Spotify CEO Daniel Ek

Ben Gilbert 0:00 It is impossible to flawlessly execute a podcast of this style.

David Rosenthal 0:04 Yeah.

Ben Gilbert 0:05 And that's the beauty of it. You come up with a bunch of stuff you wanna talk about-

David Rosenthal 0:08 Yeah.

Ben Gilbert 0:08 -and then you end up having a real organic conversation, and then it turns into a product, and that product is totally different than what you envisioned in your head, but can still be great.

Daniel Ek 0:17 But I think the amazing thing is, unlike you talking to a journalist, et cetera, is it's truly a conversation, one, and the second part is, there's enough time to actually elaborate on the thought and the idea. Whereas you have to be so succinct in how you express your idea and truly get it across in thirty seconds, or, like, you lose the moment, and the journalists wanna move on. Brian Chesky is an example. He's, like, the master on it, and he just switches [snaps] it on, and he's, like, so good. For some reason, he and I always ends up getting on the same panels, and I'm like-

Ben Gilbert 0:50 [chuckles]

Daniel Ek 0:50 -it's game over even before it started.

David Rosenthal 0:52 Yeah. [chuckles]

Daniel Ek 0:52 You're gonna have all the great stuff.

Speaker 0:53 "Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down, say it straight. Another story on the way. Who got the truth?"

Ben Gilbert 1:10 Welcome to this episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

David Rosenthal 1:17 I'm David Rosenthal.

Ben Gilbert 1:18 And we are your hosts. This episode, we sit down with Daniel Ek, the man who saved the music industry after Napster and the piracy era killed the CD business. Some of the stats are mind-boggling. Spotify has paid forty billion dollars to artists over their lifetime. They're now the single largest source of revenue for the entire music industry.

David Rosenthal 1:40 That's crazy. Spotify also has over five hundred million monthly active listeners, over two hundred million of which are paid subscribers. Both of those numbers are bonkers.

Ben Gilbert 1:52 And in today's conversation, we're talking about, one, how Spotify managed to get to this five hundred million number by stacking all these different expansion strategies on top of each other over the years, and two, we're gonna dive into the current moment that Spotify is in. They've entered podcasting in a huge way that has not only changed the experience for consumers, but Spotify's business and their future as a company, which is, of course, very interesting to David and I, as Acquired's growth has really exploded on Spotify.

David Rosenthal 2:22 Totally. As I think we referenced early on in our conversation with Daniel, over sixty percent of Acquired's audience is now on Spotify, which is up from basically zero four years ago.

Ben Gilbert 2:32 It's wild. In fact, we were so interested in having this conversation that when Spotify asked if we wanted to fly to Stockholm and record in person with Daniel in the Spotify studio, we jumped at the chance. Daniel also foreshadowed some of what's to come with the cousin of podcasting, audiobooks.

David Rosenthal 2:48 Ooh.

Ben Gilbert 2:49 We can't wait to hear what you think. Come discuss it after you listen to this episode in the Acquired Slack, acquired.fm/slack. You should subscribe to our interview show, our second show, ACQ2. You can find it in any podcast player, and we've had some killer back-to-back discussions with the CEOs of Retool and AngelList, both about AI. Now, without further ado, this show is not investment advice. David, myself, and our guest may have investments or many shares in the companies that we discuss, and this show is for informational and entertainment purposes only. Now on to our conversation with Daniel Ek.

David Rosenthal 3:24 We wanted to start with, like, something kinda incredible has happened in podcasting.

Ben Gilbert 3:28 If you look at January first, twenty nineteen, we had less than a thousand listeners on Spotify.

David Rosenthal 3:32 Yeah, crazy. And now it's by far the majority-

Ben Gilbert 3:35 Over a hundred thousand

David Rosenthal 3:35 -of our listeners. [chuckles]

Ben Gilbert 3:37 And unless you're us, and you're looking at the data all the time, or other podcasters, I think it's easy to underestimate how seismic of a shift has happened in the podcasting ecosystem since you guys dove in. And I just wanted to, sort of Acquired style, go to a moment in time and say: How did that happen, and how did you guys decide to become an audio company instead of a music company?

Daniel Ek 4:00 I like to say that there was probably this genius insight at some point in moment, but that's, [chuckles] certainly not in the case of Spotify, true. Uh, it is often quite serendipitous. And for a long time, you know, I was kind of fighting the urge on this, but we were oftentimes trying to not think of ourselves as the users and customers, because once you got through kind of a hundred million users, you're kind of like: Well, obviously, I shouldn't be the target demo. I need to kind of listen to what the actual users are telling me. And there, there's some part that's true with that, but then, uh, more and more, what I've, I've realized, uh, is also that, actually, internally, we probably have the best sounding board of a quite representative Spotify user and what they might like. And so, uh, one of my favorite topics is how often people game our platform. For instance, in Germany, unbeknownst to us, but one of the, the sort of crazy things that ended up happening was just people started uploading audiobooks because it turns out that, um, these music labels actually own a bunch of audiobook rights.

Ben Gilbert 5:05 Mm.

Daniel Ek 5:05 And so, as the platform was taking off, they realized: What else can we put on this platform that gives us a leg up and creates more revenue for us? And they realized that they had this catalog of audiobooks sitting on there. So I think that was kind of one realization where we kind of realized, hey, this platform, it doesn't seem to matter all that much what we're putting on it. People just like consuming content. And then I and others at Spotify, we were big podcast listeners ourselves, and we love that, uh, but we hate the fact that we had to switch app,

Daniel Ek 5:35 uh, from our, our normal one. We hate the fact that we couldn't get the recommendations working. We hate the fact that we couldn't get this to work on my car speaker or my home speaker, and all these things that we've spent literally a decade, um, building for the music industry. So it kind of dawned upon us that podcasters have sort of the same problems that the music creators have, and we should be able to play a pretty big role. And all the primitives that we built for music, uh, should work really well in terms of discoverability, in terms of, uh, ubiquity, that we call, which is sort of our ability to play on, on any device. And, of course, our freemium model, where the ad-supported and eventually paid models as well, should be able to, uh-... all work together. And so the craziest thing in, in the beginning was probably when, when, uh, we started talking about it as building it in the same app. That was what the biggest resistance was, because the common wisdom at the time was obviously, well, podcasting has to be a distinct own thing.

David Rosenthal 6:38 I mean, this was like the-- you've talked about this before, the constellation of apps was the-

Daniel Ek 6:42 Yeah

David Rosenthal 6:42 ... you know, oh, the like, all the rage. Facebook's got all these different apps, and Apple has all these different apps.

Ben Gilbert 6:48 And unless I'm a person who already defines myself as into podcasting, I'm never gonna click a podcast app to try and get into podcasting. You can't expand the TAM if they're all in separate apps.

David Rosenthal 6:59 Which still is a super nerdy thing.

Daniel Ek 7:02 Even merchandising podcasting is a very different problem than music, and it's actually one of the things that we're still working on trying to crack the code on. But that was probably the most contrarian, both inside and outside.

David Rosenthal 7:14 Mm.

Daniel Ek 7:14 But to us, it was probably the most obvious one because we had already seen the behavior happening, uh, in Germany. Um, and uh, once we had tried onloading it for ourselves so that we could play around with the product, it was kind of obvious that this would be a great experience. And it's probably been the most interesting one for me, where, uh, and what I often tell other entrepreneurs is like: Well, um, the fact that people doubt you in the beginning, you kind of need to pay attention to that, uh, and hear what valid concerns they may have. But a bunch of that is just, like, they're not used to the concept, uh, and it's going to change. But by the time it changes, it, it will have already passed over. Not that you were right, but actually, well, of course-

David Rosenthal 7:57 Mm-hmm

Daniel Ek 7:57 ... this is kind of obvious, right? So my favorite one, obviously, is streaming music, where when we, we began doing it, I always got this sort of pushback of like: Why would I want to rent my music? I want to own my music.

Ben Gilbert 8:10 And the phrase streaming did not exist.

Daniel Ek 8:13 Yeah. Uh, people were not talking about it, and, and people actually conceptualized it more around sort of renting things.

Ben Gilbert 8:20 Mm.

Daniel Ek 8:20 And wh- why is that good for me? This is horrible. Um, and you know, that means that technically, what happens, uh, if you guys don't wanna have that song anymore? The song disappears, and and people-

David Rosenthal 8:31 People care so much about their music, like it's their identity. Like: I wanna own this. I want my, you know, record collection.

Daniel Ek 8:37 Yeah. E- e- exactly, and we were fighting, uh, against it, where it was so obvious to us that, um, because I grew up with piracy, that no, actually, all you want is access to it. And it was such a hard notion for people to get conceptually because we've been spending thirty years just getting people into that, and I feel like most of the tech industry has spent a decade plus learning about having separate apps, and we kind of said, "No, no, no, it's-- doesn't really matter. Uh, we can put it in the same app, and actually, people will love it even more because we're solving the same sort of user needs."

David Rosenthal 9:10 Where did that insight come from? Was it you as a user? Was it elsewhere in the company?

Daniel Ek 9:16 Well, it was really a lot more of a first principles kind of thinking around it. It didn't really make sense if you looked at sort of like, what are we trying to solve for? And was it truly so different in terms of a consumer experience? No, it was the same playing view, a slightly different sort of modalities, but totally possible. And if you thought about it as discovery, okay, well, that's a similar problem. Ubiquity, being able to play it on all these speakers made a lot of sense of having the same thing. Search, uh, all of these things were basically shared infrastructure that we could-

David Rosenthal 9:52 Yeah

Daniel Ek 9:53 ... utilize. And, um, again, if you're searching for content, why, uh, you don't really care all that much about it on YouTube. Uh, and on one end, you're listening to music, on one side, you had all these other short-form videos and sports and so on. You don't think that those are distinctly different behaviors, so why do you think about it that way? And it's because you really think podcasting is a different format, but actually, it's audio, all right? And-

David Rosenthal 10:18 Let's go back to the radio days. Talk radio and music and sports, they were all on the same device.

Daniel Ek 10:24 Yeah. I mean, that's the thing with audiobooks too, right? Like, what's the difference between an audiobook and a podcasting? Well, you would say chaptering and some of those stuff, uh-

David Rosenthal 10:34 I mean, we think of ourselves as, like, right on that line between a audiobook and a podcast.

Ben Gilbert 10:38 Actually, we, we'd love your help trying to solve this for ourselves. So we, uh, have recently realized that Acquired is, uh, the canonical episode, uh, uh, Nvidia episode or TSMC-

Daniel Ek 10:50 Yeah

Ben Gilbert 10:50 ... or Taylor Swift.

David Rosenthal 10:51 Yeah, right.

Ben Gilbert 10:52 These, these are more like conversational audiobooks between David and I than they are podcasts.

Daniel Ek 10:57 Yeah.

Ben Gilbert 10:57 They're four hours long. They drop infrequently. How does that kind of fit into, uh, what you imagine is the job to be done by audio, and is it an audiobook? Is it a podcast?

Daniel Ek 11:10 My view, I guess, is the boundaries are, from a format side, it's definitely being blurred, uh, quite a lot, and, and for right reasons. But the better way to think about audiobooks and podcasting is it's, it's really around a business model, mostly. So one way to frame it instead would be podcasting is ad-supported audio-

David Rosenthal 11:29 Mm-hmm

Daniel Ek 11:29 ... and audiobooks is paid audio.

Ben Gilbert 11:31 Hmm.

Daniel Ek 11:32 So for you guys, I mean, I also happen to know you spent so much time and effort on the research of that site. You could imagine that in the future, you have the, um, ad-supported side of your podcast be certain types of episodes, and, and you'd have for s- your subscribers, um, the unlock, where they get access to, um, you know, these kind of deep dives, et cetera. And obviously, the subscription thing could be as simple as like, "Hey, you're part of our other network, and it doesn't cost money," or you could pay-gate it, uh, all the way through. But I think it's more of a business model that's the big format differentiation, because as, as we said, like, the quality, the mics we're using relative to an audiobook, there, there's no difference here. You're using, like, high-quality camera equipment, um, also very similar to more professional style than sort of do-it-yourself kind of equipment.

Ben Gilbert 12:29 Mm.

Daniel Ek 12:30 Editing, all these things, it's getting more and more blurred.

David Rosenthal 12:33 Yeah, which is so interesting. Like, to-... us, like, we've lived this over the past eight years. Like, what podcasting has unlocked, and now with Spotify bringing so many more people to the medium that weren't consuming before, is like a mass audience for niche products. Like, if we were authors and we wrote a book, and we get pitched all the time on writing a book, like, the business model for us does not make sense anymore-

Ben Gilbert 12:59 Sure

David Rosenthal 12:59 ... given the audience size that we have-

Ben Gilbert 13:01 Yeah

David Rosenthal 13:01 -and the particular type of audience.

Ben Gilbert 13:02 Yeah.

David Rosenthal 13:03 We monetize so much better with the ad-supported content.

Ben Gilbert 13:05 Yeah.

David Rosenthal 13:05 But, like, to make that unlock happen, it needed to become a mass medium.

Ben Gilbert 13:10 Yep.

David Rosenthal 13:10 It's interesting to think about: would that change if audiobooks can access a mass audience in the same way?

