Spotify CEO Daniel Ek

In this episode of "Acquired," hosts Ben Gilbert and David Rosenthal, alongside Spotify CEO Daniel Ek, delve into the transformative journey of Spotify from a music streaming service to a dominant audio platform. Ek discusses the organic and serendipitous nature of podcast creation, contrasting it with the structured brevity required in traditional media. He highlights Spotify's role in saving the music industry post-Napster, with over $40 billion paid to artists and becoming the industry's largest revenue source. The conversation also touches on Spotify's foray into podcasting and audiobooks, their impact on consumer experience and Spotify's business, and the platform's growth strategies that have attracted 500 million monthly active users. Ek outlines the importance of company culture and intentional evolution, citing Spotify's various phases of growth and the necessity to adapt and innovate, such as embracing AI and localization to expand global reach and content diversity.

• The process of creating a podcast can lead to an organic and dynamic conversation that diverges from initial plans, yet still results in a valuable product.
• The unscripted nature of podcasts allows for elaboration on ideas, unlike the time constraints faced when speaking with journalists.

"It is impossible to flawlessly execute a podcast of this style. And that's the beauty of it. You come up with a bunch of stuff you want to talk about, and then you end up having a real organic conversation, and then it turns into a product."

This quote highlights the unpredictable and creative process of podcasting, which can lead to unexpected but successful outcomes.

• Podcasts provide a platform for in-depth discussion, unbounded by the brevity required in traditional media interviews.
• Brian Chesky, CEO of Airbnb, is cited as being particularly adept at concise and impactful communication in time-limited settings.

"But I think the amazing thing is, unlike you talking to a journalist, et cetera, it's truly a conversation."

The quote emphasizes the conversational depth and authenticity that podcasts offer compared to other media interactions.

• Spotify's significant contributions to the music industry, including payouts to artists and becoming the largest revenue source for the industry, are discussed.
• The podcast "Acquired" has seen its audience on Spotify grow from nearly zero to over 60% in four years.

"Spotify has paid $40 billion to artists over their lifetime. They're now the single largest source of revenue for the entire music industry."

This quote underscores Spotify's monumental role in financially supporting artists and reshaping the music industry's revenue streams.

• Spotify's strategy involved expanding beyond music to include other forms of audio content, such as podcasts and audiobooks.
• The company's internal user base provided insights into consumer preferences, leading to the integration of podcasts within the Spotify app.
• Resistance to merging music and podcasts within one app was overcome by recognizing user behavior and preferences.

"And so one of my favorite topics is how often people game our platforms, for instance, in Germany, unbeknownst to us."

This quote reveals how unexpected user behavior, such as uploading audiobooks to Spotify, can lead to strategic insights and platform evolution.

• The distinction between podcasts and audiobooks is becoming blurred, with business models being the primary differentiator.
• Spotify envisions a future where audiobooks reach a much larger audience, facilitated by improved discovery and business models.

"My view, I guess, is the boundaries are from a format side. It's definitely being blurred quite a lot and for right reasons."

This quote reflects the speaker's perspective on the converging formats of audio content and the potential for business model innovation in the space.

• Podcasting presents opportunities for higher margins compared to music streaming due to the potential for owning content and building an ad network.
• The challenges of content moderation and building scalable advertising systems are acknowledged as significant factors in the podcasting business model.

"Well, I think it was a bit of both. And you have to contemplate that if you're making moves like certainly of our size, because many of these investments that we're making are multi year ones and pretty substantial from a signaling point of view too."

The quote indicates that both product vision and business considerations are important in Spotify's strategic decisions regarding podcasting.

• There is a discussion about the potential for different monetization strategies for audio content, including ad-supported models and subscriber-exclusive content.
• The speakers contemplate the evolution of the audio content market and the need for new business models to support it.

"But I think his main takeaway is obviously that all media models ought to move to freemium."

This quote suggests a belief in the viability of freemium models for media content, including audio, aligning with broader trends in content monetization.

• Pilot provides comprehensive accounting, tax, and bookkeeping services for startups and growth companies.
• The service is presented as a way for companies to focus on their core product and customer experience while outsourcing necessary but non-core functions like accounting.

