Spotify CEO Daniel Ek

1. 0:00 – 1:10

   Why long-form conversations beat press soundbites

   1. BGBen Gilbert0:00

      It is impossible to flawlessly execute a podcast of this style.

   2. DRDavid Rosenthal0:04

      Yeah.

   3. BGBen Gilbert0:05

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

   4. DRDavid Rosenthal0:08

      Yeah.

   5. BGBen Gilbert0:08

      -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.

   6. DEDaniel Ek0:17

      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-

   7. BGBen Gilbert0:50

      [chuckles]

   8. DEDaniel Ek0:50

      -it's game over even before it started.

   9. DRDavid Rosenthal0:52

      Yeah. [chuckles]

   10. DEDaniel Ek0:52

       You're gonna have all the great stuff.

   11. SPSpeaker0:53

       "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?"

2. 1:10 – 4:00

   Spotify’s scale today and the pivot from music company to audio company

   1. BGBen Gilbert1:10

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

   2. DRDavid Rosenthal1:17

      I'm David Rosenthal.

   3. BGBen Gilbert1:18

      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.

   4. DRDavid Rosenthal1:40

      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.

   5. BGBen Gilbert1:52

      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.

   6. DRDavid Rosenthal2:22

      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.

   7. BGBen Gilbert2:32

      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.

   8. DRDavid Rosenthal2:48

      Ooh.

   9. BGBen Gilbert2:49

      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.

   10. DRDavid Rosenthal3:24

       We wanted to start with, like, something kinda incredible has happened in podcasting.

   11. BGBen Gilbert3:28

       If you look at January first, twenty nineteen, we had less than a thousand listeners on Spotify.

   12. DRDavid Rosenthal3:32

       Yeah, crazy. And now it's by far the majority-

   13. BGBen Gilbert3:35

       Over a hundred thousand

   14. DRDavid Rosenthal3:35

       -of our listeners. [chuckles]

   15. BGBen Gilbert3:37

       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?

3. 4:00 – 5:35

   Serendipity, user behavior, and the ‘audiobooks in Germany’ insight

   1. DEDaniel Ek4:00

      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.

   2. BGBen Gilbert5:05

      Mm.

   3. DEDaniel Ek5:05

      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,

4. 5:35 – 10:24

   The contrarian bet: podcasts inside the same Spotify app

   1. DEDaniel Ek5:35

      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.

   2. DRDavid Rosenthal6:38

      I mean, this was like the-- you've talked about this before, the constellation of apps was the-

   3. DEDaniel Ek6:42

      Yeah

   4. DRDavid Rosenthal6:42

      ... you know, oh, the like, all the rage. Facebook's got all these different apps, and Apple has all these different apps.

   5. BGBen Gilbert6:48

      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.

   6. DRDavid Rosenthal6:59

      Which still is a super nerdy thing.

   7. DEDaniel Ek7:02

      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.

   8. DRDavid Rosenthal7:14

      Mm.

   9. DEDaniel Ek7:14

      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-

   10. DRDavid Rosenthal7:57

       Mm-hmm

   11. DEDaniel Ek7:57

       ... 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.

   12. BGBen Gilbert8:10

       And the phrase streaming did not exist.

   13. DEDaniel Ek8:13

       Yeah. Uh, people were not talking about it, and, and people actually conceptualized it more around sort of renting things.

   14. BGBen Gilbert8:20

       Mm.

   15. DEDaniel Ek8:20

       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-

   16. DRDavid Rosenthal8:31

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

   17. DEDaniel Ek8:37

       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."

   18. DRDavid Rosenthal9:10

       Where did that insight come from? Was it you as a user? Was it elsewhere in the company?

   19. DEDaniel Ek9:16

       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-

   20. DRDavid Rosenthal9:52

       Yeah

   21. DEDaniel Ek9:53

       ... 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-

   22. DRDavid Rosenthal10:18

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

5. 10:24 – 13:18

   Formats blur, business models don’t: podcasting vs. audiobooks

   1. DEDaniel Ek10:24

      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-

   2. DRDavid Rosenthal10:34

      I mean, we think of ourselves as, like, right on that line between a audiobook and a podcast.