Daniel Ek 13:18 Yeah, and, and obviously, our, our view is we eventually think audiobooks should be much, much larger, uh, than what it is today. Hundreds of millions of people who are actually listening to audiobooks because the content is great, rather than today, what's tens of millions of people.

David Rosenthal 13:33 Is that the market size today of audiobooks?

Daniel Ek 13:35 Yeah, we believe it's, like, tens of millions. It's one of the fastest-growing categories, uh, which makes it interesting. But, um, it's, it's, again, uh, fundamentally, it's both a business model problem-

David Rosenthal 13:46 Right

Daniel Ek 13:46 ... it's, um, you know, again, a discovery problem, and all those, uh, other things.

David Rosenthal 13:50 You either gotta pay a lot of money for a one-off purchase-

Daniel Ek 13:53 Yep

David Rosenthal 13:54 ... or you need to have a pretty expensive subscription-

Daniel Ek 13:57 Sure

David Rosenthal 13:57 -to a service that you may or may not use that and get value out of.

Ben Gilbert 14:00 It reminds me of music in two thousand and eight.

David Rosenthal 14:03 Yeah, [chuckles] exactly.

Daniel Ek 14:04 Yep. You guys are exactly right, and, and there probably needs to exist a, a different business model for all of these things. But you could even, in your case, I mean, you guys have probably right now, um, a pretty defined audience, I would guess-

David Rosenthal 14:19 Yeah

Daniel Ek 14:19 ... and, and probably a very high-value audience, which makes, um, you- ad-supported monetization probably better than the average creator for you guys, just given, uh, the type of audience-

David Rosenthal 14:29 Yeah

Daniel Ek 14:29 -that people wanna, wanna get to. But you could even contemplate, like, some of your deep dives. Like, I've, I've heard of, uh, like, actual hedge fund investors literally have that as the sole input to their entire process. [chuckles]

Ben Gilbert 14:43 Which is terrifying. [chuckles]

Daniel Ek 14:44 Yeah. Yeah. Well, yeah.

David Rosenthal 14:45 Not investment advice. [chuckles]

Daniel Ek 14:47 Yeah, exactly. But, I mean, you know, it is one of the areas that I'm, I'm kind of, um, the most intrigued about. I think Ben Thompson had this piece very recently. I think he called it, like, the unified content business model-

David Rosenthal 15:00 Yep

Daniel Ek 15:00 ... uh, piece. I don't necessarily agree with everything he said, but, but I think i- his main takeaway is obviously that all media models ought to move to freemium. It's... As someone who's been saying that for, for 15 years, uh, I obviously agree with him there. But I think that's true in all formats, right? Like, as I said, I think, you know, what's the difference between audiobooks and podcasting? There are definitely differences, but, but the formats are blurring. But the main one is, is the business model-

David Rosenthal 15:30 Yeah

Daniel Ek 15:30 ... as I said. So it, it's just, it, it, it's talk audio, but with a paid or an ad-supported business model. And I guess my advice to you guys would just be, I think you should kind of, like, explore both and see, to an extent, what's possible.

Ben Gilbert 15:45 Yeah.

David Rosenthal 15:46 For our first sponsor of this episode, we have one of our favorite companies on Acquired: Statsig. Statsig is a feature management and experimentation platform that helps product teams ship faster. The founder, Vijay, was a VP and one of Facebook's most prolific engineers for over a decade, and the Statsig platform is based on the world-class product tools they built in-house over at Facebook. It's unique because it combines smart feature flags with automated A/B testing and accelerates results with advanced statistical methods like sequential testing and CUPED. Statsig is also the only player in the market that offers a full-stack experimentation platform that's data warehouse native and agnostic, giving product, data science, and engineering teams a flexible platform that works no matter what your data infrastructure is.

Ben Gilbert 16:34 Yeah, like so many of our favorite companies on Acquired, Statsig is the epitome of the Bezos maxim that companies should focus on what makes their beer taste better-

David Rosenthal 16:43 Whoo

Ben Gilbert 16:43 ... their core value prop and differentiation, and use best-in-class, third-party tools for everything else. And Statsig is definitely best in class. Companies like Notion, Brex, OpenAI, Vanta, Vercel, Cruise, Univision, and more all use Statsig to increase their product velocity. Plex, for instance, saw over an eight percent increase in new user registrations with their very first Statsig experiment, and Notion uses it to manage their entire awesome new generative AI feature set. So with Statsig in your modern product stack, you can build a culture of data-driven decision-making with less overhead and focus on what makes your business truly unique.

David Rosenthal 17:22 So if your company could benefit from increased conversions and engagement by leveling up your product infrastructure, and really, what company couldn't? Statsig is generously offering Acquired community member companies five million free user events per month, plus a white glove onboarding experience, including migration support.

Ben Gilbert 17:41 Yes. Go on over to statsig.com/acquired, or click the link in the show notes to learn more and 10X your experimentation velocity, and just tell them that Ben and David sent you.

David Rosenthal 17:51 Thank you, Statsig.

Ben Gilbert 17:52 Thanks, Statsig. Speaking of the podcasting business model, there's the potential for podcasting to be a far better business at scale than music streaming. Obviously, with music streaming, you take thirty percent, and you share seventy percent with the labels. Uh, with podcasting, um, there's the potential for real operating leverage, especially if you own the content, to, uh, build a fantastic ad network or, you know, however you wanna monetize it. But you actually can take advantage of the scale of your audience in a way that it's sort of hard to outrun your costs in the music world. I'm curious, how early in your sort of dreaming about becoming a podcasting platform did you start thinking about that, uh, or was it purely product-driven?

Daniel Ek 18:40 ... Well, I think it was a bit of both. Um, and you have to, to contemplate that if you're making moves like, uh, certainly of, of our size, because many of these investments that we're making are multi-year ones, um, and pretty substantial from a signaling point of view, too. And obviously, public market investors wanna know, like, well, is this ultimately a good business, and why do you think that is? And for me to have said, "Well, we're- we've bought a bunch of companies, but I don't really know what kind of business it'll be,"-

Ben Gilbert 19:10 [laughing]

Daniel Ek 19:10 -it's probably not gonna be the right, um, answer. So, uh, obviously, we contemplated that, and we, we thought about that. But the reality is, there's a lot of the grass is greener on the other side when, when you go too deep in that. So obviously, on the one hand, if you deal with a lot of licensed content and, um, you know, in this case, from some major labels and obviously a lot of indies, uh, as well, but still relatively supply-constrained from, from some big ones, the natural tendency is for you to think, "Well, this is much better," because all of a sudden you have this sort of much wider scope of different creators. That matters. It's great. Um, you... That means-

Ben Gilbert 19:50 And aggregate a fragmented market.

Daniel Ek 19:51 Yeah, you, you can do the aggregation theory.

Ben Gilbert 19:53 Yeah.

Daniel Ek 19:54 That's, that's all good and great. What, what you don't really contemplate all, all that much is obviously there's other challenges with that business model. Uh, moderation all of a sudden becomes a massive thing. Um, you have to build an actual ad network that probably then scales. So in theory, yes, you're right, uh, you may have an opportunity to gain, um, more mar- uh, margin over time, uh, in this model, but fundamentally, you have to do many more steps along the way. Like, we don't have to contemplate content moderation as much when it comes to music. We certainly don't have to have these very elaborate, systematic processes about what constitutes speech and, um, you know, uh, violence. And we knew that because I'd seen enough of these, obviously, uh, platforms. But, but it is important because if you think about it from a P&L, so, so on, on the surface of these, this, these models are great, right? Uh, because very high gross margins-

Ben Gilbert 20:51 Yeah

Daniel Ek 20:52 ... and, and so on and so forth.

Ben Gilbert 20:53 G- great at scale.

Daniel Ek 20:54 Great at scale.

Ben Gilbert 20:54 Expensive at small scale.

Daniel Ek 20:56 Yes. Uh, but even at scale, if you think about it, is the cost increasing or decreasing? And if you think about, um, you know, right now, obviously, AI will come in, and it will be massive, but I think at one point in time, uh, Facebook, or now Meta, had over a hundred thousand content moderators actually working for them.

Ben Gilbert 21:16 What, a hundred thousand?

Daniel Ek 21:17 I believe so. I don't know. An insane amount of people.

Ben Gilbert 21:21 So it, it's tempting to believe that that's a fixed cost, uh, and that they're ru- running this, like, unbelievably high gross margin advertising business, and-

Daniel Ek 21:29 Yeah

Ben Gilbert 21:29 ... they can outrun those fixed costs, no problem. But in reality, what you're saying is, actually, they build up a, a whole bunch of variable costs, too, that don't fit into this, um, platonic form of ideal social media business model.

Daniel Ek 21:42 Yeah, for sure, and, and, e- and even today, if you think about it, so all right, uh, well, maybe that's not a hundred thousand anymore because they've been able to automate some of that process. But, uh, it's kind of m- mouse game as well. So the other side is now using quite sophisticated AI.

Ben Gilbert 21:57 They use open AI, too. [chuckles]

Daniel Ek 21:59 Yeah, exactly-

Ben Gilbert 21:59 [laughing]

Daniel Ek 22:00 ... to, to, to, uh, to do that. And that means that your AI models has to be a lot more, uh, you know, sophisticated, uh, and that still adds cost. So I think the best-case scenario... I, I was looking at this, uh, this is very old data, but I, uh, but I believe at the time of Facebook's IPO, it was something like the cost for Facebook to onboard a user was, like, a dollar a user or something like that-

Ben Gilbert 22:25 Hmm

Daniel Ek 22:26 ... in, like, hardware cost and all that stuff, uh, basically, to have lifetime value of a customer. And so a- at that time, obviously, the monetization wasn't as advanced, so that was what, what was burning cash for quite a while. And then eventually, their growth rate probably slowed down enough where their monetization started, uh, kicking in and kind of scaled up enough where, where those two effects kind of, uh, took out each other, and they became, uh, very profitable. But if you look at, look at it now, uh, I would- I don't know what the cost would be, but if I would guess, uh, if I would start a social media company today, the cost may be an order of magnitude more.

Ben Gilbert 23:04 Hmm.

Daniel Ek 23:04 Right? Uh, because of all the other things you now have to do. Uh, the ad platforms are way more sophisticated. They have to build... The moderation tools are way more sop- uh, sophisticated. Now, the good news, so, so you may then come to the, to this and say, "Well, was that a mistake then?" Well, we knew a lot about that going in, and we weren't entirely new. It wasn't like we were starting an ad business from the scratch.

Ben Gilbert 23:29 Right.

Daniel Ek 23:30 Um, so we had already been-

Ben Gilbert 23:31 You worked with Facebook for a long time. [chuckles]

Daniel Ek 23:33 Yes, uh, that too. So we had, we had relatively good idea of what type of problems we would encounter.

Ben Gilbert 23:40 And to give you some credit for listeners, I think at the time, you probably had maybe two hundred million people on the ad-supported tier who weren't in premium when you launched podcasting, maybe something like a hundred and fifty million, but you had a gigantic scale advertising business. You just didn't have user-generated content being the content that it was advertising against.

Daniel Ek 24:01 Yes, that's accurate. And, and the amount of inventory, obviously, um, that we were, were, uh, monetizing it against was relatively small. And, and one of the big things right now is obviously this is a huge thing, perhaps even more so than music, for us to offer monetization to a lot of these podcasters that perhaps, unlike yourself, can't sell, uh, ads.

Ben Gilbert 24:25 Unless you're in a niche like ours, if you're subscale, you're never gonna be able to access Unilever or P&G or Coke, you know-

Daniel Ek 24:34 Yeah

Ben Gilbert 24:34 ... on your own or Nike.

Daniel Ek 24:36 Yeah. So I wanna ask you about that because, um, I saw the, um, uh, episode you guys did with David Sendrow, by the way. Uh-

Ben Gilbert 24:42 Oh!

Daniel Ek 24:43 So, so, uh-

Ben Gilbert 24:44 David's the man.

Daniel Ek 24:45 A- and, and he, he's interesting because, like, in, in my opinion, he seems to almost dig in more.... in like what made him successful and, like, tries to not at all veer to broadening the base. So how do you think about that? Like, 'cause you could just go serve your niche even better-

David Rosenthal 25:04 Yeah, yeah.

Daniel Ek 25:04 -uh, or you could try to like, well, let's try to include other forms of content. Like, how, how do you decide what, what type of content to go after?

David Rosenthal 25:12 Oh, man, we are right in the middle of figuring this-- I mean, you always said for a long time, you're like: "I would rather not have growth and keep our audience who they are."

Ben Gilbert 25:23 I'm not sure I'd go that far, but I would rather-

David Rosenthal 25:26 [chuckles]

Ben Gilbert 25:26 -saturate our niche-

David Rosenthal 25:27 Yes. Yeah, yeah.

Ben Gilbert 25:27 -and then at some point stop growing, than expand the niche.

David Rosenthal 25:31 And then-

Ben Gilbert 25:32 Which I think we have three to four X headroom on our current.

David Rosenthal 25:35 Yes, yes. We, we still can expand in our niche, but, but then we did our Taylor Swift episode, we did the NBA, we did the NFL, and then we did LVMH.

Ben Gilbert 25:43 LVMH.

David Rosenthal 25:43 And LVMH, we got forty thousand new subscribers.

Daniel Ek 25:48 Wow.

David Rosenthal 25:49 And we were like, "Okay," so to your point about, like, some- something is hacked here.