"Pilot both sets up and operates your company's entire financial stack. So finance, accounting, tax, even CFO services like investor reporting from your general ledger all the way up to budgeting and financial sections of board decks."

The quote describes Pilot's range of services, positioning it as an all-encompassing financial management solution for companies.

• The cost of starting a social media company today is significantly higher than it used to be.
• The complexity of ad platforms and moderation tools has increased.
• Despite these challenges, some companies have a good understanding of potential problems due to prior experience.

"know what the cost would be, but if I would start a social media company today, the cost may be an order of magnitude more. Right. Because of all the other things you now have to do, the ad platforms are way more sophisticated that you have to build. The moderation tools are way more sophisticated."

This quote emphasizes the increased complexity and cost of starting a modern social media company, particularly due to the need for sophisticated ad platforms and moderation tools.

• Spotify had a large-scale advertising business before entering the podcast market.
• The company did not initially have user-generated content to advertise against.
• The goal was to offer monetization opportunities to podcasters who couldn't otherwise sell ads.

"And to give you some credit for listeners, I think at the time, you probably had maybe 200 million people on the ad supported tier who weren't in premium when you launched podcasting, maybe something like 150,000,000. But you had a gigantic scale advertising business. You just didn't have user generated content being the content that it was advertising against."

This quote explains Spotify's position prior to podcasting, highlighting the company's large user base on the ad-supported tier and the scale of its advertising business despite the absence of user-generated content.

• The challenge of deciding whether to serve a niche better or to broaden the content base.
• The balance between saturating a niche and expanding to reach new audiences.
• The importance of maintaining a core audience while exploring new content opportunities.

"So we have had to redefine what acquired is basically once a year since we started. It used to be technology acquisitions that actually went well. And then it was acquisition."

This quote illustrates the evolving nature of content creation and the need to redefine objectives to meet the changing demands of the audience and the market.

• The process of selecting content for episodes and managing audience expectations across different niches.
• The consideration of audience investment in niche topics versus broader interests.
• The challenge of creating content that resonates with both core and new audiences.

"We did two and a half episodes on Nintendo, two on Nintendo, one on Sega, and we had a blast. And people who love video games had a blast. But by the time the Sega episode came out, the people who don't love video games in video game history had stopped listening."

This quote highlights the creators' experience in balancing deep dives into specific topics with the risk of losing engagement from those outside the niche.

• Recognizing that the final stages of content creation require significant effort.
• The comparison of content creation to software engineering, where the last 10% of work can be as substantial as the first 90%.
• The exploration of producing "shorts" to include content that didn't make it into the main episodes.

"I think we had high level concepts in our head for eight, but it turns out most of the work is the last 10%. It's like software engineering, where there's the first 90% and then there's the second 90%."

This quote draws a parallel between the content creation process and software development, emphasizing the substantial effort required to finalize and polish content.

• The dilemma creators face between focusing on a single platform or diversifying across multiple platforms.
• The difficulty in attributing success to specific platforms and the risks associated with algorithm changes.
• The importance of understanding what drives audience growth and engagement.

"I believe one of the biggest problems we have in this new creator economy is the one of attribution, right? So many creators like you have, or try many of these different platforms and they use it, and they can see on each individual platform how well they're doing, but it's very hard for them to understand what actually drives what."

This quote addresses the challenge of attribution in the creator economy, where creators struggle to identify which platforms are driving their success.

• The necessity for different merchandising strategies for music, audiobooks, and podcasts.
• The importance of building trust with the audience to encourage them to invest time in new content.
• The role of geographical density and targeted marketing in Spotify's early growth.

"how we merchandise content has to be very different for music than it is for an audiobook or a podcast."

This quote explains the need for tailored content merchandising strategies depending on the type of media and the commitment required from the audience.

• The benefits of launching in specific geographical areas due to licensing constraints.
• The advantage of focusing on a first audience, whether geographically or demographically.
• The impact of Spotify's constrained early launch on its eventual success.

"Spotify would not have been alive today had it not been that we couldn't launch in the US as our first market."

This quote reflects on the unintended benefits of Spotify's initial geographical constraints, which ultimately contributed to its long-term success.