   3. BGBen Gilbert10:38

      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-

   4. DEDaniel Ek10:50

      Yeah

   5. BGBen Gilbert10:50

      ... or Taylor Swift.

   6. DRDavid Rosenthal10:51

      Yeah, right.

   7. BGBen Gilbert10:52

      These, these are more like conversational audiobooks between David and I than they are podcasts.

   8. DEDaniel Ek10:57

      Yeah.

   9. BGBen Gilbert10:57

      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?

   10. DEDaniel Ek11:10

       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-

   11. DRDavid Rosenthal11:29

       Mm-hmm

   12. DEDaniel Ek11:29

       ... and audiobooks is paid audio.

   13. BGBen Gilbert11:31

       Hmm.

   14. DEDaniel Ek11:32

       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.

   15. BGBen Gilbert12:29

       Mm.

   16. DEDaniel Ek12:30

       Editing, all these things, it's getting more and more blurred.

   17. DRDavid Rosenthal12:33

       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-

   18. BGBen Gilbert12:59

       Sure

   19. DRDavid Rosenthal12:59

       ... given the audience size that we have-

   20. BGBen Gilbert13:01

       Yeah

   21. DRDavid Rosenthal13:01

       -and the particular type of audience.

   22. BGBen Gilbert13:02

       Yeah.

   23. DRDavid Rosenthal13:03

       We monetize so much better with the ad-supported content.

   24. BGBen Gilbert13:05

       Yeah.

   25. DRDavid Rosenthal13:05

       But, like, to make that unlock happen, it needed to become a mass medium.

   26. BGBen Gilbert13:10

       Yep.

   27. DRDavid Rosenthal13:10

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

6. 13:18 – 17:52

   Why audiobooks haven’t hit mass adoption (yet)

   1. DEDaniel Ek13:18

      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.

   2. DRDavid Rosenthal13:33

      Is that the market size today of audiobooks?

   3. DEDaniel Ek13:35

      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-

   4. DRDavid Rosenthal13:46

      Right

   5. DEDaniel Ek13:46

      ... it's, um, you know, again, a discovery problem, and all those, uh, other things.

   6. DRDavid Rosenthal13:50

      You either gotta pay a lot of money for a one-off purchase-

   7. DEDaniel Ek13:53

      Yep

   8. DRDavid Rosenthal13:54

      ... or you need to have a pretty expensive subscription-

   9. DEDaniel Ek13:57

      Sure

   10. DRDavid Rosenthal13:57

       -to a service that you may or may not use that and get value out of.

   11. BGBen Gilbert14:00

       It reminds me of music in two thousand and eight.

   12. DRDavid Rosenthal14:03

       Yeah, [chuckles] exactly.

   13. DEDaniel Ek14:04

       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-

   14. DRDavid Rosenthal14:19

       Yeah

   15. DEDaniel Ek14:19

       ... 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-

   16. DRDavid Rosenthal14:29

       Yeah

   17. DEDaniel Ek14:29

       -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]

   18. BGBen Gilbert14:43

       Which is terrifying. [chuckles]

   19. DEDaniel Ek14:44

       Yeah. Yeah. Well, yeah.

   20. DRDavid Rosenthal14:45

       Not investment advice. [chuckles]

   21. DEDaniel Ek14:47

       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-

   22. DRDavid Rosenthal15:00

       Yep

   23. DEDaniel Ek15:00

       ... 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-

   24. DRDavid Rosenthal15:30

       Yeah

   25. DEDaniel Ek15:30

       ... 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.

   26. BGBen Gilbert15:45

       Yeah.

   27. DRDavid Rosenthal15:46

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   28. BGBen Gilbert16:34

       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-

   29. DRDavid Rosenthal16:43

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   30. BGBen Gilbert16:43

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7. 17:52 – 24:36

   Podcasting unit economics: margin upside meets moderation and ad-tech realities

   1. BGBen Gilbert17:52

      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?