Daniel Ek 25:54 Yeah.

David Rosenthal 25:54 Like, there's a, there's a new phenomenon happening. [chuckles]

Ben Gilbert 25:57 Yeah. So we, 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.

Daniel Ek 26:05 Mm.

Ben Gilbert 26:05 And then it was acquisitions and IPOs.

David Rosenthal 26:06 We would never be talking if it was still that.

Daniel Ek 26:08 Yeah. [chuckles]

Ben Gilbert 26:08 And then it was... You know, and, and, and so at some point, um, we expanded beyond just tech founders and engineers. It became venture capitalists also-

Daniel Ek 26:18 Yep

Ben Gilbert 26:19 ... and then it became their LPs. There's a bunch of university endowment folks that listen, and now we're realizing as long as we keep making these really deep, really long, really esoteric stories and analysis, you can create smart content for smart people that is not scoped to a particular industry.

Daniel Ek 26:38 Mm.

Ben Gilbert 26:39 And I think that that's our new sort of-

David Rosenthal 26:40 That's our new

Ben Gilbert 26:41 ... definition of-

David Rosenthal 26:42 Yeah

Ben Gilbert 26:42 ... the, the job to be done from Acquired.

Daniel Ek 26:43 Mm-hmm. Yeah. I think it's brilliant how, um, you're able both to satisfy your own curiosity, I guess, and at, at the same time, sort of... It, it, it doesn't seem that far-fetched, uh, some of the ideas, um, you're trying. Uh, obviously, I would, I would probably assume the Taylor Swift one was more out there than, than something else.

David Rosenthal 27:08 Oh, yeah.

Daniel Ek 27:08 But, but the LVMH one actually felt, to me, super natural. Um, and it's, it's funny, you know, how well talked about it, it's been, even among, like, what I would have not assumed would have been your crowd. Like, I had a bunch of, like, really old-school value investors that I, I honestly didn't even realize listened to podcasts, [chuckles] they've been pinging me about it, and like, "Have you listened to this one?" It's like, uh... Which is pretty cool. Um, so, so I think there's a way where there's probably l- some overlap between the audiences, but also kind of clearly attracts a new, new-

David Rosenthal 27:42 Yeah. I mean, it's kind of like... It's a very, [chuckles] very different scale and different business, but, um, it's, it's a, a little bit like the Spotify adding podcast to a music. But, like, we have this audience that is, like, traditionally very tech-focused. We have this format that we've refined, uh, and now we're like: Well, okay, if we bring something else into it, is that gonna expand it?

Daniel Ek 28:04 Yeah.

Ben Gilbert 28:05 But I will say, unlike Spotify, which you can, by virtue of being a tech platform, you can aggregate a bunch of different audiences and then let them choose their own adventure on a really broad platform.

David Rosenthal 28:19 We choose the adventures.

Ben Gilbert 28:20 We-

David Rosenthal 28:20 Yeah. [chuckles]

Ben Gilbert 28:20 ... we create these serial episodes, and so if we go on a bender and do, uh... Like we just did Lockheed Martin-

David Rosenthal 28:26 Mm.

Ben Gilbert 28:26 -and it hasn't, it hasn't come out yet as we speak-

David Rosenthal 28:28 Mm

Ben Gilbert 28:28 ... but we could have done eight Lockheed Martin episodes-

Daniel Ek 28:30 Yeah

Ben Gilbert 28:30 ... and we chose two particular stories to tell, and we called that the Lockheed Martin episode.

David Rosenthal 28:34 Yeah.

Ben Gilbert 28:34 If we went on a bender and did eight, then, like-

David Rosenthal 28:37 We did this with Nintendo

Ben Gilbert 28:38 ... we're underserving a lot of-

David Rosenthal 28:40 Yeah

Ben Gilbert 28:40 ... our other niches.

David Rosenthal 28:41 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-

Ben Gilbert 28:54 Right

David Rosenthal 28:54 ... and video game history had stopped listening. [chuckles]

Ben Gilbert 28:56 Right. Right.

Daniel Ek 28:58 But sort of diving deeper on that, uh, I'm curious then, um, would it have been that much more effort for you guys to produce the eight, or did you have the content, but it just didn't make sense from an audience point of view?

Ben Gilbert 29:09 I think we had high-level concepts in our head for, for eight, but it, it turns out, uh, most of the work is the last ten percent.

David Rosenthal 29:18 Yeah.

Daniel Ek 29:19 Yeah.

Ben Gilbert 29:19 It's like that... It's like software engineering-

Daniel Ek 29:21 Uh-huh

Ben Gilbert 29:21 ... where, like, there's the first ninety percent, and then there's the second ninety percent.

Daniel Ek 29:24 Yeah.

Ben Gilbert 29:24 And I think so much of the work is-

David Rosenthal 29:27 The last-

Ben Gilbert 29:28 Yeah

David Rosenthal 29:28 ... ten, twenty percent. Yeah.

Ben Gilbert 29:29 There's usually one thing on the cutting room floor, though, so we're, so we're playing with this idea of shorts.

Daniel Ek 29:33 Mm.

Ben Gilbert 29:33 The... What we did for Sega. If, uh, in approximately one hour, uh, can we take one thing that just we couldn't squeeze it in-

Daniel Ek 29:41 Mm

Ben Gilbert 29:41 ... and, and, uh, um, and tell one more story?

Daniel Ek 29:44 Mm-hmm. Yeah, I w- I was just thinking about sort of touching upon where we sort of were a, a little while ago, about sort of paid versus ad-supported. I bet you that there would be a very small one-

David Rosenthal 29:57 Yeah

Daniel Ek 29:57 ... but there would be an audience that would listen to all eight. Whether you want to spend all the time-

David Rosenthal 30:01 Right

Daniel Ek 30:02 ... um, doing the eight is a totally different, uh, question. It seems to me like the best creators just pursue whatever they're interested in, and some of it will work, some of it won't work. They don't really seem to care all that much. Obviously, they'll learn from, from what seems to be resonating and not, but, but that's the cool part. Like, we're, we're living in an internet where, on the one hand, everyone talks about this fi- fifteen-second kind of clips, um, thing, and everyone's-

David Rosenthal 30:29 Yeah

Daniel Ek 30:29 ... uh, sort of getting down in that rabbit hole. But then at the same time, uh, you could have like three, four, five-hour long conversations in super esoteric, very, very deep, um, topics, and people love that, too.

David Rosenthal 30:43 Yeah.

Ben Gilbert 30:43 It's funny, us, uh, Joe Rogan, Lex, at the same time that short-form is having a breakout moment-

David Rosenthal 30:49 Yeah

Ben Gilbert 30:49 ... extreme long-form is also having a breakout moment.

David Rosenthal 30:52 ... We want your views on this. On our very small scale, like, we're struggling. Like, we haven't acquired TikTok, we're on YouTube Shorts, we post on Twitter, and, like, none of that drives the needle for us.

Host 31:04 Mm.

David Rosenthal 31:04 Like, we've had videos on TikTok get a couple million views, and we don't know if it translated to a single new subscriber [chuckles] -

Host 31:11 Right

David Rosenthal 31:11 ... to the, to the pod.

Host 31:11 Or in many cases, we do know it translated to a single new subscriber. [chuckles]

David Rosenthal 31:15 Right, a single new subscriber.

Daniel Ek 31:16 [chuckles]

David Rosenthal 31:16 Right, like-

Host 31:17 Welcome, both of you, to TikTok. [chuckles]

David Rosenthal 31:18 Yeah, [chuckles] welcome, both of you. Thank you for staying with us. At the same time, like, you get- you know, you are, at least on the podcasting side, the home of long-form content, and you just launched the new... Wall Street all thinks it's the TikTokification of podcasts.

Host 31:32 It's the new home screen.

David Rosenthal 31:33 The new home screen, yes.

Host 31:34 Yeah, yeah.

Daniel Ek 31:35 Uh, both extremes seem to work. I believe one of the biggest problems we have in this new creator economy is, um, is the one of attribution, right? So, you know, uh, many creators, like you, um, have or try many of these different platforms and use it, but, um, you know, and they can, they can see on each individual platform how well they're doing, but the- it's very hard for them to understand what actually drives what. And I actually see both. I see some creators who are, like, under-investing in other platforms and probably too singularly, just because they have success on one, they kind of ignore all the others. Which my advice to all of those is that feels kind of dangerous to do, because if there would be a, uh, an algorithm change or any of the kind, uh, even, you know, unanticipated by the platform, because, you know, they may see that something, uh, resonates, watch time resonates better with some other metric. It doesn't have to be skewed as an evil thing, it just could be something that actually benefits the user. But it- but if you built your entire livelihood of that one platform, that could be a big problem for you. So I see them underinvesting in other platforms. Um, and then the other one also be true, which is they're overinvesting in too many and not realizing that, that actually they probably would do better in just focusing more on one or two. And so I think that there's two different problems. I, I believe, um, that for us and why we care about this, um, and certainly why we designed the, the home feed the way we did is, um, because fundamentally, how we merchandise content has to be very different for music than it is for an audiobook or a podcast. Um, and if you think about it, it's kind of logical, because, um, in a song, it's a three-minute commitment-

David Rosenthal 33:24 Yeah

Daniel Ek 33:24 ... of your time. And you can actually probably tell within the first 10, 15 seconds whether this is worth investing your time in or not.

Host 33:33 Unless it's a Radiohead song. [chuckles]

Daniel Ek 33:35 That is true. That is true. But you probably then know the brand, and you know how to give it the time and attention-

Host 33:43 Yeah

Daniel Ek 33:43 ... to it because you're, you're like, "Well, I love Radiohead, so I'm gonna give this sh- song a chance, and maybe not just one s- chance. I'll, I'll listen to it a few times before I make up my mind." And obviously, if you now think about that, uh, with podcasting, I mean, if, if I'm listening to you guys, and, and even if it's a topic I don't necessarily know that I'm interested in, I might give it a shot because it's you guys, and I trust you because I built up this rapport with you.

David Rosenthal 34:10 It's a much bigger commitment, though. Much bigger.

Daniel Ek 34:12 It is a much bigger commitment, for sure, but I may give it 10, 15, 20 minutes, right? Because I have that relationship. But if I've never listened to you guys before-

David Rosenthal 34:22 Yeah

Daniel Ek 34:22 ... that o- one hook that gets me in, the... How many people, you, you know, in marketing you usually had? In, in early Spotify, we had, uh, eight people needed to have heard about Spotify before we were able to sign someone up.

Host 34:34 Oh, interesting.

David Rosenthal 34:35 Mm.

Daniel Ek 34:35 And so we realized that the geographical density in which that happened, uh, was actually a key sort of contributor and a timeline. So much of our early-

David Rosenthal 34:45 That's so funny

Daniel Ek 34:45 ... marketing efforts were in college cities in the US.

Host 34:47 Makes sense.

Daniel Ek 34:48 You have, like, consumers who are probably more attuned to music being a big part of their life, um, small geographical areas. So we, we kind of bombarded it. Uh, we did a bunch of different things-

David Rosenthal 35:00 Mm

Daniel Ek 35:00 ... that was hugely successful.

David Rosenthal 35:01 In retrospect now, you know, God, how long? Fifteen years later, was it almost like a benefit that you had to launch geographically, specifically because of the label negotiations? Like, that you could really saturate Sweden, the UK-

Daniel Ek 35:16 Oh

David Rosenthal 35:17 ... before moving to-

Daniel Ek 35:17 Oh, oh yeah, for sure. We all believe that these, like, sort of internet companies that go global day one, that's, like, the right approach. I, I actually think 99.9%, th- this is just untrue and false-

Host 35:30 Hmm

Daniel Ek 35:31 ... that entrepreneurs have to revise. We all are benefited from constraining ourself to finding what our first audience is. And it could be geographically niched, it could be, uh, that it actually is, um, you know, again, a subset of a, um, a demographic or, or, or whatever. But, but, uh, but, um, more often than not, it's actually geography helps. Limiting yourself to a city, to a state, to a country, whatever it might be. And so that was a huge part. I can tell you definitively, Spotify would not have been alive today had it not been that we couldn't launch in the US as our first market.

Host 36:07 Uh-huh.

David Rosenthal 36:08 Wow!

Daniel Ek 36:08 And, and if you asked me at the time, it was like a huge kind of step back to say, "Well, I can't launch in the most, uh, biggest market in the world, and I'm, I'm running an internet company. Like, come on!" [chuckles]

David Rosenthal 36:21 You told the stories of, uh, you believed, and you told investors like, "Oh, we're gonna be live in the US in, like, three months."

Daniel Ek 36:27 Yeah.

David Rosenthal 36:27 "We're having the conversations."

Daniel Ek 36:28 Yeah.

David Rosenthal 36:29 And then it was three years later [chuckles] -

Daniel Ek 36:30 Oh, yeah

David Rosenthal 36:30 ... actually.

Daniel Ek 36:31 Yeah.

David Rosenthal 36:32 You must have been so stressed.

Daniel Ek 36:34 Yeah. Uh, well, I had many, uh, uh, many of those episodes, [chuckles] and, and it, it, it always followed with, uh, enormous weight gains, uh, and hair loss. [laughing] So that was basically-

David Rosenthal 36:46 You literally ripped your hair out.

