is that positive press or negative press? But I just believe that what made them succeed is the fact that they took the counter position of almost saying, 'Here's what we do and if you're 30 seconds late, screw you. If your luggage weighs about 2 lbs too much, screw you,' right? And that works for their business and it's very clear. And the people who ride them, they don't ride them because they think that people there are nice, because they're not. But it's because it's the cheapest way to get from point A to point B, right? And I respect that from the sense that they're very clear about what they are to the world and what they're not, where coming full circle on it, I think that a lot of people aren't clear about that.

So what people perceive about us being our biggest disadvantage, we actually view as our biggest advantage. And there's something about what Bezos famously said, which is you need to be willing to be misunderstood for long periods of time if you're going to do something that's radically different than what other people believe is the norm, but it's often those things that really advance culture and really advance society.

I

Interviewer1:36:32

Right. So what do you feel you need to prove as a company by the time you're in that negotiating position again with the labels? Does it have to do with users? Does it have to do with some sort of proving some ROI to them? Does it have to do with getting more developers on the platform and showing more innovation? Which of these is sort of the most important milestone?

D

Daniel Ek1:36:55

The most important milestone for the labels is our growth as a company.

I

Interviewer1:37:01

In terms of users? In terms of revenue?

D

Daniel Ek1:37:05

In terms of revenue. Because they obviously get — in terms of revenue you're giving them essentially. Yeah. So let me try to explain that — it's not about that we need to pay more per user. It's really about the perspective that the record industry over the last decade have gone from a $45 billion industry to less than 15. That means that they really want to really find the growth drivers again for their business. So the most important thing we can do to get them to support us even more is by providing them with another path and to show them that the evolution of the internet isn't just going to marginalize or stabilize their business, but it's actually going to long-term grow their business as well.

And I believe that because I believe that there's a half a billion people that currently listen to music online right now and the vast, vast, vast majority — 90% or so — don't even pay for music.

I

Interviewer1:38:08

Right. So I don't know if these numbers are updated, but I read that you guys have paid out like 150 million to the labels. Is it more than that now? What's the tally?

D

Daniel Ek1:38:20

Well, the last public figure we gave out was that we've paid out more than a quarter of a billion.

I

Interviewer1:38:26

So what does it need to be by the next time you're negotiating or by — I mean, do you track it in sort of milestones the way you would for investors?

D

Daniel Ek1:38:33

No, I don't think so. We've already proved that our model works. So we don't need to show a certain number in order to keep the license going. But us — if you think about the reason why we started this company, it's because we wanted the entire world to be able to listen to music and share it with their friends and do it in a way where it would benefit the music industry. We're not happy being where we are. Like if anything, we're our own biggest critics internally. We quite often don't spend that much time — when we have people joining from other companies, I think this is part of the Swedish culture too, but we're always criticizing ourselves instead of sort of doing, 'We're so great.' It very rarely happens. Quite often whenever we've had a milestone of some kind — not even when we reached four million paying customers — I think the only thing that happened was we sent out an email and then everyone sort of drank a beer and then went home. It wasn't more than that and we didn't ever talk about it again because our mission is much larger than that. Our mission is to really try to change the world and how people consume music.

I

Interviewer1:39:50

I want to go to questions from the audience. I actually — I didn't intentionally lie to you. They've changed the microphone format. There's one over there if you want to sort of line up against that wall. And while you're doing that, people always talk about how social has been this big weapon for you. People talk about a lot of other changes. To me, one of the things that doesn't get enough credit — with Pandora you clearly, Apple — is the role mobile has played. And to me, that was the breakout moment for Pandora. Internet radio was something that receptionists did while they played solitaire and then it became in your car and everywhere and on iPhones. This obviously clearly correlates to your business model — people pay you when they want to take it everywhere. Could your company have been built in an era where we didn't have computers in our pockets?

D

Daniel Ek1:40:46

No. If you think about it, the way I approached things — and I like to think back in history because I think it teaches us a lot — in 2007, five years ago, there was no Facebook platform, there was no iPhone, or it got introduced that year. We're talking about two super platforms, both of them really, really unique and special in their own way. And I wouldn't say that Spotify could have been — we wouldn't have been where we are today without either one of those. But you're right that mobile has been super important to us. It's actually probably been more important to us than many other companies because if you start thinking about it, the reason why people pay for music is portability.

I

Interviewer1:41:34

Exactly.

D

Daniel Ek1:41:35

So the biggest change — and I often get asked the question, you know, why did you guys succeed on other subscription offerings? And I think part of it was also great product, but also down to timing on the market. When it comes to mobile throughout history, if you think about it, I don't know many users who listen to music solely on their computers. What they did was they bought music off iTunes to have on their iPod, which is really — you're paying for the portability. You're not paying to listen.