   2. DEDaniel Ek18:40

      ... 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,"-

   3. BGBen Gilbert19:10

      [laughing]

   4. DEDaniel Ek19:10

      -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-

   5. BGBen Gilbert19:50

      And aggregate a fragmented market.

   6. DEDaniel Ek19:51

      Yeah, you, you can do the aggregation theory.

   7. BGBen Gilbert19:53

      Yeah.

   8. DEDaniel Ek19:54

      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-

   9. BGBen Gilbert20:51

      Yeah

   10. DEDaniel Ek20:52

       ... and, and so on and so forth.

   11. BGBen Gilbert20:53

       G- great at scale.

   12. DEDaniel Ek20:54

       Great at scale.

   13. BGBen Gilbert20:54

       Expensive at small scale.

   14. DEDaniel Ek20:56

       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.

   15. BGBen Gilbert21:16

       What, a hundred thousand?

   16. DEDaniel Ek21:17

       I believe so. I don't know. An insane amount of people.

   17. BGBen Gilbert21:21

       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-

   18. DEDaniel Ek21:29

       Yeah

   19. BGBen Gilbert21:29

       ... 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.

   20. DEDaniel Ek21:42

       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.

   21. BGBen Gilbert21:57

       They use open AI, too. [chuckles]

   22. DEDaniel Ek21:59

       Yeah, exactly-

   23. BGBen Gilbert21:59

       [laughing]

   24. DEDaniel Ek22:00

       ... 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-

   25. BGBen Gilbert22:25

       Hmm

   26. DEDaniel Ek22:26

       ... 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.

   27. BGBen Gilbert23:04

       Hmm.

   28. DEDaniel Ek23:04

       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.

   29. BGBen Gilbert23:29

       Right.

   30. DEDaniel Ek23:30

       Um, so we had already been-
8. 24:36 – 30:43

   Creator strategy dilemmas: serving a niche vs. expanding the audience

   1. DEDaniel Ek24:36

      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-

   2. BGBen Gilbert24:42

      Oh!

   3. DEDaniel Ek24:43

      So, so, uh-

   4. BGBen Gilbert24:44

      David's the man.

   5. DEDaniel Ek24:45

      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-

   6. DRDavid Rosenthal25:04

      Yeah, yeah.

   7. DEDaniel Ek25:04

      -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?

   8. DRDavid Rosenthal25:12

      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."

   9. BGBen Gilbert25:23

      I'm not sure I'd go that far, but I would rather-

   10. DRDavid Rosenthal25:26

       [chuckles]

   11. BGBen Gilbert25:26

       -saturate our niche-

   12. DRDavid Rosenthal25:27

       Yes. Yeah, yeah.

   13. BGBen Gilbert25:27

       -and then at some point stop growing, than expand the niche.

   14. DRDavid Rosenthal25:31

       And then-

   15. BGBen Gilbert25:32

       Which I think we have three to four X headroom on our current.

   16. DRDavid Rosenthal25:35

       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.

   17. BGBen Gilbert25:43

       LVMH.

   18. DRDavid Rosenthal25:43

       And LVMH, we got forty thousand new subscribers.

   19. DEDaniel Ek25:48

       Wow.

   20. DRDavid Rosenthal25:49

       And we were like, "Okay," so to your point about, like, some- something is hacked here.

   21. DEDaniel Ek25:54

       Yeah.

   22. DRDavid Rosenthal25:54

       Like, there's a, there's a new phenomenon happening. [chuckles]

   23. BGBen Gilbert25:57

       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.

   24. DEDaniel Ek26:05

       Mm.

   25. BGBen Gilbert26:05

       And then it was acquisitions and IPOs.

   26. DRDavid Rosenthal26:06

       We would never be talking if it was still that.

   27. DEDaniel Ek26:08

       Yeah. [chuckles]

   28. BGBen Gilbert26:08

       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-

   29. DEDaniel Ek26:18

       Yep

   30. BGBen Gilbert26:19

       ... 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.
9. 30:43 – 34:22

   Short-form vs. long-form and Spotify’s new home feed merchandising problem

   1. BGBen Gilbert30:43

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

   2. DRDavid Rosenthal30:49

      Yeah

   3. BGBen Gilbert30:49

      ... extreme long-form is also having a breakout moment.

