August 18th, 2020 | By: Jonathan Low | Tags: Strategy
In 2008, the world got a new music streaming service named Spotify. It was developed in Stockholm, Sweden, and provided digital rights management-protected content from record labels and media companies. It may have started out as a local thing, but the freemium service quickly expanded. Today, Spotify has more than 140 million monthly active users and over 50 million paying subscribers.
I had the pleasure of meeting up with Andreas Ehn, who was Spotify’s first employee and CTO. Andreas was responsible for the product and platform architecture as well as hiring a world-class engineering team, of which many have gone on to become successful entrepreneurs on their own.
After Spotify, Andreas founded Wrapp — a mobile online-to-offline customer acquisition service for brick-and-mortar retailers that raised money from prominent investors including Atomico and Greylock (with Niklas Zennström and Reid Hoffman joining the board).
Jonathan: Many people talk about disruption and how to disrupt markets. Did Napster disrupt the music industry or did Spotify?
Andreas: Neither, I believe.
Technology disrupted the industry. The massive-scale file-sharing of Napster completely changed the dynamics in the business and completely revolutionized music online. Ultimately, it forced the labels to consider new business models, and this enabled the rise of streaming — which was led by Spotify.
Jonathan: At the beginning with Napster, you could access music very conveniently, but no one was really paying for it. Then iTunes launched, but as I understand, you guys didn’t really look at them for inspiration?
Andreas: True. Spotify did not have the same mindset as iTunes. Everyone else had tried to launch a music service and just looked at the commercial landscape of other licensed services. Our background was not music or consumption, because we were computer science graduates with hacker mentalities, so we focused on file-sharing as our main source of inspiration.
We were all pirating music for our own needs, so we set out to build a commercial service that would be better than piracy. The key element was that the price point had to be zero, and we created an ad-funded solution. That strategy took a long time for the labels to accept, so we didn’t launch commercially until 2 years after, we started working on the service.
Jonathan: And no venture companies would invest in you guys in the beginning?
Andreas: No. We were lucky enough to have founders who had built and sold businesses before. Martin had built a highly successful marketing company named Tradedoubler, and Daniel had in fact sold his company to Tradedoubler. That is how they got to know each other, and that is how we got enough money to finance the first couple of years when we earned absolutely nothing.
Jonathan: I’ve seen you discussing this dilemma about being perfect versus good enough. Meaning how good should a product or service be before you introduce it to the marketplace. Where is your take on this today?
Andreas: I think that my mindset has shifted over the years. I started with a classical engineering mindset —meaning that everything should be really well built before we launch it.
Today, I think that I’ve realized that only the market really gives you the true answers, so you should ship sooner. Time and time again it’s been shown impossible to know in advance.
Jonathan: You mention that you were not really looking at the existing services to compete with. What was your mission then?
Andreas: We entered an industry where the record labels fundamentally wanted music to be expensive. They would rather sell something expensive to fewer people; before, their mindset was that music is an art form, and art costs money.
Our approach was to change the fundamentals of music online. We introduced a free model that people still to this day want us to shut down.
We entered into a market where there were no viable online business models. People had more or less stopped buying CDs, so we had to convince the record labels that Spotify was the way to go in this bleeding market. It took time, but we started locally and from there started signing national and global deals.
Jonathan: If Napster had never disrupted the music industry, would we ever have had a Spotify too?
Andreas: I think something else would have existed anyway. Napster and Spotify were natural children of their time. People were already pirating things online, so the next obvious step was to build some sort of sustainable and viable business model around this.
Jonathan: What was the biggest strength of Spotify as a company?
Andreas: It was and still is the focus on user experience, I believe.
Today, Spotify is moving more toward becoming a media company, and in fact, I think this is the biggest threat to the business model right now — risking to lose having tech at the core of everything you do.
Spotify managed to attract all the best engineers because we were not a conventional music label or media company but a tech company that focused on user experience and technical skills among our staff members.
Jonathan: You left Spotify after having worked there for some years, and then you moved away from Sweden. Why this desire to leave your home country?
Andreas: For different reasons. First of all, I’m a very curious person. I have started on a personal education project, where I want to learn more about the world and understand it better. For this reason, I’ve set up a framework for myself where I should live in 10 different countries for the next 5 years — so 6 months in each place. My goal is to get to know these places. Get to know the people. Get to know the cities, the startups, and so on. And also be doing some investments there.
Jonathan: Do people that have big dreams need to leave their home country?
Andreas: Not necessarily, but for instance, living in San Francisco in the United States or in Shenzen in China will just give you completely different opportunities than most places. You are in the epicenter of tech innovation, and just being there and working there makes you bump into things and people that you would never do in, for instance, my home town of Stockholm.
I’M NOT AN INVENTOR. I JUST WANT TO MAKE THINGS BETTER.
This article was done by the Danish serial entrepreneur Jonathan Low. Low is based in Scandinavia but has traveled the world interviewing and talking to some of the leading entrepreneurs and innovators on the planet. The article is part of this journey.
Jonathan Low is the founder of 5 tech-companies and the author of two #1 bestsellers about entrepreneurship and marketing. He is also a public speaker at events in both Europe and the US.
Currently, he is the co-founder and CEO of JumpStory transforming the image industry online. JumpStory has experienced massive growth during the last year and has expanded from nothing to customers in more than 135 countries. Major media like Forbes, Entrepreneur.com, The Next Web, etc. have named JumpStory Netflix of images.