I

Interviewer1:42:09

Well, and even Napster, you were burning it onto a CD.

D

Daniel Ek1:42:12

Yeah. So I just always think that portability has been a huge use case — or a huge driver for people to pay.

I

Interviewer1:42:22

Right. All right. Let's go to questions.

A

Audience Member1:42:25

Hi, my name is Andy Pickkins. I run a social marketing company in New York called Jamplify. One of the big stories in the music industry in the last year has been the emergence of electronic dance music in the US and it's obviously been huge in Europe for years. I'm curious to hear what influence EDM had on Spotify in the early years as it did on SoundCloud, obviously another European-based music startup. And I'm curious how you're positioning Spotify to grow with EDM in the future.

D

Daniel Ek1:42:49

Well, that's a great question. I think what's really interesting for me is first I think Sweden has had a pretty big impact. We have Avicii, Swedish House Mafia, and several others. Spotify itself — we're not a platform for one type of music and we're not even as associated with electronic dance music as say SoundCloud. But what's probably more interesting to me long-term is how I've been thinking about what the next format is for music. Music has always been constrained by physical restrictions of what you can actually do. Music really started by being singles-driven — not because someone came up with the idea that we're going to do a single, but because that was all that fitted onto a record. And that evolved onto you can fit 10 or 12 songs on a CD, but the limitations were exactly that. Now, when everything's electronic, what are the actual limitations? And I think what's really inspiring and interesting for me with electronic dance music is I feel that a lot of those guys are so forward-thinking and experimental in terms of how they release their music and how they want people to hear what they're doing and even collaborate across different artists, the mixing and so on. So we're looking a lot at it, but more from the perspective of what ideas can we take to help create the next big format for music? Does it mean that we should release a song just every time it gets done like electronic dance music? Or does it mean that a song can be 10 minutes long instead of 3 minutes long? So I think that's the impact electronic dance music has had on us, which I think long-term for culture is going to be huge.

A

Audience Member1:44:52

Hi, my name is Pete Sullivan. I have an interesting story where I was an American who started a company in Sweden. And although it has a great — I felt like a design community, developer community — doing business there was, I thought, extremely difficult. And now I've moved the company back here to New York. And my question was now that you have a foundation here, would you on your next venture start in the US directly or would you go back to Sweden? And as a little follow-up, I know when I was in Sweden, a big story about Spotify was the technology behind it about how you could instantly play a song and it could stream right away. And that whole story kind of got lost here on the launch in the US. Can you describe so normal people can understand the technology behind the service?

D

Daniel Ek1:45:41

Sure. So two parts of the question. Too bad you had a bad experience in Sweden. I don't think we would have started in the US for the simple purpose that being a serial entrepreneur — even though I don't like the word, that's probably what I was — what I think is some of the success stories of entrepreneurs as well is the first couple of people you hire are so insanely important for your business. And in my case, many of the people I hired for Spotify was people I met through high school that later on developed — I really, really knew well. So I think that's been a recipe for success, at least for me, that the people that I've worked on in my prior companies are also the people that I work with now. So these are people that I've known for a very long time. But I also think the same is true by the way in the Valley, where you see constellations of people — the PayPal mafia — working again and other people. That's kind of like what I did. And being a Swede, obviously there's a huge advantage of just knowing great engineers by being brought up together with them. So I don't think I would have done that and I still believe that we have an amazing — there aren't that many interesting technology companies out of Europe. So we still have an amazing potential of tapping that talent.

And then sort of to your second question, the technology — it's really for me about solving a problem. So when I think about it, what's the shortest route between point A to point B? And if you think about in music, it's really how fast can I listen to the song that I want to listen to. And the experience that we wanted to create with Spotify was like imagine if you had iTunes but all the world's music on your computer. So how do you create that experience? Well, it turns out that the fastest point of going from point A to point B is that you need to start really, really hammering down milliseconds of things like what codec you use, like how they actually sound. Can you shave something off there? Can you shave something off by making better compression algorithms? And what we really did was all of those things and employed peer-to-peer as well so that we can really just distribute these music files a lot faster than many other people could. But technology isn't the end of the means. The end of the means is what problems you solve. So for us, we just knew that the most important problem we could solve in the early days of Spotify was just creating that feeling like if you had all the world's music on your hard drive.

A

Audience Member1:48:43

Hi, Matt Brandan. My question is more about the underlying musician and I wanted to get your thoughts on how Spotify and other players in this space are basically inspiring musicians, smaller musicians predominantly, into thinking that their music has value and that maybe this is something they could turn into an actual career sometime down the line.