   4. DRDavid Rosenthal30:52

      ... 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.

   5. SPSpeaker31:04

      Mm.

   6. DRDavid Rosenthal31:04

      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] -

   7. SPSpeaker31:11

      Right

   8. DRDavid Rosenthal31:11

      ... to the, to the pod.

   9. SPSpeaker31:11

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

   10. DRDavid Rosenthal31:15

       Right, a single new subscriber.

   11. DEDaniel Ek31:16

       [chuckles]

   12. DRDavid Rosenthal31:16

       Right, like-

   13. SPSpeaker31:17

       Welcome, both of you, to TikTok. [chuckles]

   14. DRDavid Rosenthal31:18

       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.

   15. SPSpeaker31:32

       It's the new home screen.

   16. DRDavid Rosenthal31:33

       The new home screen, yes.

   17. SPSpeaker31:34

       Yeah, yeah.

   18. DEDaniel Ek31:35

       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-

   19. DRDavid Rosenthal33:24

       Yeah

   20. DEDaniel Ek33:24

       ... 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.

   21. SPSpeaker33:33

       Unless it's a Radiohead song. [chuckles]

   22. DEDaniel Ek33:35

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

   23. SPSpeaker33:43

       Yeah

   24. DEDaniel Ek33:43

       ... 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.

   25. DRDavid Rosenthal34:10

       It's a much bigger commitment, though. Much bigger.

   26. DEDaniel Ek34:12

       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-

   27. DRDavid Rosenthal34:22

       Yeah

10. 34:22 – 40:24

    Early Spotify growth lessons: geographic focus, constraints, and near-death stress

    1. DEDaniel Ek34:22

       ... 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.

    2. SPSpeaker34:34

       Oh, interesting.

    3. DRDavid Rosenthal34:35

       Mm.

    4. DEDaniel Ek34:35

       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-

    5. DRDavid Rosenthal34:45

       That's so funny

    6. DEDaniel Ek34:45

       ... marketing efforts were in college cities in the US.

    7. SPSpeaker34:47

       Makes sense.

    8. DEDaniel Ek34:48

       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-

    9. DRDavid Rosenthal35:00

       Mm

    10. DEDaniel Ek35:00

        ... that was hugely successful.

    11. DRDavid Rosenthal35:01

        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-

    12. DEDaniel Ek35:16

        Oh

    13. DRDavid Rosenthal35:17

        ... before moving to-

    14. DEDaniel Ek35:17

        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-

    15. SPSpeaker35:30

        Hmm

    16. DEDaniel Ek35:31

        ... 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.

    17. SPSpeaker36:07

        Uh-huh.

    18. DRDavid Rosenthal36:08

        Wow!

    19. DEDaniel Ek36:08

        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]

    20. DRDavid Rosenthal36:21

        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."

    21. DEDaniel Ek36:27

        Yeah.

    22. DRDavid Rosenthal36:27

        "We're having the conversations."

    23. DEDaniel Ek36:28

        Yeah.

    24. DRDavid Rosenthal36:29

        And then it was three years later [chuckles] -

    25. DEDaniel Ek36:30

        Oh, yeah

    26. DRDavid Rosenthal36:30

        ... actually.

    27. DEDaniel Ek36:31

        Yeah.

    28. DRDavid Rosenthal36:32

        You must have been so stressed.

    29. DEDaniel Ek36:34

        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-

    30. DRDavid Rosenthal36:46

        You literally ripped your hair out.
11. 40:24 – 46:20

    Taylor Swift’s 2014 Spotify pullout: why it wasn’t existential—and why she returned

    1. DRDavid Rosenthal40:24

       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?

    2. DEDaniel Ek40:44

       Um, this was 2014?

    3. DRDavid Rosenthal40:46

       2014.

    4. DEDaniel Ek40:47

       Yeah.

    5. DRDavid Rosenthal40:47

       October 2014.

