It’s hard to imagine doing anything other than swiping to your streaming app when you want to listen to the latest Drake or Taylor Swift release. But go back 20 years and the idea had one massive naysayer: the CEO of Spotify.
Speaking to Steven Bartlett on The Diary of a CEO podcast, Daniel Ek said he thought making a music streaming platform was a “terrible idea” before co-founding the now massively popular company in 2006.
The Spotify CEO told Bartlett he was convinced the music industry was “going down the drain” at the time, as illegal streaming sites began to proliferate. It did, however, give him the idea of paying artists based on the number of listens their songs achieved.
Ek told Bartlett he has a notebook of crazy ideas, most of which come to nothing.
One of those, he told the Telegraph in 2010, was Spotify, the seeds of which formed back in the earliest days of digitized music in 2002. At the time Napster, a free music-sharing platform started by Sean Parker, had blown up before being taken down for breaching copyright laws.
The billionaire had money to burn after selling his online marketing company Advertigo in 2006 at the age of 23 to Swedish digital marketing firm TradeDoubler for $1.25 million.
After going through an existential crisis and indulging in a manic social life, which included buying expensive cars and going to luxurious nightclubs, he told Bartlett he decided to focus on his idea for a music streaming platform alongside fellow Swede Martin Lorentzon. He knew it needed to be different to anything that came before.
"Laws can definitely help, but it doesn't take away the problem. The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry—that gave us Spotify," he told the Telegraph.
Egged on by his co-founder, Ek decided to move forward despite his major reservations about being able to get licenses from record labels.
“I told him from the beginning that, hey, this is probably gonna lose us a lot of money. I have a hard time seeing this ever being a sustainable business. But I’m in,” Ek told Bartlett of starting the company with Lorentzon.
"I honestly did not think we would succeed. But if we succeed, I knew it was going to be a big thing."
Spotify was revolutionary in how it provided value to music consumers while staying within the boundaries of the law.
Prior to its launch, users would typically pay to download each song or album they wanted to listen to on platforms like iTunes. Meanwhile LimeWire, an illegal streaming service, was commanding 50 million monthly users at its peak in the late-2000s before it was taken down.
Spotify's rise
After launching in 2008, Spotify hit 1 million streamers in 2011 and passed 500 million users in April this year. The company is now valued at around $30 billion and Ek himself is worth about $2.8 billion, according to Forbes estimates.
But back in 2006, even as it looked like Spotify would become one of his rare good ideas, Ek found himself in the midst of a major uphill battle.
The company only had a handful of engineers working in a three-bedroom apartment above a coffee shop when the platform was founded, while Ek traveled the globe trying to secure licenses from record labels.
Ek told Bartlett that Spotify “almost died four times” during the 18-month period he was trying to secure licenses—because it almost ran out of money.
He added that for a two-year period, he thought “once every month or two” that Spotify was going to fail, and he thinks the associated stress put a strain on his body.
“In the beginning of that process, I had hair and then at the end of it, I lost all of the hair. I probably gained 30 pounds in weight during that period of time. It was awful.”
Ek credited the optimism of Lorentzon for helping him persevere through those challenging times to launch the site in 2008 and watch Spotify go on to become a streaming giant.