D

Daniel Ek1:49:04

Well, first and foremost, I think if you start earlier in the artistry process, a lot of the folks today that are music producers or an artist — and this is probably one of the facts that I'm most proud about about Spotify — are using Spotify of showcasing, 'This is the kind of sound that I'm looking for or trying to create' as a part of the creative process. And that's huge. Long-term for artists, I believe again that what we want to do is we don't want the music industry to be where it is at today. We believe that if you think about it, there's more people now than ever before listening to music and the cultural importance of music is bigger than ever before as well. Given that there's hundreds of millions if not billions of people that listen to music that are all going to be digital, we want to transfer them into actually in some way monetizing them back for the artist so that they can make a decent living out of it. But the beautiful part I think in this age is that we're not restricted — like any artist can get heard. Any artist can create the kind of music that they want and put it out there. And we're trying to build tools so that you can market that more efficiently as well.

A

Audience Member1:50:32

Hey, I'm David Fu and thanks again for taking the time to speak to us. I was curious about your thoughts on growing the user base and what's the next value proposition after having all the world's music on your desktop at your disposal? What's kind of the next step you envision for getting people onto the platform and getting people excited about Spotify?

D

Daniel Ek1:51:03

Making sense out of it. Like if you have 20 million songs, what are you going to listen to? That's the next big question. And sometimes when people start thinking about product, they get down into details like person A didn't like feature Z or whatever. It's rarely that complicated. It really starts with the big questions and you just got to ask yourself and the people around you like what are the biggest frustrations they have with the product. It doesn't start with a feature. It really starts with what they're trying to do with your product. In our case, Spotify is fantastic if you know what song you want to listen to, but what if you don't? Well, that's a huge problem to solve. How do we make sense?

I

Interviewer1:51:47

And sometimes having a bigger selection makes that worse.

D

Daniel Ek1:51:50

Oh, yeah.

I

Interviewer1:51:51

I mean, like I read this New Yorker article several years ago that was a particular American problem because we have like infinite selection of things — it's like, it wouldn't just be like 'I'm going to buy this black dress I like,' it's like, 'No, I've got to buy the best black dress the world has ever conceived of.' And it sort of paralyzes you. I imagine it's somewhat similar when you can have any song you want.

D

Daniel Ek1:52:12

It does. Again, it's this paradox of choice. Like, every study that's done on choice seems to indicate the more choice you're given, the less likely you are to choose anything. Which is kind of funny. So like, which is also why I think one of the bigger trends on the internet now is curation. Pinterest and what everyone else is doing is just making sense out of all that. And what Flipboard is trying to do for news, just making sense out of it, which is also the biggest problem for music now. We add 10 to 20,000 new songs every single day. How are you going to make sense out of that?

I

Interviewer1:52:50

Yeah, good question.

A

Audience Member1:52:54

Thanks. Hi, Daniel. My name is Jason Kek. I used to run business development at Shazam and I'm now working on a social music startup called Stereotypes.

D

Daniel Ek1:53:03

Cool.

A

Audience Member1:53:03

Wanted to ask you if you had general advice for music-related startups these days and in particular if you could speak to the Spotify Apps Platform. Curious about that.

D

Daniel Ek1:53:14

Sure. It will take time if you try to go to a label. That's the first advice. So four and a half years. If you're in a hurry, don't do that. I think again, there's a lot of resources that weren't available when we built Spotify, like for instance the Spotify Platform, where you can now build off having the whole library of Spotify at your disposal. I also think that there's a lot of other cool technology like Songkick if you want to have ticketing and integrate that.

So it's kind of interesting I think how the internet is evolving and things are moving up on the stack. So there's these huge platforms that do fairly rudimentary things — it's kind of almost like if you visualize the internet as an operating system, there are like core features that people have solved, like search for instance that cuts across every vertical of the internet. Social is also something that cuts across most verticals on the internet. And in our case we've tried to tackle music and try to tackle that, but we also realize that we're not going to solve every single use case in music and that's huge. So my advice to you guys is just think about the internet as it constantly tries to move to the next level in abstraction. So I would pick very carefully — if you don't have to do something yourself, don't do it, and focus really hard on just choosing what problem you're going to tackle and where you can make an impact.

I

Interviewer1:54:55

Yeah, there's a ton of VCs who feel like, particularly after MySpace and some of these guys, that if you're not going to have the content, you just cannot build a big company in music. Do you think that's true?

D

Daniel Ek1:55:08

No, I don't at all. I think again it's about choosing the right problem and if that problem turns out to be big enough and enough people are interested in it, you're going to build something that's valuable.