Daniel Ek 36:47 Yeah, pretty much. Like, I, I started... When I started, I had hair, and then, like, two, three years later, I didn't have hair.

Host 36:52 When you started Spotify, you had hair?

Daniel Ek 36:54 Yeah.

Host 36:55 Whoa!

Daniel Ek 36:55 Yeah, there's, like, old pictures, um-... of me with hair, like [laughing] from the first, uh, year or something, and then it kind of all disappeared.

David Rosenthal 37:04 Wow!

Daniel Ek 37:04 Uh, and I don't know anything-

David Rosenthal 37:06 Was it worth it? Was it worth the trade?

Daniel Ek 37:08 Um, [laughing] well-

David Rosenthal 37:09 [laughing]

Daniel Ek 37:10 ... um, so obviously, I, I, I think it has been, but obviously I, I can't recommend, um... It is an emotional rollercoaster. You guys know this, being an entrepreneur, it's not for the faint-hearted. And I think every really successful entrepreneur, in my opinion, has had at least three near-death experiences with their company, right? Where you just feel like: I'm not sure whether this thing is gonna work, not work, uh, whether we're gonna be alive tomorrow or not. And I kind of hate, um, how media portrays this and sometimes how en- entrepreneurs, uh, we're, we're supposed to be sort of like, "We're so big. We're, like we understood everything from day one." It's certainly not been my, my journey. Like, my journey was, uh, you know, I, I had a lot of luck. Uh, I worked insanely hard, um, uh, to get to, to even half of where we were today, and then it's been a true sort of emotional rollercoaster. And it, it is true what you say, but like, for me, had you told me how hard this would've been, I would've never done it. I'm happy I, I went through it-

David Rosenthal 38:14 Yeah

Daniel Ek 38:15 ... uh, but I would've never done it.

David Rosenthal 38:16 Wow!

Daniel Ek 38:17 Hmm.

David Rosenthal 38:18 It's time to talk about another one of our favorite companies in the Acquired universe, Vouch, the insurance of tech. Today, we are talking about Vouch and artificial intelligence. Vouch is by far the best and fastest way to insure your startup at day one, and because they're the only insurer that really gets tech companies, they're also the right way to stay insured and build your coverages as you scale. They have deep partnerships with and are recommended by Y Combinator, Carta, Brex, Vanta, and of course, Acquired itself. Now, as you can imagine, there are all sorts of new business risks that accompany the incredible opportunities unlocked by generative AI, and most traditional insurers are nowhere near equipped to cover them. But not Vouch. They are adapting coverages to offer protection for generative AI risks. Just as one example, Vouch is building solutions to close the gaps in your tech errors and omissions policy for generative AI mistakes, which is something most other insurers not only can't do, but many specifically exclude it, meaning that if a customer or a user sues you for a mistake generated by your AI stack, you're out in the cold and responsible not only for the damages, but also on your own for the cost and process of litigation. In this brave new world of AI legal landscape, you do not want to be on your own.

Ben Gilbert 39:41 Yep. Vouch is already by far the leading AI company insurer, with over three hundred and fifty companies covered, and they're just getting started. Now, you might say: "Hey, uh, that's cool, but I'm not a generative AI company." The reality, though, is whether you realize it or not, you probably are, because many employees are using ChatGPT and other services to help with their work.

David Rosenthal 40:02 Yes, and when it comes to insurance, choosing a partner like Vouch that deeply understands AI in this brave new world will ensure that you can get all the benefits of it while still being protected. Head on over to vouch.us/acquired and save ten percent on your first policy, or just tell them that Ben and David's AI avatars [chuckles] sent you.

Ben Gilbert 40:23 [chuckles] Thanks, Vouch.

David Rosenthal 40:24 Thanks, Vouch. We wanted to ask about, um... I wonder if you consider this one of those near-death moments, but because we did the T-Swift episode, and we talked a lot about it on the show, um, the week that 1989 dropped and Taylor pulled off the platform. Like, d- do you consider that one of those moments?

Daniel Ek 40:44 Um, this was 2014?

David Rosenthal 40:46 2014.

Daniel Ek 40:47 Yeah.

David Rosenthal 40:47 October 2014.

Daniel Ek 40:48 Yeah. W- weirdly enough, no. Uh, that, that's, that's the crazy part, uh, with it. It, it w- it was one of those where, if you'd asked us, uh, externally, it felt like this massive event. But if you, if you were inside of Spotify at that moment, um, there was no one who thought that that was sort of the defining moment. Uh, we certainly worried about, "Okay, well, is this the beginning of-

David Rosenthal 41:16 Right

Daniel Ek 41:16 ... like, more artists, um, sort of pulling out, et cetera," um, for a few days. Um, and, and then, you know, I spoke to a lot of artists, but, um, mmm, I think, uh, there was certainly a lot of skepticism about Spotify at the time, but, but generally speaking, there had been enough things in Europe where people really saw, like: "No, actually, this kind of works. Maybe it doesn't work-

David Rosenthal 41:41 Hmm

Daniel Ek 41:41 ... yet in the US. Maybe it's better for her to do this thing." But there was enough people that believed at that time that, um, it was only a matter of time before the US would be majority streaming, too. The sort of, uh, way it's been portrayed, oftentimes with Spotify in particular, has been, like, this sort of dogmatic, "It has to be, uh, all in with me or not," and, and actually, that's not how I advise artists or creators. I always tell them, like, this kind of... And it's kind of an unusual thing because everyone wants to build their own platform and, and, and so on, but, but my firm view is that, um, truly, I believe in open as the model at its core. And so my view has been, like, there's, there are some artists that at that time, I don't believe it's true anymore, but like the Adeles of the world, that probably benefited from physical scarcity-

David Rosenthal 42:34 Hmm

Daniel Ek 42:34 ... that probably didn't need to be on streaming, uh, that probably, um, should have done a windowing-type model. Um, the number of those artists, uh, were going to be very, very small.

David Rosenthal 42:47 Yeah.

Daniel Ek 42:48 Uh, but she was certainly one of them.

David Rosenthal 42:50 Was that because of the demographics of her, uh, audience, or?

Daniel Ek 42:54 I think so. But also, she-... on her own, um, can basically control the zeitgeist, right? Like, she can-

Ben Gilbert 43:02 Mm

Daniel Ek 43:02 ... decide that this is a big cultural moment.

Ben Gilbert 43:04 Taylor Swift.

Daniel Ek 43:04 Yes.

Ben Gilbert 43:05 Yeah.

Daniel Ek 43:05 Um, it is remarkable. Not a lot of people in the world can get hundreds of millions of people around the world to, to wait-

Ben Gilbert 43:12 Yeah

Daniel Ek 43:12 ... uh, for a moment, and she did it brilliantly with this, uh, album launch, too.

Ben Gilbert 43:17 I stayed up till midnight.

Daniel Ek 43:19 Yeah. [laughing]

Ben Gilbert 43:19 [laughing]

David Rosenthal 43:19 [laughing]

Daniel Ek 43:20 A, a lot of, uh, I, I don't know if it was hundreds of millions, but certainly tens of millions of people literally waited and sort of... She got them in on the hour, uh, and it was like each hour was another sort of give. So she played that to perfection. Um, and, and she's really remarkable at understanding how to speak to her audience, um, and she does it authentically. So she can do that, and there's definitely other artists that can do the same, but, um, uh, what's rare is for her to have that kind of zeitgeist, um, and connection with that, uh, deep connection with that audience, the, the, the fan base that she has, uh, how vigorous, uh, and how intense they are at that scale. That's the unique thing, right?

Ben Gilbert 44:04 Was there something that changed between 2014 and when she came back on Spotify, uh, where it may have made sense for her not to be here in 2014, but then in 2017, or whenever that was, that she came back that the world had changed enough where it did make sense? And how did the relationship between... Like, did you actually talk to her? Like, how did that all go down?

Daniel Ek 44:27 Yeah. I think the predominant thing that changed, uh, was streaming just became the majority of the industry-

Ben Gilbert 44:34 Mm

Daniel Ek 44:34 ... in, in a bigger way. So, uh, if the option was like, "Hey, am I on streaming or not on streaming?" Do I think she could have reached number one at that point without streaming? Probably not, would've been the answer.

Ben Gilbert 44:47 Yeah. Yeah.

Daniel Ek 44:47 And, and she's super smart, so she understood that, um-

David Rosenthal 44:50 And kind of to your point, like, even in 2014, in Europe, that had already happened, but it hadn't happened in the US yet.

Daniel Ek 44:56 No-

David Rosenthal 44:56 Yeah

Daniel Ek 44:56 ... it definitely hadn't happened in the US. We were much earlier. I mean, Spotify at that time was, like, shy of three years in the US. Streaming penetration was relatively low. Radio was, like, the, the predominant thing. Uh, at that time, physical sales, uh, was still very big. Um, you know, I remember, I think it was Lil Wayne that sold, like, 3 million albums in that year, uh, on Costco, out of all places. [chuckles]

Ben Gilbert 45:22 No way!

David Rosenthal 45:22 Wow.

Daniel Ek 45:22 Yeah. It's, it's some sort of demographic connection thing was going on, um-

David Rosenthal 45:27 [chuckles] I love that.

Daniel Ek 45:28 It was-

David Rosenthal 45:28 The intersection of, like- [chuckles]

Daniel Ek 45:30 I-

David Rosenthal 45:30 ... Charlie Munger and Lil Wayne in Costco-

Ben Gilbert 45:32 Costco-

David Rosenthal 45:32 ... is Costco

Daniel Ek 45:32 ... Costco sells more chickens than anyone in the US.

David Rosenthal 45:34 Yeah.

Ben Gilbert 45:34 Yeah.

Daniel Ek 45:34 Uh, in the world, actually.

David Rosenthal 45:35 In the world. Yeah.

Daniel Ek 45:35 Costco just is an unbelievable-

David Rosenthal 45:37 Unbelievable

Daniel Ek 45:37 ... distribution channel if you can get in.

David Rosenthal 45:38 Yeah.

Ben Gilbert 45:39 Yeah.

Daniel Ek 45:39 And we were talking about it before, but, uh, Starbucks and, and Howard Schultz was actually one of the, the biggest retailers of CDs, uh-

Ben Gilbert 45:46 Really?

Daniel Ek 45:46 ... in the US.

David Rosenthal 45:47 Wow.

Daniel Ek 45:47 Uh, that's actually how I'd met him the first time.

Ben Gilbert 45:49 Oh, really?

Daniel Ek 45:50 Yeah, because they were, they were, um, uh, becoming a partner of ours-

Ben Gilbert 45:55 That's right

Daniel Ek 45:56 ... right around that-

David Rosenthal 45:56 You did a partnership-

Daniel Ek 45:56 Yeah, yeah

David Rosenthal 45:57 ... with Starbucks.

Daniel Ek 45:58 Um, exactly, at that moment, and got to know him, um-

Ben Gilbert 46:01 Huh

Daniel Ek 46:01 ... spent some time with him. So yeah, I mean, the world just looked very different, uh, back at that time, and I think that changed, and, and yeah, I mean, uh, ever since, uh, she's been great with the team-

David Rosenthal 46:13 Yeah

Daniel Ek 46:13 ... and, and she's super s-smart.

David Rosenthal 46:15 That was our big takeaway from the episode, just like, she is really, really smart.

Ben Gilbert 46:20 And Dave and I were talking before this episode, are there other artists that you've got an interface with, where you walk away and you're like, "Better business acumen than any founder I've met, any investor I've met?"

David Rosenthal 46:32 We've kind of become obsessed with, like, who are people who are top-of-their-game artists and top-of-their-game business people? [chuckles]

Daniel Ek 46:38 There's quite a few of them, um, because I actually believe these days, if you consider a mega artist of that stature, it's like they're their own enterprise, and they're the CEO of that enterprise. There's- they, they certainly have people who help them, but at this level today, there's almost no one of them that's not very active as well i- on the business side-

David Rosenthal 47:02 Mm

Daniel Ek 47:02 ... and understand deeply what their audience wants, what's authentic to them. Um, by making move X-

David Rosenthal 47:10 Mm-hmm

Daniel Ek 47:10 ... how does that affect that relationship? And what's super cool to me is that, you know, you, you have everything from, from the Taylor Swifts of the world, um, and then you have, um, something like BTS, which is, like, insane.

Ben Gilbert 47:26 And how are they different? 'Cause they're reas- they're same order of magnitude scale, right?

Daniel Ek 47:31 I don't, uh, pretend to know all of Taylor Swift's business sides and, uh, who's p- involved in everything, um, but from, from what I would guess is she probably runs with a pretty lean team, um-

David Rosenthal 47:44 That's what we heard when we were researching the episode.

Daniel Ek 47:46 Yeah. Um, and that's certainly been our interaction with, with her is like, very tight, uh, very lean. Um, and then you, if you think about, um, uh, something like BTS, but I- actually, quite a lot of the Korean artists, it is like an industry. It's huge.

Ben Gilbert 48:00 Mm.

