Exclusive: Spotify CEO Daniel Ek on Apple, Facebook, Netflix–and the future

07 Aug Exclusive: Spotify CEO Daniel Ek on Apple, Facebook, Netflix–and the future

Spotify founder and CEO Daniel Ek, who calls himself an introvert and rarely talks to the media, spent more than six hours in interviews with former Fast Company editor and founder of The Flux Group Robert Safian. What follows is an edited transcript of the sessions, which took place in both Stockholm and New York City, both before and after Spotify went public this spring.

Daniel Ek: I haven’t done a lot of these interviews because I don’t believe Spotify is about any one individual. I don’t want to diminish my role, but in almost all innovations, it’s the collaboration of the team that creates something in a creative process that’s hard to capture. What often happens, people simplify the process and put it on one person who then looks like they’re some sort of demigod, infallible, up until the moment when they’re not and then the whole world collapses. I have some strengths but I have a lot of weaknesses, too. I wanted you to hear that directly from me.

Fast Company: The music industry, at least in the beginning, seemed to focus on the weaknesses.

DK: When it comes to me and Spotify, there’s two sides of the story. There’s the positive story, and then there’s the dissent in the industry. Traditionally there’s been very little trust between any of the participants in the music business: between songwriters and publishers, songwriters and artists, record companies and the retailers. Everyone assumes everyone else is out to screw them. So the incentives have always been aligned on, can I get the money now? Because I don’t know what’s going to happen later.

In streaming, you get paid every time someone plays your song. If you can’t trust that the numbers are accurate, how are we going to have a continuous relationship? We’ve been very forthcoming with the industry, always kept our word. We’re super dependent on having the labels, the artists, and the songwriters like what we do—”like” is not the right word—but accept what we do, agree with the direction that we’re heading, and license us their content.

FC: Some people look at Spotify as the Netflix of music.

DK: The public perception is that Netflix and Spotify are very similar. No, not really. Both are consumer subscription businesses, in media, but that’s where the similarities end. Our company mission is to have more than a million artists to be able to live off of their art. In that model, it’s almost like you’re managing an economy, not just 10, 15, 100 deals that you’re doing. We’re trying to provide the tools to enable all these different constituents to do better business on our platform. That’s very different from what Netflix is. At the surface it’s similar, but underneath it couldn’t be more different.

FC: If you were putting together a playlist of the history of Spotify, where would you begin?

DK: I would start at pre-Spotify, what caused us to do this, the roots of Sweden. The first song, I guess it has to be something from ABBA. The culture and the context at Spotify are totally different than Silicon Valley.

As an example, we were talking before about a gender gap in pay, that’s starting to become a hot potato in the U.S., but it’s been the law for 20 years in Sweden. So we had that covered from the beginning. I’m not saying that we don’t have any of those cases, but it’s not a big issue for us as a company.

FC: Sweden was the center of music piracy, right?

DK: We had the Swedish prime minister say that it’s totally okay to illegally download things if it’s for your own use. There was something called the Pirate Party that had over five% of all the votes for the parliament, made it all the way to the EU to try to influence copyright law.

We took the other side on piracy, [saying], no, that’s not how it should work. There ought to be a way where you create a better experience and fairly compensate artists. I went to parties and some of my artist friends were complaining. I have a friend who is a bass player and he was talking about having to take a second day job just to make rent.

FC: Aren’t you a musician?

DK: I play music. I love music. My family comes from a history of musicians. But I’m not really a musician.

FC: You didn’t want to be a musician?

DK: Oh yeah. I would’ve loved to be, but I wasn’t good enough.

I went to [free] music school starting at about four. I learned how to play [the guitar]. Then shortly thereafter I got a computer, and those two things were always competing for my attention. I could never pick. As I got older, I was never an outcast, but I never felt like I was in a circle of people either. I was playing a lot of sports, but I wasn’t a jock. The musician crowd, none of them were really into computers. I could hang with them, I could speak their language, I could play with them, but I wasn’t really part of their crew. And then I had the other group, people who were really into computers. They accepted me, but I didn’t have time to hang out with all of them. So I kind of moved around to these various groups.