• The emotional toll and near-death experiences faced by successful entrepreneurs.
• The misconception perpetuated by media about entrepreneurs' foresight and certainty.
• The reality of entrepreneurship involving luck, hard work, and emotional challenges.

"And I think every really successful entrepreneur, in my opinion, has had at least three near death experiences with their company."

This quote acknowledges the difficult and uncertain journey of entrepreneurship, countering the narrative that success is a straightforward path.

• Statsig's role in helping product teams ship features faster and measure their impact.
• The platform's ability to manage and test AI product features and provide data-driven insights.
• Statsig's customer base, which includes major companies across various industries.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics."

This quote describes the functionalities and benefits of Statsig as a tool for product teams to enhance their feature deployment and evaluation processes.

• The impact of Taylor Swift's departure from Spotify on the company and the music industry.
• The changes in the streaming landscape that influenced Swift's decision to return to the platform.
• The strategic considerations for artists in managing their presence on streaming services.

"But if you were inside of Spotify at that moment, there was no one who thought that that was sort of the defining moment we certainly worried about."

This quote provides an insider perspective on Taylor Swift's departure from Spotify, indicating that it was not considered a critical moment internally, despite external perceptions.

• Modern artists are deeply involved in business decisions and audience engagement.
• Artists like Taylor Swift and BTS show diverse approaches to managing their careers.
• Taylor Swift is known to have a lean team, while BTS and other Korean artists operate like industries with extensive teams.

"this level today, there's almost no one of them that's not very active as well on the business side and understand deeply what their audience wants, what's authentic to them by making move x."

The quote emphasizes the current trend of artists being actively involved in the business side of their careers, understanding their audience, and making decisions that remain authentic to their brand.

• Taylor Swift's business operations are lean and tight-knit.
• Korean artists, like BTS, have extensive operations including large songwriting teams and merchandise development.
• The talent development pipeline in K-pop is a structured and comprehensive process.

"In Taylor Swift's camp, it's like two, three, four, maybe at the top. In some Koreans, it's 200 writers."

This quote contrasts the scale of songwriting teams between Western artists like Taylor Swift and Korean artists, highlighting the industry-like nature of Korean pop music production.

• Global cultural trends coexist with local nuances in music.
• Niche genres have the potential to gain global appeal, as seen with reggaeton and Bad Bunny's success.
• Spotify's data predicted the global success of reggaeton, which is now the largest genre on the platform.

"We're now living in a very global world when it comes to culture."

The quote reflects the global nature of cultural trends while acknowledging the existence of specific local nuances within these global movements.

• Music transcends language and cultural barriers, resonating with people globally.
• The storytelling aspect of music is foundational and often indescribable.
• Platforms like Spotify enable artists to reach global audiences, regardless of language.

"It's music, it makes people feel there's something about the artist, there's something about how they're communicating that resonates with you as an individual."

This quote captures the universal appeal of music and its ability to connect with individuals on a personal level, transcending cultural differences.

• The rise of digital platforms has democratized the creative industries, including music, gaming, and podcasting.
• More people have the opportunity to create and share their work, leading to both increased competition and success.
• The misconception that the current model doesn't work is challenged by the fact that while more people may fail, more are also succeeding.

"There are a lot more people who are failing, but there are also a lot more people who are succeeding."

This quote addresses the misconception about the music industry's business model by highlighting that the increase in both failures and successes is a result of a larger pool of participants.

• The process of creating music has evolved from requiring musical genius to technical proficiency with software.
• Modern music producers have intricate workflows and utilize software and plugins to create music.
• The barrier to entry for creating professional-sounding music is still high but is being lowered by advancements in technology.

"They've kind of have their plugin sets, they've got these 16 things that they chain together in order to create that one effect that defines them."

This quote describes the technical nature of modern music production, where producers use a combination of software tools to create distinctive sounds.

• AI has the potential to simplify the music creation process, making it more accessible to a broader range of people.
• The use of AI can lower barriers to entry in various fields, including coding and content creation.
• The democratization of creativity could lead to a greater expression of cultural ideas and a deeper understanding of other cultures.

"There's nothing that says that it wouldn't be possible for those 100 million plus people to make something that actually sounds pretty good."

The quote suggests that AI could enable a vast number of people to create high-quality music, potentially transforming the music industry and cultural expression.