Daniel Ek 48:01 Just on the songwriting side, it's the difference between, uh, if i- in Taylor Swift's camp, it's, like, two, three, four, maybe, at the top. In some Koreans, it's 200-

David Rosenthal 48:12 Yeah

Daniel Ek 48:13 ... uh, writers-

Ben Gilbert 48:13 That's wow

Daniel Ek 48:14 ... uh, involved, and that's, like, a small part. And then you have, like, everything from merchandising. There's another few hundred, um-

David Rosenthal 48:21 The talent development, too. Like, the pipeline to go from you enter into the K-pop system to you become a member-

Daniel Ek 48:28 Yeah

David Rosenthal 48:28 ... of XYZ group is-

Daniel Ek 48:29 Yeah

David Rosenthal 48:30 ... uh, yeah. [chuckles]

Daniel Ek 48:30 Well, that, that, that could be your next deep dive-

David Rosenthal 48:32 Oh, that would be fun

Daniel Ek 48:32 ... because honestly, it is fascinating how they do it and the 360, how they think about it, not just from sort of maximizing their recorded side, but actually thinking about sort of fan development. Uh, all the digital platforms, they have their own developers, uh, programmers-

David Rosenthal 48:49 Wow

Daniel Ek 48:49 ... building specific platforms.

David Rosenthal 48:51 Wow.

Ben Gilbert 48:52 Mm.

Daniel Ek 48:52 Uh, it, it, it's, it's pretty cool.

David Rosenthal 48:54 One thing I'm really curious on that we hadn't thought about before, we came here yesterday to Stockholm, and we were talking with other folks on the Spotify team. I'm curious-... in this lens, what, uh, the past few years have been with Bad Bunny and reggaeton. And I've heard you talk about that, like, you knew from the data on Spotify that this was gonna be huge-

Ben Gilbert 49:16 Yeah

David Rosenthal 49:16 ... and now I think it's the largest genre-

Ben Gilbert 49:18 Yeah, it is

David Rosenthal 49:19 ... on Spotify?

Ben Gilbert 49:19 And many of our listeners will not know either of those two terms you just threw out. [chuckles]

David Rosenthal 49:24 Yeah. [chuckles]

Daniel Ek 49:24 And I think this is a broader trend, right? We're now living in a very global world, uh, when it comes to culture. Um, at the same time, there's still a lot of local nuances, right? So, um, it's this extremity that we talked about. On the one end, um, you have these super, super niches, um, that exists, but then once every blue moon, one of these niches kind of develop into something that's actually quite sizable, and you kind of start realizing that maybe this has a global appeal, um, on top of it. So in Latam, as an example, uh, gospel music is quite big.

David Rosenthal 50:01 Hmm.

Daniel Ek 50:02 Uh, and funk music is also quite big. Okay, well, that's probably not what you would associate with popular music.

David Rosenthal 50:09 Yeah.

Daniel Ek 50:09 Um, but they are real things, and obviously they exist in microcosms elsewhere. Like, you could probably guess in the South, in the US, gospel might be a larger genre, et cetera. Um, so it's not like it's totally kind of isolated and just happening there, but there's something that creates a, a sort of cultural resonance, uh, with, um, those types of styles. And then you have something like reggaeton, and, and it, it usually starts pretty small. Um, and then actually in, in each cluster, it's kind of like starts developing more broadly. And, and when you re- really look at it, like, it has oftentimes a pretty huge diaspora outside of, of that sort of near region as well. So I mean, uh, the Hispanic population in the US would be kind of an obvious one, right? And so many years ago, we kind of started seeing them breaking out their natural clusters and becoming a pretty big thing. And it was, for me, at that time, it was just pretty obvious that, um, if we invested in that genre-

David Rosenthal 51:15 Hmm

Daniel Ek 51:16 ... um, on a global basis, we thought that, that that would have a global appeal. And-

David Rosenthal 51:21 Yeah, because before a platform like that, obviously, like, it could happen, and maybe there are examples where it did, but, like, that's... Like, it's just so wild. May- maybe the Acquired audience, not as many people know Bad Bunny or, like, know the lyrics to his songs, but, like, a large portion of non-Spanish-speaking Americans, and, like, non-Spanish-speaking people around the world know all the lyrics-

Daniel Ek 51:42 Yeah

David Rosenthal 51:42 ... in Spanish-

Daniel Ek 51:43 Yeah

David Rosenthal 51:43 ... to Bad Bunny's songs. [chuckles]

Daniel Ek 51:44 They, they may not know what the lyrics are about, though. [laughing]

David Rosenthal 51:46 [laughing] Yeah, for better or worse.

Daniel Ek 51:48 Yeah, that would be a very different thing. There's a lot of local cultural things that, uh-

David Rosenthal 51:52 Hmm

Daniel Ek 51:52 ... seems like, "What? He's talking about, you know, someone cheating with this one-"

David Rosenthal 51:56 Yeah. [chuckles]

Daniel Ek 51:57 - "and then all this kind of relationship stuff." Um, that's the sort of local nuances. Um, but, but yeah, I mean, yeah, that, that's the fascinating thing, right? But, but the same, same time, um, you probably wouldn't have, uh, imagined, um, MSG being sold out and, like, 20,000, if not more, people singing Korean lyrics. That doesn't look Korean, by the way, like, and know every word to every lyric.

David Rosenthal 52:21 Hmm.

Daniel Ek 52:21 And that's the amazing thing, right? Like, when things catch on, it's music, it makes people feel. There's something about the artist, there's something about how they're communicating, uh, that resonates with you as an individual. Um, and it is the foundational storytelling. We've always used music. It is so hard to describe art, right? Like, we, we can objectively describe, "Oh, there's art," but how you feel, why do you feel a certain way when you're looking at a painting? Why do you feel a certain way when you're listening to a song? It's really hard-

David Rosenthal 52:52 Yeah

Daniel Ek 52:52 ... uh, to describe that. And, and that's the amazing thing about what we're able to do. And the q- really cool thing is you're, you're able to take artists that otherwise, you know, um, perhaps m- may not even have been able to be professional, and, and now they have a global audience. I don't know how to express it, other than they, they have some sort of God-given talent. Uh, that's the best way I can describe this kind of genius, when they're able to express these things in a way that it just resonates with people, uh, all over the world, just instantly. It's like, how, how do you do that?

Ben Gilbert 53:26 It, it's clearly they're tapping something innate to humans-

Daniel Ek 53:29 Yeah

Ben Gilbert 53:29 ... independent of culture-

Daniel Ek 53:30 Yeah

Ben Gilbert 53:30 ... which, absent data, if you were to ask me and say, "Hey, do you think that, um, someone is inventing a brand-new genre of music today? Do you think it's going to appeal to people similar to them or all humans-

Daniel Ek 53:43 Yeah

Ben Gilbert 53:44 ... equally in some way?"

Daniel Ek 53:46 Yeah.

Ben Gilbert 53:46 I, I, I would probably tell you, like, "No, it's more about nurture than nature."

Daniel Ek 53:49 Yeah. Yeah.

David Rosenthal 53:51 Well, it's like we were talking about on the Nintendo episode, like, there are always only gonna be a handful of Shigeru Miyamotos in the world. But until recently, and in the gaming industry, it's still pretty much the case, like, you need to also have the luck of being, being the Venn diagram of a Shigeru Miyamoto, who happened to be the arcade cabinet designer at Nintendo-

Daniel Ek 54:11 Yeah

David Rosenthal 54:11 ... in order for, like, the possibility of Mario and Zelda to happen.

Daniel Ek 54:15 Yeah.

David Rosenthal 54:16 And, like, in music and podcasting now, in this world, like, everybody has the opportunity... Not everybody's a Shigeru Miyamoto.

Daniel Ek 54:23 Yeah, of course.

David Rosenthal 54:23 Not everybody is, you know, a Bad Bunny. [chuckles]

Daniel Ek 54:25 Of course.

David Rosenthal 54:25 Most people aren't, but you have the opportunity to be one. [chuckles]

Daniel Ek 54:29 Yeah. I think that's so interesting. Uh, I was talking to Ted Sarandos about this, um, he's on, on our board, and, um, this was a number of months ago, but, like, if you think about filmmaking, it's still, as, as you said, uh, one of the things about a Nintendo is you have to have the resources enable to build a game, and that's still not cheap. Um, and it's expensive, and back in the day, maybe you had to build the entire console in order to even have a chance-

David Rosenthal 54:54 Yeah

Daniel Ek 54:54 ... of doing it. Um, but these days, you still, like, a triple A game, uh, is-

Ben Gilbert 55:00 A few hundred million dollars.

Daniel Ek 55:01 Yeah, a very big production.

David Rosenthal 55:02 And five years. [chuckles]

Daniel Ek 55:04 ... very big productions, right? And, and, uh, sure, you can build an indie game and so on and so forth, but, but, but it's still a very limited number of people that are able to do that. But even in filmmaking or in TV series, uh, the amount of people that used to be able to be showrunners or, like, producing or directing these things, it was fairly limited group of people, right?

David Rosenthal 55:26 Yeah. Very socially connected, people hanging out in backlots in LA, part of the studio.

Daniel Ek 55:32 And it probably mattered a lot, not su- to diminish any of their talent, but it probably mattered who you knew, um, was an integral component and having talent. So you kind of had two di- different things. But in the last few years, as the budgets have expanded, uh, and certainly in the Netflix case, um, it, it would have been physically impossible to just keep this, um, same set of producers, directors, et cetera-

David Rosenthal 55:57 Mm

Daniel Ek 55:57 ... right? Because they're just trying to make so much more content. So one of the interesting things is the same thing is happening now, where there's Latam directors and producers-

David Rosenthal 56:07 Ah

Daniel Ek 56:07 ... uh, not just doing sort of local productions, but actually now coming to Hollywood-

David Rosenthal 56:12 Getting a bigger stage. Yeah

Daniel Ek 56:12 ... and, and doing that as well, and I've seen it in, in, in my case. Um, there's been a bunch of Swedish, um, writers and producers and, and, uh, actors now that are getting into Hollywood productions, and it's been, you know, fun to see.

David Rosenthal 56:27 Hmm.

Daniel Ek 56:27 Um, and, and not just the usual names, but actually, like, some more unknown talent, uh, making its way as well. And there are more people trying, but there are also, also more opportunities. Um, and then obviously, as you mentioned on the podcasting side, uh, the same is true there, but, but it's true on both sides.

David Rosenthal 56:46 Yeah.

Daniel Ek 56:46 That's, that's the crazy thing. But there's also more competition, which is-

David Rosenthal 56:49 Yeah

Daniel Ek 56:50 ... I think when, when people are, are talking about Spotify and criticizing it, that's the part I think is the biggest misconception.

David Rosenthal 56:57 Hmm.

Daniel Ek 56:58 Because they hear so many, many people who are trying, and it doesn't work, where they're not making a lot of money of it. They're naturally sort of drawing the conclusion that, "Hey, there has to be something wrong with the model. This model can't work." But in reality, both things could be true at the same time.

David Rosenthal 57:13 Right. There are a lot more people who are failing, but there are also a lot more people who are succeeding.

Daniel Ek 57:17 Exactly.

David Rosenthal 57:18 Like, the total pool is so much bigger.

Daniel Ek 57:19 Yeah. And, and I think that's-- podcasting is, like, much earlier in its maturity.

David Rosenthal 57:25 Yeah.

Daniel Ek 57:25 So we may not hear it, plus we don't have this sort of, um... I- I'm not sure a podcaster sees it as, uh, it's a sort of given that monetization is there, and it needs to be there from day one. Whereas I think obviously with the professionalization of music, that's a much bigger part of the expectancy. But that's actually a kind of a, um, relatively limited part of our human history. It's not been,

Daniel Ek 57:56 uh, you know, it's probably even less than a hundred years that we've had recorded music and it being a form, and yet it's part of the copyright regime, it's part of, like, um, some pretty, um, important laws. Uh, so I think it comes with a different expectancy. I'm, I'm not saying that's wrong, I'm just saying just the arc of history. And I was actually gonna latch on to something you talked about, sort of being creative, too. One of the things I often think about when you think about sort of the history of music, going back to it, at the time of Mozart, if I wanted to create music, the reality is I had to be a musical genius. 'Cause I needed to hear every single tone in my head, um, every single note. I needed to hear all the different instruments, how they would all play together. I could write them down, but I could never hear them all being played at once, right?

David Rosenthal 58:47 Hmm.

Daniel Ek 58:48 Many times, the composers of that era, they were only able to listen to their actual compositions, like, a few days before the actual-

David Rosenthal 58:57 Hmm

Daniel Ek 58:57 ... concert that they were doing, and then making small tweaks.

David Rosenthal 59:01 Wow!

Daniel Ek 59:01 But by that time, it had to be pretty perfect. And so sure, they could play a little bit on the piano, but then they kind of needed to, not visualize, but sort of somehow, somehow, uh, internalize what, what, what that ended up being. So-

David Rosenthal 59:14 Having a whole orchestra is the triple A game equivalent.

Daniel Ek 59:17 Yes, exactly. Um, and so obviously, a very few could do that, but also the process, the creation process was insane because you, you needed to do so much.

David Rosenthal 59:28 Hmm.

Daniel Ek 59:29 Um, and then, you know, you, you move forward and think about it, sort of the era of playing instruments, um, and take jazz, which is highly technical, right? Like, every single member in a jazz band is excellent at their instrument, right? Like, really excellent, and it's really hard.

David Rosenthal 59:48 Yeah.