When I was 18 or 19 I actually tried to be a musician for a full year. I spent some time in a tour bus. I realized that music wasn’t the thing I wanted to do six hours every day. At a certain point you have to level up to yourself a couple of degrees and I just never made that commitment. You know, you were the second guitar one day or lead guitarist another. Then all of a sudden, there was another guitarist that came along that played better than you. So they stopped calling. That’s how it works.

FC: Was it hard? It’s sounds kind of rejecting.

DK: Yeah, it’s tough. I mean, it’s a part of your identity and to realize that you’re not good enough . . . . It’s the same thing with sports. I played soccer and to realize that you’re not fast enough, you’re not good enough, you don’t have that level, I learned a lot.

I realized that it was not that thing in music and it was not the thing in sports. And to be honest, it wasn’t that thing in computers either, which sounds ironic given that’s where I work, but I wasn’t the best programmer either. I learned that there were other people who had much better skill than me, which was also kind of a big defeat because for awhile I thought my identity was maybe to be the best programmer.

FC: You make it sound like you’re a guy without any special skills.

DK: But it’s true. I’m relatively decent at most things, like a jack of all trades, but not really great at anything. I can dabble enough where most people would say, oh, this guy is pretty good.

FC: You seem pretty directed when it comes to Spotify.

DK: It wasn’t like Spotify was this amazing idea from day one. The idea has evolved. The best analogy I can give, it’s like you’re on an airplane at 60,000 feet, so you look down on the ground, and it’s all blurry, right? You might see there’s a city there, but you don’t know anything about the people that are there. But the closer you get, the more resolution you get. You see that vision. When people say, I knew this exactly, it’s complete horseshit. The most important thing is to be honest that things will evolve. It’s just part of life.

FC: Is this a change in the way businesses need to look at the world?

DK: Consumers are waking up and asking very different questions than just a few years ago, particularly of consumer tech companies. What does this company do with my data? What kind of brands do I associate with? And ultimately some of these companies, certainly not Spotify, but they are making so much money at a time when society as a whole is struggling, and how can we reconcile that? Shouldn’t we hold them then accountable to a higher standard than just to do the minimum of what the law says? I’m not trying to debate the ethics of what’s right and wrong. I’m just simply trying to say, those are the questions that society right now is asking.

FC: You’re talking about Google and Facebook?

DK: And Amazon, Apple, quite a few of them.

FC: You’re friendly with Mark Zuckerberg, right? I sat down with him last year. He seems to believe that the overarching activity of his business, by connecting people, makes the world a better place in the long run, that whatever discomfort we have to go through is worth it because the long-term vision is good.

DK: Well, sometimes perception becomes reality. I think his motives are really good. Mark is an optimist in that he fundamentally views technology as a force for good. Where I may have a more nuanced point of view, [which] is it’s a double edge sword. Every time you have a piece of technology come out, people will use it for good and for bad. I can’t speak for all the others, but I have a responsibility to do more than what I’m doing. Maybe this comes back to the Swedish roots, like you’re not supposed to be a billionaire in your thirties. You’re not supposed to be the zero point zero one percent. No matter what it is you’ve accomplished.

FC: You talk about jobs at Spotify as missions. Can you explain that?

DK: [LinkedIn founder] Reid Hoffman wrote this book that introduced the concept of the “tour of duty.” You have a number of years when you perform a job, and then your tour is over, and it’s time for you to think about what the next step is. I describe them as missions. You may have the same title, but you don’t have the same job more than two years, and the more honest we are about that, the better it is.

Millennials in the tech sector today on average switch jobs every 1.8 years. I think that has to do with the fact that leaders in those companies don’t set clear expectations that their jobs will change. When it doesn’t, and you have really talented people, they will move on to the next challenge. I think it’s like a forcing function. You should force it.

FC: You said earlier that you’re weird about time.

DK: I’m really organized. I don’t do social calls. For so many people, you’re beholden to this social thing, if I don’t show up, someone is going to be sad. I’m just pretty ruthless in prioritizing. What I tell my friends is, I like to be invited, but I probably won’t come. The transparency helps. This is how I’m wired. It’s not a personal thing. It doesn’t mean that I don’t enjoy your company. It’s just means that I’m focusing on something.