I

Interviewer1:55:20

That guy also has a sweet mustache. I think he's going to go far. All right.

A

Audience Member1:55:25

I just moved to New York. I'm from Toronto. Not really relevant, but I think — something — I forget everyone had like a little intro, so I had to throw in something. I thought what was really interesting about Spotify is that you kind of said one of your main advantages was understanding content, the perspective — you know those label companies that owned it. Do you think that this similar philosophy could apply to another industry, something like publishing for example, and having a very similar model to Spotify where you maybe on your computer you can read it for free and then when you go portable you have to pay for it. Is that something that perhaps has ever crossed your mind or do you know anyone that's kind of trying to tackle this issue as well? Because that's definitely my issue. Like I love books, but I can't buy them all.

D

Daniel Ek1:56:06

I don't know if anyone else is tackling it, but if the problem is big enough, the answer is probably yes. And by the way, that shouldn't stop you. You just need to focus again on executing it much better and be really focused. So what I said about understanding content, I just think again you have to be really, really, really picky about what things you should care about and what things you shouldn't. And my advice to whatever you're doing, if you're choosing a big area, make sure that you start super focused and super small on what's the minimum viable thing I can do to make a massive impact and then start building it from there because otherwise you'll end up building something where you're not even sure who's going to use it or whether someone else might actually come around and do something that's more focused that's better at solving just that problem. So I don't think you should pay attention to whether someone else is doing something. If the idea is good and the space is good, it usually ends up being a lot of people focusing on it. I think you should just focus on defining what you are and what you're not. And if there's any big lessons that I've learned is just stay more focused and be really, really crisp around what it is you do.

I

Interviewer1:57:30

Great. I know in one of our first PandoMONTHLies, Peter Thiel said something I think about a lot, which is, you know, it's not the first mover, second mover, fifth mover that gets to market, it's the last mover because that's basically that person who just defines it and ends it.

A

Audience Member1:57:46

Hi, my name is Avi Leshine. I just actually am curious about from the artist perspective. So just a couple — might have a couple limbs to this question — that basically, can an artist say we don't want to be on Spotify? What's the process if they do want to be on Spotify? And how does it work exactly — are the record companies paid a fee just to use all the music or each artist is paid per play, you know?

D

Daniel Ek1:58:12

Yeah. So pretty much every artist can choose whether they want to be on services or not. And the way it works with record labels is every time someone plays a song, we pay. But we don't just pay record labels, we pay publishers, we pay collecting societies. So it's actually a lot more complicated in every single market. We do unique deals, which is why it ends up taking time for us to get to new markets as well. So it's a really complicated and time-consuming effort, but the artist definitely has the choice and in the end also gets paid of course for all the usage of music.

I

Interviewer1:58:55

Okay, great. Last question.

A

Audience Member1:58:59

Hi, my name is Albert. I'm from ThingLink and I wanted to ask you a question about uTorrent because you haven't mentioned that much in your presentation. It was a music streaming service before Spotify which is basically pretty similar to Napster, right?

D

Daniel Ek1:59:14

Yeah.

A

Audience Member1:59:15

How much it influenced Spotify?

D

Daniel Ek1:59:18

It didn't influence as much as you might think. I've always been driven by engineering challenges. And it's actually quite funny because uTorrent sort of already existed at the point where I got involved in it. I just happened to find the greatest talent in the world. I think one of the best engineers in the world. So I got so astounded by this guy. So I went to Gothenburg. He was based there and I just knew I had to work with him. So it sort of ended up that we bought his company and we ran uTorrent for a while as just that. But we never wanted to do it. I did it from a sort of talent perspective more than anything else.

I

Interviewer2:00:06

Thanks so much. Great. So I always end with two questions and I don't know if you know about them. The beauty is most entrepreneurs do not watch the full video so it's usually a surprise. But before I get to them I want to thank our sponsors. You know, we have a very — some people would say crazy — philosophy at PandoDaily of most blogs try to gouge and make money on their event series. We want people to be able to get in and see people like Daniel for $20. So, particularly in New York since a lot of us have to fly here, we lose a tremendous amount of money producing this series every month. And I just want to give a huge thanks to our sponsors because they are finally starting to stem that cost and it's tremendously important. So if you enjoyed the pizza and beer and t-shirt and this conversation, it would just be awesome if you thank these guys on Twitter or something because they've essentially paid for your ticket so our burn rate isn't going through the roof. Projective Space is one of the only places that gives us actually a free venue and is amazing to work with. The second the storm hit last week, they were on the phone with us and assuring us that everything would be taken care of and there was no worries and they were just phenomenal. Huge thanks to them. Huge thanks to Rackspace and Zencoder who've been doing our free streaming. We actually didn't have streaming for a few months because it's incredibly expensive doing all the video production and they stepped back in and helped us with the Chris Sacca one and this one. So if you enjoyed Chris, thank them for that. And then last but not least, Accel Partners. They came to me and they really believed in what we were trying to do for the ecosystem and appreciated that we were doing it more than Silicon Valley. And they really wanted to help support it and sort of buy everyone's tickets. And I gave them the lineup and they said, 'We've got to do the Spotify one because if entrepreneurs in New York need to learn from one person, it's Daniel.' So huge round of applause for the sponsors. Please thank them on Twitter. We wouldn't be able to do this otherwise.