Daniel Ek 59:48 Like, it's really hard to be that good of a musician and, and play jazz. Um, and then, you know, fast-forward a little bit more and take, um, someone like, um, you know, Swedish Avicii a- as an example. He was a brilliant composer. He truly was, but, um, he didn't really know how to play any instruments. Um [chuckles]

David Rosenthal 1:00:10 It turns out that technical musical proficiency may or may not be correlated with making great music. [chuckles]

Daniel Ek 1:00:16 Exactly. Uh, exactly my point. But, but he actually had a different tool. He had a-- he, he had software, right? And he's actually-- he was really good at that software. He knew all the knobs and, um, you know, plugins and all that stuff and how, how, how it worked, and a lot of musicians are that way today. Like, if you actually look at the workflow, it's very technical, it's very, uh, detailed, it's very nuanced. Like, I have this, um, thing that I do where... I probably shouldn't admit this, but, like, I sit on YouTube on evenings and look at music producers-

David Rosenthal 1:00:47 Oh, oh

Daniel Ek 1:00:47 ... their workflows, and, like, when they get into the weeds of, like, um, decoding how they do stuff.

David Rosenthal 1:00:52 Oh, man, we were t- we were, like, having just, like, our faces lit up. We walked in this studio, and we're like, "We think we are, like, highly technical podcast producers. We think we're like-

Daniel Ek 1:01:02 You think we are. I don't think we are

David Rosenthal 1:01:02 ... top .1%." [laughing] Well, I think we are. I think we are. Uh, you know better, and then we walk into this studio here, you know, in Spa- in, in Stockholm, and we're like, "This is just a scale beyond our imagination."

Daniel Ek 1:01:14 Yeah. Yeah, we're, we're, we're very fortunate, and it's a lot of fun because artists love just hanging out here, too, because we've got kind of everything that they'd like to, to use and to do. But my point, uh, is, I mean, if you think about it, it is a kind of a very technical workflow that takes a lot of time to get into, and some of the parts of that workflow, you'd have to watch probably hundreds of hours of YouTube videos to even decode or how to do it and, like, start getting into it. And a lot of these, uh-... today's composers are experts in their workflows, right? Like, they've, they've kind of have their, their plug-in sets. They've got, like, these sixteen things that they, they see chained together in order to create that one effect that defines them, and so on and so forth. So the barrier still, like, if you said today, "I wanna start making music, and I wanna make something that sounds pretty good," it's still quite high, uh, that barrier. And it's getting lower and lower, and it's, it's getting easier and easier, but, but, but I would still argue the bar for you to sound- make something that sounds professional and would actually be a, a high-quality song, it requires a lot of time and a lot of effort.

Ben Gilbert 1:02:26 And it might be less CapEx and less equipment. I mean, you hear the, the rise of the, you know, apartment music producer on the laptop.

Daniel Ek 1:02:34 Yep, yep.

Ben Gilbert 1:02:34 But it still takes an enormous amount of-

David Rosenthal 1:02:37 Mastery

Ben Gilbert 1:02:37 ... self-training, mastery, creativity.

Daniel Ek 1:02:40 Yes. My opinion is it, it takes a little bit too much to get started. Like, it's quite a barrier to entry still.

Ben Gilbert 1:02:47 Mm.

Daniel Ek 1:02:47 I mean, if you just wanna make something, like, super simple, it doesn't take a lot. There's, there's all Smule and all these other apps, you can probably make something. Um, but th- from there on, to actually compose something, getting into the, the, uh, idea of the workflows, the plug-ins, all that kind of concepts, it's quite a lot, uh, to master. And I think that's the potential power with something like AI, obviously, right? Which is, uh, we're most likely going to have another order of magnitude of simplicity. You know, on a, on a personal level, if, if you liken that to coding, um, I used to code, um, but I haven't now for, for about ten years, and so probably a little bit embarrassing to admit, but the barrier to entry or re-entry, uh, for me-

David Rosenthal 1:03:33 Mm

Daniel Ek 1:03:33 ... was so high, uh, with all, uh, you know, Node, all of these different frameworks, uh, even setting my, up my own workflow. For me to be able to, to do something in the Spotify ecosystem, uh, this is hundreds of hours probably for me to kind of re- um, acquaint myself with all, all the stuff, right?

Ben Gilbert 1:03:53 Like, how do I install the PHP server?

Daniel Ek 1:03:55 Yeah, exactly. [chuckles]

Ben Gilbert 1:03:55 You know, like, I got bad news for you. [chuckles]

Daniel Ek 1:03:56 Yeah.

David Rosenthal 1:03:57 [chuckles]

Daniel Ek 1:03:57 Uh, it, it, it's changed a lot, right? And so the amazing thing is, um, I, I, just for the fun of it, like, wanted to start doing stuff, and I asked ChatGPT to help me. And pretty much, um, on a few hours on a Sunday afternoon, I was up and running. And, and, uh, because of that sort of starter help, I had my own, my own, uh, sort of environment set up. I was contributing code. I was iterating.

Ben Gilbert 1:04:22 Did you contribute code to the Spotify code base?

Daniel Ek 1:04:24 Um, no, they won't let me do that yet. [laughing]

Ben Gilbert 1:04:26 [laughing]

Daniel Ek 1:04:26 Uh, so I, I got a little bit more work, um, to do before, before they allow me to do it.

Ben Gilbert 1:04:31 You gotta pass a coding test.

Daniel Ek 1:04:32 Yeah. I think out of spite, they probably won't, won't let me do that anyway. [laughing]

Ben Gilbert 1:04:36 [laughing]

Daniel Ek 1:04:36 They pride themselves on, on not... Um, I don't have any access to [chuckles] -

Ben Gilbert 1:04:42 [chuckles]

Daniel Ek 1:04:42 ... any of the actual systems. Um, but it was, uh, it was such a liberating feeling because it, it made the re-entry for me, um, so much easier, uh, and so much more enjoyable. And so I think about that. So if you think about the world of music now, there are tens of millions of people, uh, in the world that probably are recording stuff, but there's hundred, two hundred million, something like that, that's playing some kind of instrument and expressing themselves musically.

Ben Gilbert 1:05:10 Mm.

Daniel Ek 1:05:11 Uh, there's nothing that says that it wouldn't be possible for those hundred million-plus people to make something that actually sounds pretty good. Now, again, um, w- what is that going to, going to do with the music industry? And is it really going to be that all of a sudden, everything becomes commoditized? I don't believe so, because we've seen time and time again, that quality rises to the top and actually becomes even more valuable, um, in that world. Photography being the sort of key reference point. Every... When Instagram came: "Oh, no, no one's gonna want photography," but the price of fine art photography actually increased, not decreased. So my view is you're gonna see both extremes. You're gonna see the middle getting wiped out-

Ben Gilbert 1:05:53 Mm

Daniel Ek 1:05:53 ... more people participate, but the very, very top is probably going to increase in value, um, as well, and they'll figure out other things to do with this technology. But it is pretty cool for humanity, and we talked about that, being able to relate and, like, you know, expressing ideas. Um, every permutation of every cultural idea will finally be able to be expressed. We've never been in a world where that's been possible before.

Ben Gilbert 1:06:21 Mm.

Daniel Ek 1:06:22 And it'll be really fascinating to see what that means for our understanding of other cultures, our a- ability to relate to other people. Some really cool stuff.

Ben Gilbert 1:06:34 Interesting.

David Rosenthal 1:06:34 Th- this has kinda, like, already happened over the past few years in podcasting too, right? Like, there are... I don't know, you probably know better than me, millions of podcasts out there, right?

Daniel Ek 1:06:43 Two, two million.

David Rosenthal 1:06:44 Two million plus, I'm sure, at this point.

Daniel Ek 1:06:45 Uh, it's about a little bit more than double that now.

Ben Gilbert 1:06:48 Really?

Daniel Ek 1:06:49 Yeah, yeah.

Ben Gilbert 1:06:50 Wow.

David Rosenthal 1:06:50 Whoa! So, like, it's kinda like you're-- these are numbers like you're talking, there are four to five million people out there that are like, "I can make a podcast." [chuckles]

Daniel Ek 1:06:56 Yeah.

David Rosenthal 1:06:57 And yet, the very, very top ones are still, like, of a quality bar that is so high and getting higher.

Daniel Ek 1:07:05 Yep.

David Rosenthal 1:07:06 But, like, I've heard you guys talk about this, that you now can take shows that are in a specific language, in a specific region, that you can identify based on the data, there's something really cool happening here-

Daniel Ek 1:07:17 Yeah, yeah

David Rosenthal 1:07:18 ... and then bring them to other-- around the globe to other audiences.

Daniel Ek 1:07:21 Yeah. And r- right now, obviously, that's a manual, um, process, where, um, you know, we have to hire voice actors that re-enact that.

David Rosenthal 1:07:30 Yeah.

Daniel Ek 1:07:30 We have to kind of tweak the script a little bit to make it culturally relevant. And obviously, this won't be news to you, but perhaps to some of your listeners, that, uh, I mean, already probably today, it won't be as high quality, and the cost would be too expensive to express this, but there's, there's no reason technically why-... you guys and I, this podcast couldn't be done right now in Chinese with our voices.

Ben Gilbert 1:07:56 Well, I was gonna say, as a, so you have X now, [chuckles] the AI DJ-

Daniel Ek 1:08:01 Yeah

Ben Gilbert 1:08:02 -that speaks many languages?

Daniel Ek 1:08:05 Well, we've had him speak Swedish, uh, for sure, uh, and he obviously doesn't know S- Swedish. Um, but, but it's, uh, only today available, uh, because the intonation is a little bit off. Uh, so it's, it's really only English language content. And honestly, that's probably just a training problem. So if, if we were training, uh, the models on specific languages and not just X voice, uh, per se, I, I think that would have been totally possible. Uh, and again, the largest problem today is the cost per minute, uh, would be too high for most podcasts. I think you guys could actually support it, probably with your model, but the average podcaster couldn't. You know, I don't know if you guys seen, have seen this, but, like, MrBeast has, like, a Spanish language channel.

Ben Gilbert 1:08:51 I did see.

Daniel Ek 1:08:51 I don't know if he has-

Ben Gilbert 1:08:53 Yeah, I did know this

Daniel Ek 1:08:53 ... like, a, um, you know, French one, et cetera, but he certainly has a Spanish language.

Ben Gilbert 1:08:57 Computer translated or, or humans re-recording?

Daniel Ek 1:09:00 Uh, I think it's humans re-recording it at the moment, uh, but it's huge.

Ben Gilbert 1:09:04 Wow.

Daniel Ek 1:09:04 Uh, I think-

Ben Gilbert 1:09:05 Yeah

Daniel Ek 1:09:05 ... it, it may have, like, fifteen, twenty percent more subscribers, uh, a- additional subscribers, not more than what the English language one has.

Ben Gilbert 1:09:14 Hmm.

Daniel Ek 1:09:14 Um, so, so it's, it's, it's like a really, um, a really big deal, and I think that's, like, the next step, right? Like, where, where, you know, in your case, like, why wouldn't you take the LVMH episode and make it all in French or whatever?

Ben Gilbert 1:09:32 Yeah, it should at least be in French.

Daniel Ek 1:09:33 Yeah. [chuckles]

Ben Gilbert 1:09:34 It's time for another one of our favorite companies here at Acquired, PitchBook-

Daniel Ek 1:09:38 Ooh

Ben Gilbert 1:09:38 ... which I used heavily in preparing for this interview. So here's some of the data from the PitchBook page on Spotify itself. You might remember that one of the early breakout moments for Spotify was a two thousand and nine email that Sean Parker sent to Daniel talking about how he loved the idea for Spotify. He wanted to invest. He saw social media, specifically Facebook, as the distribution channel.

Daniel Ek 1:10:00 And Sean Parker, at the time, was uniquely qualified to opine on this because he was mostly Sean Parker of, you know, Napster fame. [chuckles]

Ben Gilbert 1:10:07 And also-

Daniel Ek 1:10:08 He's... And also president of Facebook.

Ben Gilbert 1:10:10 Yes, yes, the best person in the world to offer that opinion.

Daniel Ek 1:10:13 Yes.

Ben Gilbert 1:10:13 So ironically, while social was the first, Spotify would go on to have concentric circles of growth strategies over time, again, reaching the over five hundred million people now, including being the fastest way, when they first started, to listen to music by basically inventing modern streaming, then going freemium, then figuring out social distribution, then podcasts, now audiobooks. Browsing PitchBook jogged my memory about the early Facebook strategy that Sean Parker, then at Founders Fund, invested in two thousand and nine and ten, again, found both in PitchBook, which led to a lot of the discussion on this episode about the importance of distribution channels. PitchBook has all the financing events over the company's history, including pioneering the modern direct listing when Daniel and Barry McCarthy-

Daniel Ek 1:10:55 Ooh

Ben Gilbert 1:10:55 ... took the company public in twenty eighteen without raising any new capital because they didn't need it.

Daniel Ek 1:11:01 Barry McCarthy rides again.

Ben Gilbert 1:11:02 Indeed. In addition to the individual company data, PitchBook also has industry data, like financing trends. So I went in and generated a graph of financing activity in music tech startups in the US and Europe from twenty ten to today. The last four years, just to kind of level set where we are today, has averaged about four hundred million dollars of investments in music startups.

Daniel Ek 1:11:23 Wow, that's a lot.