    6. DEDaniel Ek40:48

       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-

    7. DRDavid Rosenthal41:16

       Right

    8. DEDaniel Ek41:16

       ... 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-

    9. DRDavid Rosenthal41:41

       Hmm

    10. DEDaniel Ek41:41

        ... 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-

    11. DRDavid Rosenthal42:34

        Hmm

    12. DEDaniel Ek42:34

        ... 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.

    13. DRDavid Rosenthal42:47

        Yeah.

    14. DEDaniel Ek42:48

        Uh, but she was certainly one of them.

    15. DRDavid Rosenthal42:50

        Was that because of the demographics of her, uh, audience, or?

    16. DEDaniel Ek42:54

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

    17. BGBen Gilbert43:02

        Mm

    18. DEDaniel Ek43:02

        ... decide that this is a big cultural moment.

    19. BGBen Gilbert43:04

        Taylor Swift.

    20. DEDaniel Ek43:04

        Yes.

    21. BGBen Gilbert43:05

        Yeah.

    22. DEDaniel Ek43:05

        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-

    23. BGBen Gilbert43:12

        Yeah

    24. DEDaniel Ek43:12

        ... uh, for a moment, and she did it brilliantly with this, uh, album launch, too.

    25. BGBen Gilbert43:17

        I stayed up till midnight.

    26. DEDaniel Ek43:19

        Yeah. [laughing]

    27. BGBen Gilbert43:19

        [laughing]

    28. DRDavid Rosenthal43:19

        [laughing]

    29. DEDaniel Ek43:20

        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?

    30. BGBen Gilbert44:04

        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?
12. 46:20 – 57:56

    Global culture flywheels: mega-artists, K-pop industrial scale, and reggaeton’s breakout

    1. BGBen Gilbert46:20

       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?"

    2. DRDavid Rosenthal46:32

       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]

    3. DEDaniel Ek46:38

       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-

    4. DRDavid Rosenthal47:02

       Mm

    5. DEDaniel Ek47:02

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

    6. DRDavid Rosenthal47:10

       Mm-hmm

    7. DEDaniel Ek47:10

       ... 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.

    8. BGBen Gilbert47:26

       And how are they different? 'Cause they're reas- they're same order of magnitude scale, right?

    9. DEDaniel Ek47:31

       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-

    10. DRDavid Rosenthal47:44

        That's what we heard when we were researching the episode.

    11. DEDaniel Ek47:46

        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.

    12. BGBen Gilbert48:00

        Mm.

    13. DEDaniel Ek48:01

        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-

    14. DRDavid Rosenthal48:12

        Yeah

    15. DEDaniel Ek48:13

        ... uh, writers-

    16. BGBen Gilbert48:13

        That's wow

    17. DEDaniel Ek48:14

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

    18. DRDavid Rosenthal48:21

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

    19. DEDaniel Ek48:28

        Yeah

    20. DRDavid Rosenthal48:28

        ... of XYZ group is-

    21. DEDaniel Ek48:29

        Yeah

    22. DRDavid Rosenthal48:30

        ... uh, yeah. [chuckles]

    23. DEDaniel Ek48:30

        Well, that, that, that could be your next deep dive-

    24. DRDavid Rosenthal48:32

        Oh, that would be fun

    25. DEDaniel Ek48:32

        ... 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-

    26. DRDavid Rosenthal48:49

        Wow

    27. DEDaniel Ek48:49

        ... building specific platforms.

    28. DRDavid Rosenthal48:51

        Wow.

    29. BGBen Gilbert48:52

        Mm.

    30. DEDaniel Ek48:52

        Uh, it, it, it's, it's pretty cool.
13. 57:56 – 1:25:43

    AI’s next wave in creation and distribution: lowering barriers, translation, and authenticity

    1. DEDaniel Ek57:56

       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?

    2. DRDavid Rosenthal58:47

       Hmm.

    3. DEDaniel Ek58:48

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

    4. DRDavid Rosenthal58:57

       Hmm

    5. DEDaniel Ek58:57

       ... concert that they were doing, and then making small tweaks.