Okay, last two questions. What is the one thing that you believe that very few people in the world believe?

D

Daniel Ek2:02:20

Oh, that's a really hard one.

I

Interviewer2:02:23

I used to say 'nobody' and people would take this really literally and they'd be like, 'Well, there might be one guy' and like we'd be here all night. So say very few people, not everyone.

D

Daniel Ek2:02:33

I believe that it's actually a whole lot of fun dancing around a pole on Midsummer like a crazy frog.

I

Interviewer2:02:48

I mean, I don't believe that. So you've got me there. Or do you have to be drunk for this to be fun?

D

Daniel Ek2:02:54

Yeah. But it's actually like some folk music, Swedish folk music. It's what we do on Midsummer. And typically 96% of all Swedes are drunk by that time, but it's crazy fun.

I

Interviewer2:03:08

It's an official statistic you learn in the history. Is it essential to be a frog? Could you be any sort of reptile?

D

Daniel Ek2:03:14

No. It's very important that it is a frog actually. That's what everyone else does. And you dance around in a ring and it's kind of big — like there's hundreds of people doing it, right? Like at one place and then around the country there's like thousands of those places. So yeah, it's a pretty big one. So you should check it out on YouTube, like search for Midsummer. It's pretty crazy.

I

Interviewer2:03:38

You should do one in New York. I bet all these people would come and dress.

D

Daniel Ek2:03:41

They do it in Battery Park. So go check it out.

I

Interviewer2:03:46

I might do that. I doubt I'll dress like a frog. But I would watch.

D

Daniel Ek2:03:50

You don't have to dress as a frog. You just have to dance as a frog.

I

Interviewer2:03:53

Oh, I thought you had to dress as a frog.

D

Daniel Ek2:03:55

No, no, no. You can dress any way you want.

I

Interviewer2:03:57

Oh, that's a much lower barrier to entry. Could you do your frog for us?

D

Daniel Ek2:04:02

No. I'm not drunk.

I

Interviewer2:04:05

You really thought about it, though.

D

Daniel Ek2:04:06

Yeah.

I

Interviewer2:04:07

We have beer. At the LA PandoMONTHLY, they did keg stands. You could do a keg stand and come back in.

D

Daniel Ek2:04:11

Yeah, I might do it later then. Not on camera.

I

Interviewer2:04:14

All right. Last question. If you could have one mediocre superpower in the world, what would it be?

D

Daniel Ek2:04:22

Would you like some examples of mediocre superpowers?

I

Interviewer2:04:24

I actually prepped for this one though. God, we're doing too many of these events.

D

Daniel Ek2:04:29

Yeah. Well, so I thought for a while and I figured if I can look into the future for one hour, that would be more than sufficient for me.

I

Interviewer2:04:40

So any point in the future or just an hour ahead?

D

Daniel Ek2:04:43

Just an hour ahead. So, back when I was single and going to nightclubs, knowing whether —

I

Interviewer2:04:52

Everyone knows where this is going, but continue anyway.

D

Daniel Ek2:04:56

Yeah. You know — we can put it as the nice version of this is like, well, we can put it as the last beer, whether I should have had that, but obviously it could have been, should have actually kept talking to that girl or not in the end. So yeah, the Barry White probability.

I

Interviewer2:05:14

The Barry White probability.

D

Daniel Ek2:05:16

Yes, exactly. So I think that's my mediocre superpower.

I

Interviewer2:05:20

That's a good one. It's similar to Dennis Crowley's, which was basically to be able to go backwards and like — to just go backwards like five minutes. But I don't think his application of the superpower was the same as mine.

D

Daniel Ek2:05:36

No, I just — it's time-shifting, which —

I

Interviewer2:05:39

No one has said time-shifting. No, you're forward-looking. He's backwards-looking.

D

Daniel Ek2:05:44

Okay.

I

Interviewer2:05:45

All right. Huge round of applause for Daniel.

Daniel Ek, Spotify

About Daniel Ek