Ben Gilbert 1:11:24 But if... Yeah, especially compared to back in twenty ten, that number was about a third, a hundred and thirty-one million total, and if you look just at Europe, where Daniel was, it was just thirty-three million in only thirteen companies, and this was actually two years after Spotify launched, which really shows how crazy Daniel and the Spotify team were at the time. So PitchBook is awesome. There's an insane amount of data. You can slice it and dice it in every way possible. Basically, every VC and PE firm has it, so if you don't, it's essentially a competitive disadvantage at this point. So if you want to sign up for PitchBook, they are offering a free week trial for Acquired listeners. Go to pitchbook.com/acquired to get all the details, and just tell them that Ben and David at Acquired sent you. Thanks, PitchBook. I've been uncomfortable until now, um, using any sort of AI for any seconds of audio in our podcast. Like, we always played around with the Descript replacement of certain words, but then we never shipped it to production, 'cause I was always like, "Eh, it doesn't sound quite as good, and, you know, everything should be hand mastered in Acquired."

Daniel Ek 1:12:31 Mm-hmm.

Ben Gilbert 1:12:31 And then, for the first time, on a recent episode, uh, we used an AI tool that drama-- our editor found it dramatically increased the quality-

Daniel Ek 1:12:37 Hmm

Ben Gilbert 1:12:38 ... the sound quality of the episode based on the mic that the guest was using.

Daniel Ek 1:12:41 Hmm.

Ben Gilbert 1:12:41 And once you start doing that, you're like, "Well, I mean-

Daniel Ek 1:12:45 Well, what's the difference?

Ben Gilbert 1:12:45 -shouldn't AI do all sorts of things to our audio?"

Daniel Ek 1:12:48 Yeah. Yeah, I mean, 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, uh, it's totally possible, uh, 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, uh, indistinguishable from the real thing.

Ben Gilbert 1:13:15 Yeah, and, and platforms probably have a role to play in verifying authenticity. Like, that, that actually raises the value of platforms because, uh, platforms like Spotify, YouTube, you actually-

Daniel Ek 1:13:26 Yeah

Ben Gilbert 1:13:26 ... can point to, we know for a fact that this was created by the creator, and we can stamp it and say that this, you know, you can trust this.

Daniel Ek 1:13:32 Or approved by the creator.

Ben Gilbert 1:13:33 Yeah.

Daniel Ek 1:13:33 Yeah. No, no, I think you're, you're entirely right, which is why, you know, um, uh, there's been a lot of sort of debate around the Elon Musk, the subscriber, uh, thing. Uh, and actually, a- as usual, when you tease it out, there's many different-... the things in that controversy, but perhaps the most potent and most interesting one has been the one around the, the notion and idea around like staking as a way of reducing, um, the bot, um, thing. And I feel like so much has just ended up being sort of, "Hey, do you- do I have to pay in order to reach my audience now?" That kind of switcheroo. But I think the more interesting one was kind of like, well, forget about if it's paid or not, but just increasing the cost, uh, of spam, but also increasing kind of, uh, the quality of verification and, uh, being able to truly understand what's what in, in the end.

David Rosenthal 1:14:27 Twitter is so interesting that, um... We were talking with a friend who, who's a creator peer, but, um, his platform is Twitter, and you can't monetize Twitter [chuckles] -

Daniel Ek 1:14:38 Yeah

David Rosenthal 1:14:38 ... like there's no rev share.

Daniel Ek 1:14:39 Yeah.

David Rosenthal 1:14:40 Traditional social platforms like that, you've kind of got them on one end of the spectrum. You've got Spotify, well, maybe Spotify podcasting, and then Spotify Music at the far end of the spectrum.

Daniel Ek 1:14:50 Yep, yep.

David Rosenthal 1:14:50 And you've got YouTube kind of in the middle. How do you think about what role for monetization, maybe especially on the podcasting side, um, Spotify should play for creators? [chuckles]

Daniel Ek 1:15:02 Yeah, I mean, um, our goal is to be the best partner of creators. Um, no- not the only partner, but just the best. Um, and, and win by, by basically, uh, not forcing the creator to do something, but just offering a really good way for creators to work. Uh, low friction, but also lots of potential to customize their business the way they would like to. I think for some creators, the monetization aspect is absolutely critical. It may even be a gatekeeper, uh, or, or a gate between them doing something on that platform or not. And maybe they have switching costs, uh, relative to what other stuff they're doing. Think about a creator that's in a traditional media ecosystem. If they wanna like, take their thing, okay, well, maybe my, uh, this will-- I will be less valuable on cable or whatever other thing I'm, I'm on. That would be one end of the spectrum, right? Um, and then you have another creator that may have an entirely different business model. I don't know about your other Twitter creator friend, but, um, uh, perhaps that creator either has a different business model somewhere else-

David Rosenthal 1:16:11 Well, you have to. You can't have a business model on Twitter. [chuckles]

Daniel Ek 1:16:13 Yeah, you, you, you can't do that. But, you know, the question is if, if that's truly a creator or, you know, um, you could argue VCs, a lot of them have- [laughing]

David Rosenthal 1:16:22 Right. [laughing]

Daniel Ek 1:16:22 ... Twitter as, as their marketing channel.

David Rosenthal 1:16:24 That's true.

Daniel Ek 1:16:24 Right? Uh-

David Rosenthal 1:16:24 Yeah.

Speaker 1:16:25 Just top of mind.

David Rosenthal 1:16:25 And podcasts. [chuckles]

Daniel Ek 1:16:26 Yeah. There are many different ways, and the needs are different, um, which is why, you know, for some of them, they would probably happily forfeit all the monetization because they feel like they have such a strong other business model-

David Rosenthal 1:16:39 Mm-hmm

Daniel Ek 1:16:39 ... um, on, on the back end.

David Rosenthal 1:16:41 The, the customization point is really interesting, too, and I think that's the, that's the, um, really interesting nuance about, about YouTube, because, like, on the one hand, I think YouTube for creators is amazing because you can completely abstract the business. Like, you just make the content, and they take care of the business-

Daniel Ek 1:16:57 Yep

David Rosenthal 1:16:57 ... and you get a check.

Daniel Ek 1:16:58 Yep.

David Rosenthal 1:16:59 On the other hand, like, you know, I can't even remember if we have ads on, uh, YouTube ads on Acquired content.

Daniel Ek 1:17:06 I specifically don't.

David Rosenthal 1:17:07 I think we don't. Because, like, do we want a Sprite ad in the middle of this?

Daniel Ek 1:17:11 Yeah, yeah.

David Rosenthal 1:17:11 Like, no.

Daniel Ek 1:17:12 Yeah.

David Rosenthal 1:17:12 Like, we want [chuckles] -

Daniel Ek 1:17:13 Yeah

David Rosenthal 1:17:13 ... creative control.

Daniel Ek 1:17:14 Yeah.

David Rosenthal 1:17:14 And, like, you lose that in a... if the platform is, like, too opinionated about what's happening with monetization.

Daniel Ek 1:17:20 Yeah. Most of us, as platforms go, uh, we have to start out, um, very simple with our models, right? And it takes a long time to then change that default, um, setting. But, I mean, um, uh, as I, I even talked about in music, um, it had to be, like, very binary. You had to be on or you had to be off. There was kind of no in-between, uh, like, uh, well, uh, let's do windowing, let's do this and that, et cetera, because that was the only way. My biggest, uh, problem was getting everyone off of piracy into this other model, and I needed the consistency of user experience. That was the model. Now, the next decade of music may look very different. Uh, it may look like something where there's going to be a lot more options for what a creator chooses to do. Uh, I certainly would hope so, and we're certainly gonna work towards that avenue, but any change that we're doing with the scale that we're having is going to be- there's going to be winners and losers. It's almost impossible to find a single thing we could do that's just universally going to help. And that naturally, naturally creates the constraints, that it's more of a one-way door than a two-way door, where we can kind of like iterate and, and invest on it. So I, I'm, I'm fairly certain that, like, what you're seeing now in this world of, of platforms and, and creator ecosystems is, if you asked, um, YouTube, um, like: Hey, w- i- if you had to... If you could redesign the platform right now, uh, would you just make all the same decisions you made about discovery and monetization all over again? The answer would probably not-

David Rosenthal 1:18:59 Almost assuredly no. [chuckles]

Daniel Ek 1:19:00 No.

David Rosenthal 1:19:00 Yeah.

Daniel Ek 1:19:00 Right. Um, as evident actually by Shorts, that works a little bit different on their platform, right? And they're all different, too, because Shorts, uh, obviously, you have many more potential impressions over a shorter period of time, and, you know, an average YouTube video has been X minutes, um, and that means more interstitial ads. Um, and then we have host read ads or the equivalent of, of sort of, um, more native ads or paid promotional ads that both Instagram and YouTube have. So we're living in an ecosystem where on the one end, ten, 15 years ago, there, uh, we were very primitive in terms of monetization, and today it is very, very different.

David Rosenthal 1:19:41 Yeah.

Daniel Ek 1:19:42 And I kind of think about it in a way, like, this is not too dissimilar from mom-and-pop shops, the sort of, like, coming up in the US as a cultural norm. Um, you know, on the one hand, um...... you, you had physical infrastructure, urbanization, driving these kind of things, uh, where we both created these, uh, mega, uh, Walmarts of the world, um, as a direct consequence, but actually the complete opposite was also true.

David Rosenthal 1:20:09 Yeah.

Daniel Ek 1:20:09 We had this hyper local thing, et cetera. Um, and if you think about it today, these mom-and-pop stores, the ones that are still around, they're hyper distinct in what they're offering. They're really focused on community, many cases, really knowing your customer. They're offering events around their stores. They're offering obv- obviously, online things through, uh, Shopify and so on and so forth. And in a way, I think about it in a very similar way for the creator, uh, economy, too. Uh, we had to start very simple, uh, and it was based on a very simple model where, uh, there were free platform, ad-supported platforms, and paid platform. All of that is kind of now merging together. In addition to that, just monetizing the content in itself is probably becoming a auxiliary revenue sources around them, three sixty. Very similar, again, to mom-and-pop s- uh, shops, like where you could do live events, you could be doing merchandising, you could build, um, another business-

David Rosenthal 1:21:09 Yeah

Daniel Ek 1:21:10 ... um, like Kylie Jenner or something on the side of it.

David Rosenthal 1:21:12 What's cool is, like, this is true at scale now, too. [chuckles] I mean, Taylor Swift-

Ben Gilbert 1:21:17 Well, it-

David Rosenthal 1:21:17 -monetizes through-

Ben Gilbert 1:21:18 It-

David Rosenthal 1:21:18 -everything you're talking about-

Ben Gilbert 1:21:20 Yep, yep

David Rosenthal 1:21:20 ... the same way a mom-and-pop coffee shop does. She just does it at scale.

Ben Gilbert 1:21:22 And, and it's necessarily had to be, because streaming, while at first it looked risky and then turned out to be... I don't think it's blowing smoke to say, "You guys saved the music industry." Like, it is the thing that, while the industry was in dramatic decline, ended up making it so that the music industry now generates more revenue than it ever has before, with by far the largest thing being streaming. At the same time, if you're a Taylor Swift or you're any big artist, you're not making as much money streaming as you would have on CD sales in the CD sales heyday. So you sort of have to figure out what the new business model looks like as a creator, and you have to figure out what your sort of unique constellation of revenue streams are, because it's not just gonna be Walmart or Target is gonna cut me the check from selling CDs.

Daniel Ek 1:22:09 Yeah, the music industry is healthier than it's ever been before, but, but, um, certainly, when you think about it from a singular artist's point of view, um, you know, there was a point in time where, um, the majority of the revenue could be derived from recording music. But, um, the challenge to that, what I would say, is that the time in history where that was true was actually very, very short.

Ben Gilbert 1:22:35 Mm.

David Rosenthal 1:22:36 Yeah.

Daniel Ek 1:22:36 Right? Like-

David Rosenthal 1:22:36 It was the heyday of the CD era, right?

Daniel Ek 1:22:38 Yes, uh-

David Rosenthal 1:22:38 That wasn't true back in the radio era. [chuckles]

Daniel Ek 1:22:41 And so the question is: what, what, what's the analogy? Was it that, like, that's the right model, or was it actually that having multiple revenue models was always the answer? Um, but there happened to be a moment in time where recorded music was sort of the prevalent, um, revenue source. And I, I don't know. I mean, I certainly don't say that to try to shy away from, from sort of our role, and, and my goal is just, like, I think these people, generally, whether you're a podcaster, whether you're a musician, are insanely creative people. And I love seeing, uh, people like yourself or David or, uh, Sandra or, or Taylor Swift or whoever, like-

David Rosenthal 1:23:25 Or Joe Rogan or like... Yeah.

Daniel Ek 1:23:26 Or, or Rogan or whoever, that are, like, really deep, um, on whatever they're passionate about, and they're able to get across the microphone and, and having lots of people, uh, that can resonate with them.

David Rosenthal 1:23:42 Well, that opens up, like, so much more opportunity. One of the things we learned on the LVMH episode is that Rihanna became the first female recording artist billionaire because of Fenty Beauty. [chuckles]

Daniel Ek 1:23:53 Yeah.

David Rosenthal 1:23:54 You know? And like-

Daniel Ek 1:23:54 Yeah

David Rosenthal 1:23:55 ... imagine that in the CD era.

Daniel Ek 1:23:56 Oh, yeah.