    6. DRDavid Rosenthal59:01

       Wow!

    7. DEDaniel Ek59:01

       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-

    8. DRDavid Rosenthal59:14

       Having a whole orchestra is the triple A game equivalent.

    9. DEDaniel Ek59:17

       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.

    10. DRDavid Rosenthal59:28

        Hmm.

    11. DEDaniel Ek59:29

        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.

    12. DRDavid Rosenthal59:48

        Yeah.

    13. DEDaniel Ek59:48

        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]

    14. DRDavid Rosenthal1:00:10

        It turns out that technical musical proficiency may or may not be correlated with making great music. [chuckles]

    15. DEDaniel Ek1:00:16

        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-

    16. DRDavid Rosenthal1:00:47

        Oh, oh

    17. DEDaniel Ek1:00:47

        ... their workflows, and, like, when they get into the weeds of, like, um, decoding how they do stuff.

    18. DRDavid Rosenthal1:00:52

        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-

    19. DEDaniel Ek1:01:02

        You think we are. I don't think we are

    20. DRDavid Rosenthal1:01:02

        ... 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."

    21. DEDaniel Ek1:01:14

        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.

    22. BGBen Gilbert1:02:26

        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.

    23. DEDaniel Ek1:02:34

        Yep, yep.

    24. BGBen Gilbert1:02:34

        But it still takes an enormous amount of-

    25. DRDavid Rosenthal1:02:37

        Mastery

    26. BGBen Gilbert1:02:37

        ... self-training, mastery, creativity.

    27. DEDaniel Ek1:02:40

        Yes. My opinion is it, it takes a little bit too much to get started. Like, it's quite a barrier to entry still.

    28. BGBen Gilbert1:02:47

        Mm.

    29. DEDaniel Ek1:02:47

        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-

    30. DRDavid Rosenthal1:03:33

        Mm
14. 1:25:43 – 1:38:06

    Stacking S-curves: culture as the meta-strategy behind Spotify’s evolution

    1. BGBen Gilbert1:25:43

       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.

    2. DEDaniel Ek1:26:12

       Mm.

    3. BGBen Gilbert1:26:12

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

    4. DEDaniel Ek1:26:19

       Mm.

    5. BGBen Gilbert1:26:20

       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?

    6. DEDaniel Ek1:26:47

       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.

    7. BGBen Gilbert1:28:23

       Mm.

    8. DEDaniel Ek1:28:23

       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."

    9. BGBen Gilbert1:29:26

       Mm.

    10. DEDaniel Ek1:29:26

        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.

    11. BGBen Gilbert1:30:35

        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."

    12. DEDaniel Ek1:30:42

        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-

    13. BGBen Gilbert1:31:18

        Mm

    14. DEDaniel Ek1:31:18

        ... 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-

    15. BGBen Gilbert1:31:25

        Mm

    16. DEDaniel Ek1:31:25

        -in a pretty substantial way.

    17. BGBen Gilbert1:31:27

        Like Discover Weekly huge?

    18. DEDaniel Ek1:31:28

        Yes. Uh-

    19. BGBen Gilbert1:31:29

        Wow

    20. DEDaniel Ek1:31:29

        ... and I, I think it'll even outdo Discover Weekly.

    21. BGBen Gilbert1:31:32

        Wow!

    22. DEDaniel Ek1:31:32

        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.

    23. BGBen Gilbert1:33:15

        And when you started, the common wisdom was anybody who's starting an online music thing, it will die.

    24. DEDaniel Ek1:33:21

        Yep.

    25. BGBen Gilbert1:33:21

        And I think you sought advice from hundreds of people who all told you, "Don't do this-

    26. DEDaniel Ek1:33:25

        Yep, sure.

    27. BGBen Gilbert1:33:25

        -this category is toxic."

    28. DEDaniel Ek1:33:26

        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-

    29. BGBen Gilbert1:34:15

        Yeah.

    30. DEDaniel Ek1:34:15

        -but it's not the same culture. They didn't start it in Silicon Valley.

Episode duration: 1:38:06