Spotify Is Good For The Music Industry, Its CEO Says

Dec 4, 2011
Originally published on December 4, 2011 10:19 am

American music lovers took note when the digital music service Spotify arrived in the States this summer. It's already Europe's largest paid subscription music service. Spotify's essential offering is a robust catalog of music — some 15 million songs – available for on-demand streaming. Users can call up songs for free and download them to a mobile music player for a monthly fee.

Some industry watchers see Spotify's offering as the end of the music download business. But Daniel Ek — the company's Swedish-born, 28-year-old founder and CEO — feels differently.

"I don't want to be characterized as an iTunes killer," Ek tells Weekend Edition host Audie Cornish. "What we really are trying to do is move people away from piracy into a legal model that contributes revenue back to the music industry. It's really that simple, and I think the key is by creating more convenient products."

Though the service may be convenient, some artists would rather their fans download their music or purchase physical copies. A few high-profile acts such as Coldplay and Adele have kept their latest releases off Spotify and other streaming music subscription services, since artists make tenths of a cent every time one of their songs is streamed.

Still, Ek stands by his company's business model. "Spotify is only two years [old], almost three. In that short period of time, we have become the second largest revenue generator for the labels in Europe, and we've paid out more than $150 million back to the music industry."

Ek says that Spotify's premium subscribers, by paying a $9.99 monthly fee, spend more on music each year than people who only download songs from iTunes and other services. "All of a sudden, by being a subscriber on Spotify," he says, "you're actually contributing more than three times back to the music industry."

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This is WEEKEND EDITION from NPR News. I'm Audie Cornish. Music lovers take note: the digital music service Spotify is primed to shake up the way Americans buy and share songs and the company just might have the momentum to do it. First, a little background for the unfamiliar. Spotify is an online streaming jukebox with a robust catalogue - some 15 million songs that you have access to whenever you choose to listen. Think of Spotify like the music version of the movie service Netflix.

You can call up nearly any song you want for free and if you pay a monthly fee you can download those songs to your mobile music player and take it with you. Spotify is already Europe's largest paid subscription music service. The company has been in the U.S. since July and this past week in New York Spotify held it's first U.S. press conference.


DANIEL EK: So, today Spotify brings music to the party. We become a music platform. We're launching truly integrated apps inside Spotify.

CORNISH: That's Daniel Ek, the company's Swedish-born 28-year-old founder and CEO. He joins us from New York. Daniel Ek welcome to the program.

EK: Thank you so much.

CORNISH: Can you give a sense of currently how big your audience is in the U.S.? How many people are using Spotify and how many people are paying to use Spotify?

EK: Well, we don't break out the U.S. but I will say is we have now more than 10 million active users and more than two and a half million are paying for the service.

CORNISH: And one aspect people are looking at when it comes to Spotify is this idea that it could be potentially an iTunes killer?

EK: You know, I don't want to be characterized as an iTunes killer or anything like it. What we're really trying to do here is move people away from piracy into a legal model that contributes revenue back to the music industry.

CORNISH: You mentioned the idea of piracy and the music industry. Is that what inspired you to create Spotify in the first place?

EK: Yeah, definitely. I mean piracy for us, you know, growing up in Sweden - we were kind of known for piracy. I mean we had Pirate Bay. We had Kazaa. We even had a political party called the Pirate Party that won 5 percent of all votes in the last election. It's really been crazy so, I think Sweden's gone from being the black sheep to becoming the place that people look to because it's really where the access innovation started.

CORNISH: At the same time one of the big criticisms that we've heard from artists is that the royalties that they get from Spotify are so low that it might as well be piracy.

EK: Yeah, I do want to address that because I feel that it's important to mention that it's still early days and Spotify's only two years in using the service, almost three. But in that short period of time now we've become the second largest revenue generator for the labels in Europe and we've paid out more than a 150 million dollars back to the music industry.

CORNISH: When I was online I also discovered an artist, Sam Rosenthal, who's the founder of a label called Project Records. He recently wrote on his blog that 5,000 plays on Spotify generates a little more than six dollars, and in comparison 5,000 track downloads at iTunes generates for him $3,400. I mean, it's a big gap there.

EK: Yeah, so the first thing I will say is it sounds - those numbers definitely sound way off. But again, what I sort of emphasize that we're paying the labels. We don't pay the artists directly. I also want to say that this model's very, very different from the one that iTunes and the other music players have had in the past; buying to own, and what Spotify really is changing here is we're talking about access to music. And I mean we have two-and-a-half million customers who are all paying us monthly fees.

CORNISH: So, essentially you're saying in the future we all just want to have access to the entertainment we like. We don't necessarily want to own it?

EK: I definitely think that we want to have access and that's the big shift here, but I do think that ownership still plays an important role. You do want to own the things you really care about.

CORNISH: I want to talk a little bit more about this idea of ownership and I'm going to play you a clip from the singer and composer Gabriel Kahane who was on our show last week.

GABRIEL KAHANE: I perceive this kind of decline in the spiritual value of music, where there is so much of it at our fingertips that we don't really listen to any of it with any kind of real attention and we don't take the record home that maybe on first listen didn't really catch our ear but since we bought it maybe we should listen to it a second time and then a third time and then all of a sudden we find that there's something of value there. And that's something that I think happens less and less with services like Spotify.

CORNISH: Daniel Ek, could you have a response?

EK: Well, I of course disagree with that notion because I think if you keep creating great music people will in fact listen to it and they will in fact buy it if they think it's a great record. Whether our users are listening to it - and this is especially true now with Facebook - if they really like it they will share it and their friends will discover it and they in turn will listen to it, and that means that their friends will listen to it.

So, when artists come to me and they ask me, you know, how should I get noticed and how should I get my music out there, what I always talk about is you should focus all your attention on making great music because if you do make great music people will listen to it and they will share it with their friends. And that will give you success.

CORNISH: Daniel Ek is the founder and CEO of the music streaming service Spotify. He joined us from his office in New York. Daniel Ek, thank you so much for speaking with us.

EK: Thank you. Transcript provided by NPR, Copyright NPR.