David Rosenthal 1:23:56 Like, that wouldn't have happened.

Daniel Ek 1:23:57 Oh, yeah. And that's the insane part, too, right? Because, uh, that fame, uh, in a way, it doesn't necessarily... If you think about an Elvis Presley, um, what time did it take for Elvis Presley to get to a billion people that had heard him? I don't know, but I would venture to say, um, it probably took a decade at the very least, maybe two, uh, for him to do that. And sure, it was worth a lot, that billion then, but it was hal- hard to scale to that. And then you think about how many, uh, artists today get to be heard by a billion people, and actually, that number is way higher, and it's way faster for you to do it. Now, but because it's not as scarce anymore, perhaps the, the societal value slash monetary value, whatever you wanna put it on it, maybe isn't the same, because it's not as scarce. But as you said, if you're smart in how you do it, um, and this is the sort of the, the zeitgeist on how you execute it, it doesn't work when it's not authentic. So you take the Rihanna example, it worked because she had a way to do it which was authentic to her, but also authentic to her audience. If, uh, she would've tried to, uh, flog something else that she didn't care about, it probably wouldn't have worked. And that's the unique thing when, when you realize, and you think about it yourself as an enterprise, and, you know, JC, um [chuckles] you know-

Ben Gilbert 1:25:24 I'm a businessman.

Daniel Ek 1:25:25 Yes.

Ben Gilbert 1:25:25 I'm a businessman.

Daniel Ek 1:25:27 Exactly. He un- understood-

David Rosenthal 1:25:29 Which, JC sold his, sold his champagne company to LVMH recently, or fifty percent stake.

Daniel Ek 1:25:33 Yeah. But back to that, they're incredibly talented, um, uh, artists, and they're incredibly talented, uh, businesspeople as well.

Ben Gilbert 1:25:43 Yeah. Well, as we start to wrap up here, there's one question that I've really wanted to ask you, which is: As I've studied Spotify over the last month and a half preparing for this-... It seems like you guys have been very intentional about the way that you grow and having a completely different strategy to add each next hundred million users. You guys are now over five hundred million users. A, I didn't know the scale of that before I started researching.

Daniel Ek 1:26:12 Mm.

Ben Gilbert 1:26:12 It's, it's pretty unbelievable. And B, I sort of thought that, well, you know, they just let compounding do its thing.

Daniel Ek 1:26:19 Mm.

Ben Gilbert 1:26:20 But I think you guys, it, it's, it's not well understood by the public, or certainly wasn't, wasn't by me, how you change strategy in order to go get that next group of people each time. 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?

Daniel Ek 1:26:47 Yeah. I think it's a very astute observation, um, that you're making, that, um, it's, it's not been sort of being able to just ride on this macro tailwind and just do that. Um, but actually it's been many different things that's driven the success of Spotify. And the, the way, way I, I oftentimes talk about it is if you think about an exponential curve, um, if you really zoom in on that exponential curve, it actually is like a lot of different linear, uh, curves stacked on top of each other that creates that kind of, uh, exponential curve. And this will sound like a little bit of a cliché, but what I've really realized, perhaps even in just the last two, three years more, I, I, I, I knew it, and I could talk about it, but I hadn't truly internalized it, is, um, to be, uh, intentional about the culture you're building, right? There are many different cultures that can be successful, but there are trade-offs with each, um, cultural expression. And oftentimes today, what I see with younger entrepreneurs is that they're unintentional about what type of culture they're-- they are, so they flip-flop between them. So as an example, you know, we all, um, you know, many years ago, I was certainly enamored with Google, right? Like, the twenty percent projects and all these different things. Those are cultural expressions. It's not the culture itself, but it's the cultural expressions.

Ben Gilbert 1:28:23 Mm.

Daniel Ek 1:28:23 Um, so that's where, where, where the early innings of Spotify's culture was like, I'm sure almost every Silicon Valley company of that era. Um, and then, uh, we all switched, maybe became Facebook for a while, and we all kind of took that of, like, moving fast and breaking things and so on and so forth. And then you had, like, an Amazon kind of, uh, model, where on the one end, it was incredibly long term, but also maybe a little bit more bottoms-up innovation than top-down. Um, and then you see another cultural expression with like a Tesla, where incredibly top-down, incredibly focused company, actually, for this type of scale, um, that they're doing. And my point is, I think the most important thing, um, is to th-- really, really think through and be really, really diligent about the culture you create. And we certainly were victims of that at Spotify because we had taken all these different things. There were certainly things that were Spotify, but we kept talking about all these other companies, and we're like: "Well, we like this thing that Amazon's doing, so we should copy that."

Ben Gilbert 1:29:26 Mm.

Daniel Ek 1:29:26 And then, "Oh, we like this thing that Google's doing, so we should copy that." And actually, what end-ended up happening was we're-- we were, at one point in time, almost like a little bit of a Frankenstein monster because we had some of the stuff from everyone, and we had some of the bad stuff from everyone, too, um, instead of sort of really lean- leaning into that. And then, sort of without really being intentional about it, we, we started iterating and improving on that culture. And I often get this question. So, for instance, uh, you know, when we launched certain things, people are like: "Well, you know, this thing wasn't very great." And they have a mental model of what they expect of, of Spotify, and the mental model may be: "Hey, your music app is so amazing. How come, um, in 2019, your podcast just sucked? And so that m- must mean that podcasting won't work. Having a separate app must be the, the right thing to do," et cetera. Um, and, and what people didn't realize is we're actually one of these companies that happily will release something out that's not great. It's probably have the right strategy, but execution isn't super crisp and perfect.

Ben Gilbert 1:30:35 You said this about audiobooks at Stream On. You got on stage to the public and said, "We have audiobooks. I don't think it's great right now."

Daniel Ek 1:30:42 Yeah. [chuckles] Um, and it's true, [chuckles] and it's not great right now, but we will make it great. Um, but that's a different culture, right? And that's one where we're iterating on. But then the flip side of that, uh, would be something like AI DJ, where, um, actually, I think it, it is really high quality, and unlike a lot of other products, um, that are AI, where, where it's really kind of wonky, we've made something that's actually working and is working on a very large scale, probably one of the most popular AI products out there-

Ben Gilbert 1:31:18 Mm

Daniel Ek 1:31:18 ... now, in terms of reach. We don't really tout it all that much, but it's huge in terms of, like, moving our metrics-

Ben Gilbert 1:31:25 Mm

Daniel Ek 1:31:25 -in a pretty substantial way.

Ben Gilbert 1:31:27 Like Discover Weekly huge?

Daniel Ek 1:31:28 Yes. Uh-

Ben Gilbert 1:31:29 Wow

Daniel Ek 1:31:29 ... and I, I think it'll even outdo Discover Weekly.

Ben Gilbert 1:31:32 Wow!

Daniel Ek 1:31:32 Um, so it is really cool, but we had to be super i- intentional about it because we knew that, um, it, it was an area where, um, we had to think through the consequences of this because, uh, it would be highly scrutinized. So, as you can imagine, uh, one of the benefits by choosing to do it for music and not for podcasting was, um, obviously, that it would have been, uh, horrible if we've somehow summarized or said something based on a podcast, um, that, uh, wasn't safe or, or, or culturally attuned to, say.... and yet with music, it's kind of the, the primary candidate, plus it's, it's the one where we have a huge audience that's listening in the background every day, uh, and that really wants more context. And, and my point being is, um, understanding when to do which, um, and understanding that there's, there's-- both of these cultures are perfectly fine, um, but just being very intentful about when you're choosing to do what, and having the right mental models, and, and not sort of becoming half-assed in everything, but actually becoming really good at what makes you, you. And I would say the probably other thing that's been hugely important, and that I wish more people talked about it, is there are not many of us, but there's a few of our-- few companies like Spotify, which in a way, has been heavily influenced by Silicon Valley, but we are not Silicon Valley first. So that sort of notion of being on the side and watching, um, and sort of iterating in a corner, Spotify is definitely sort of not the overnight success. It's been a sleeper for many, many years.

Ben Gilbert 1:33:15 And when you started, the common wisdom was anybody who's starting an online music thing, it will die.

Daniel Ek 1:33:21 Yep.

Ben Gilbert 1:33:21 And I think you sought advice from hundreds of people who all told you, "Don't do this-

Daniel Ek 1:33:25 Yep, sure.

Ben Gilbert 1:33:25 -this category is toxic."

Daniel Ek 1:33:26 Yep. You're, you're exactly right. And, and, um, but, but also because we were kind of doing this in Europe for the first few years, we, we started getting some, some real, um, first learnings, and I think this is, like, really key, because if you think about the t-- the ones we talk about as iconic companies, the Apples, the Amazons, uh, of the world, we all tend to forget a few things, but one is that many of them are quite old at this point. They're twenty-plus years old, so they've had a time to refine their cultures and, and getting that, that right. And the other thing is they almost started in empty ecosystems. And Amazon, sure, there was Microsoft, but they started an internet company in Seattle, right? Where there was a software company that was really big-

Ben Gilbert 1:34:15 Yeah.

Daniel Ek 1:34:15 -but it's not the same culture. They didn't start it in Silicon Valley.

David Rosenthal 1:34:18 Definitely not the same culture. [chuckles]

Daniel Ek 1:34:19 And I like to believe that that culture became very distinct also by having to figure out its own things from first principles and from learning, rather than just being able to gather through osmosis. And that might, might have been g-going slower in the beginning, uh, to then go faster, but, um, I, I think it's been hugely important for Spotify's journey, and we're-- I feel like we're, we're just right now getting into our own, of like-

Ben Gilbert 1:34:49 Mm-hmm

Daniel Ek 1:34:49 ... what is our culture in a very unique way, that it's probably the most exciting thing for me at the moment-

Ben Gilbert 1:34:55 Mm

Daniel Ek 1:34:55 ... uh, still being here at Spotify seventeen years in.

David Rosenthal 1:34:59 This is so cool. I love this as a final thought from you, 'cause, uh, it so matches, uh, something that surprised us from the LVMH episode, is just, like, all of those brands, which are like, you know, the most iconic things, you know, both owned by LVMH and ones that aren't, like Hermes, and, you know-

Daniel Ek 1:35:15 Yeah.

David Rosenthal 1:35:15 Like, they are all N of one. You can't copy them.

Daniel Ek 1:35:18 Yep.

David Rosenthal 1:35:18 They don't copy anybody else.

Daniel Ek 1:35:20 Yep.

David Rosenthal 1:35:20 They are their own thing. If you're going to be around for four hundred years, that is by necessity the case. [chuckles]

Daniel Ek 1:35:26 Yeah.

David Rosenthal 1:35:26 You're not taking from anybody else.

Daniel Ek 1:35:27 Yeah.

Ben Gilbert 1:35:28 And I have to imagine it's hard for you internally, and that it takes a decade or two to figure out what it is that makes you special, too. Because when you started, you were the company that figured out how to make it so music felt like it was on your hard drive and play fast when it wasn't, through a hybrid of peer-to-peer and client-server solutions.

Daniel Ek 1:35:48 Yep.

Ben Gilbert 1:35:49 And that's not at all what Spotify is today.

Daniel Ek 1:35:50 Thank you for summarizing that [laughing] so succinctly, by the way.

Ben Gilbert 1:35:54 It has to be a, uh, a very, like, uh, methodical, individual journey, too, to figure that, that out.

Daniel Ek 1:36:02 Yeah, um, a-and that's why I said, I mean, I, I used to talk about culture, but, but I would honestly say, uh, it was probably two, three years ago where, where, uh, where it really clicked for me, like, oh, that's what it actually means. It's not twenty percent work time. That's just an expression of a culture. The more interesting thing is, um, the true culture of what makes Google Google, or, um, an Amazon Amazon, et cetera, and, and I don't even know whether that's possible to change. Going a decade forward, that's probably the most exciting thing for me to still contribute to and work on, is the culture, and, and I think that's what's driving, at the moment, pretty much every major decision we're making.

Ben Gilbert 1:36:48 Well, Daniel, thank you so much.

Daniel Ek 1:36:50 Thank you, guys, for coming. Really appreciate it.

David Rosenthal 1:36:53 Thank you for hosting us.

Daniel Ek 1:36:54 Of course.

Ben Gilbert 1:36:55 Well, listeners, thank you so much for tuning in for this conversation with Daniel. We'd love to hear what you think, of course, in the Slack at acquired.fm/slack, where we're always hanging out, discussing episodes after we release them. Um, but there's a new Spotify feature that we've been playing around with, too. David, what is it?

David Rosenthal 1:37:11 Yeah, Spotify just launched this at Stream On recently. There is a question on the page in the Spotify app for this episode that says, "What did you think of this episode?" And you can reply and leave your thoughts right there.

Ben Gilbert 1:37:23 Awesome. Well, thank you so much, listeners. Uh, check out in any podcast player, ACQ2, with, uh, awesome recent interviews and, uh, many more to come. I think we have the best interview lineup that we've ever had here on Acquired coming up.

David Rosenthal 1:37:36 I know.

Ben Gilbert 1:37:36 So, uh, subscribe to ACQ2 to get access to that, and, um, I think that's it. Listeners, thank you so much. Thanks to Spotify and Daniel, and we'll see you next time.

David Rosenthal 1:37:46 We'll see you next time.

Speaker 1:37:47 Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Huh! [upbeat music]