• Podcasting has experienced significant growth, with millions of podcasts available.
• High-quality podcasts still stand out despite the increased quantity.
• Spotify manually adapts successful regional content for global audiences, but AI could automate this process in the future.

"There are four to 5 million people out there that are like, I can make a podcast, and yet the very, very top ones are still of a quality bar that is so high and getting higher."

This quote highlights the vast number of podcast creators and the distinction in quality that separates the top podcasts from the rest, despite the crowded market.

• AI's capabilities can significantly alter audio content, potentially creating episodes that say different things from the original.
• Platforms like Spotify and YouTube have a role in verifying the authenticity of content, adding value to the platform.
• Verification can help distinguish genuine creator content from AI-generated or altered content.

"Yeah, I think we're only in the beginning, obviously, and that's hugely exciting for creators like yourself, but it's also scary, right? Because it's totally possible for us to make an entire episode where we're saying totally different things than what we're saying now, and it, at some point in the future might be virtually indistinguishable from the real thing."

This quote emphasizes the duality of AI in content creation: while it offers exciting possibilities, it also poses risks like the potential creation of inauthentic content that could be hard to distinguish from the real thing.

• Platforms are increasingly becoming gatekeepers of authenticity.
• The value of platforms is enhanced when they can assure users of the authenticity of content.
• Authenticity verification is becoming a key aspect of platform services.

"And platforms probably have a role to play in verifying authenticity that actually raises the value of platforms because platforms like Spotify, YouTube, you actually can point to, we know for a fact that this was created by the creator and we can stamp it and say that."

This quote highlights the growing importance of platforms in verifying the authenticity of content, which in turn increases their value to both creators and consumers.

• Different platforms offer varying levels of monetization opportunities for creators.
• Spotify aims to be a low-friction, customizable partner for creators, not necessarily the only option.
• Creators may have different business models and needs, influencing their use of platforms.
• Twitter, as a platform, does not offer traditional monetization like rev share, contrasting with Spotify and YouTube.

"How do you think about what role for monetization, maybe, especially on the podcasting side, Spotify should play for creators?"

This quote introduces the topic of monetization and the role Spotify plays in providing creators with opportunities to earn revenue from their content.

• Creators value the ability to customize their business and control monetization.
• Platforms start with simple monetization models and evolve over time.
• The future of music monetization may offer more options for creators.
• The shift from simple ad-supported models to more complex monetization strategies mirrors the evolution of mom and pop shops.

"The customization point is really interesting too, and I think that's the really interesting nuance about YouTube."

This quote discusses the importance of customization in monetization, particularly how platforms like YouTube allow creators to abstract the business side but may limit creative control.

• The creator economy has evolved from simple monetization to a complex ecosystem with multiple revenue streams.
• Creators like Taylor Swift monetize through a variety of channels, not just streaming.
• The music industry has shifted from relying predominantly on physical sales to diverse revenue models.
• The value of music has changed with the ease of reaching large audiences quickly.

"The music industry is healthier than it's ever been before."

This quote reflects on the current state of the music industry and the shift towards a healthier ecosystem with various revenue streams for artists.

• Spotify's growth strategy involves adapting to add each next 100 million users.
• The company has been intentional about its culture and the changes needed to scale.
• Spotify releases products that may not be perfect initially but are improved over time.
• Being intentional about company culture is crucial for long-term success.

"And I'm curious, as you reflect back, what advice would you have for founders who are scaling to sort of continually stack these s curves on top of each other and do completely new different business activities while maintaining the cohesiveness of one platform?"

This quote asks for insights on how to scale a company effectively, suggesting that Spotify's intentional approach to growth and culture has been key to its success.

• Being intentional about the company culture is essential.
• Many companies unintentionally mix cultural elements from others, leading to a lack of distinct identity.
• Spotify has evolved by being more intentional about its unique culture.
• Understanding and embracing the company's unique culture drives major decisions.

"But what I've really realized, perhaps even in just the last two, three years, more I knew it. I could talk about it, but I hadn't truly internalized it, is to be intentional about the culture you're building, right?"

This quote emphasizes the realization of the importance of intentionally building a distinct company culture rather than adopting a mix of practices from different companies.