I also write out what my daily, weekly, monthly goals are, and every evening I check how I’m doing. And then I just over allocate my time [to match the goals]. People think that creativity is this free spirit that has no boundaries. No, actually the most creative people in the world schedule their creativity. That’s the irony. So I try to do the same. I just don’t have as many meetings as you think. Instead I have a lot of me time where I’m just thinking; I’m at a white board drawing by myself. Occasionally I might have someone with me. If I have a call or another meeting, I’ll just block it out if I’m in the zone. That’s unorthodox because it means that you’re breaking social contracts, you’re disappointing someone because you didn’t show up. But if you’re really, really focused, those are the times when the breakthroughs come.

I might go for three days and not sleep because I’m focused in that moment.

FC: When was the last time you spent three days focused on something?

DK: It was probably just before Christmas. Something I do with my leadership team, I sit each of them down every year, a mental closing on the year–what went good, what went bad, and then just ask the honest thing, is this what you want to do for the next two years? You make calls sometimes, you know, are you motivated in doing this?

I do this with myself, too, and I force them to do it with me. It’s kind of excruciating. People will naturally, without really thinking about it, say yes. But after a while you get to if that’s true, real passion.

Very few people at Spotify last more than two or three of these rounds. Which is not to say that they’re bad people. They’re phenomenal people, and many times I’m their reference and help them get their next thing. It’s not personal. It’s not because of poor performance. At this level, it’s never about that. It’s about future performance.

FC: It sounds like you have an instinct about which people need to find a new mission elsewhere.

DK: I feel it, but occasionally I’m wrong about it. We have a person who runs R&D [Gustav Soderstrom], he’s been with me for nine years, he was running product before and a great strategist. If I have a mess of things that I can’t figure out, he usually helps me get it much clearer. And he’s a great person. But we had a tough conversation two years ago because he wanted to affect more change, more influence, but he didn’t want to do the work of leading all the people. He came to me and he was like, maybe I should be doing something different, go to another company. I said to him, look, you can’t sit on the sidelines and enact control. You’re going to have to take the responsibility that comes with that. He hadn’t shown the interest in leading people. By his own team, he was getting mediocre scores, not very inspirational as a manager. So we had that discussion. And then he came back around, and weirdly enough, he said, I’m going to do this. He really wanted it badly. I’m like, okay, I’ll bet on you. And he completely outdid my expectations. Had we not had that honest discussion, he probably would have left.

FC: You’ve spent a lot of time thinking about Spotify’s culture.

DK: It’s super important as a leader to talk about what the culture is and force positive and negative examples continuously. One thing I hate: People who ask, how do we keep our culture. It’s horseshit. The culture will change. Every person that leaves, every person that joins, there’s change. The question is, what change do we like and what change do we not? What are the things we will embrace? If you say you’re a culture about diversity, then saying everything will be the same, doesn’t make sense.

When a company doubles in size, it halves in productivity; when a city doubles in size, it doubles productivity. Why is that? Society has all these norms, this built-up heritage of how people relate, and that makes it easier to get things get up and running. When you look at startups, those rules aren’t clear, and in many cases the leaders may not have actually come together in a forum to discuss it all. The process is more important than the actual decisions.

There are people who say culture eats strategy for breakfast. That’s bullshit. Great companies have both.

FC: Did you celebrate the IPO?

DK: No. I’m always thinking about what’s next. It comes back to my psyche. I’m never content with where I am now.

FC: Does that mean you don’t enjoy any of this?

DK: I enjoy it, but I enjoyed it much earlier than when it happens. By the time it happens, I’m onto the next thing.

FC: Spotify has tangled with a lot of players in the music industry, but most of the people I talked to about you describe you as a good guy. Does that matter to you?

DK: Like many people, obviously I prefer being liked than disliked. But someone once pointed out to me, the greatest people through history–you know, Gandhi, John Lennon, Jesus–what do all these people have in common? They all got murdered. The irony is that despite the positive impact they had on the world, they had an equal amount of dissent. And that’s human progress. You cannot achieve progress without being controversial.

The only way to not have anyone dislike you is not to do anything interesting.

FC: A lot of consumer tech companies are struggling with controversy.

DK: A great product without great communication falls flat on its face. Look at Uber. They broke some rules to succeed–aggressive worked. But they also have a core challenge. The end vision of Spotify is to get a million artists to make a living off of their art; the end vision of Uber is to have zero drivers: Be my partner until I don’t need you anymore. That’s a very challenging business proposition.

FC: Apple Music has to be your most obvious competitor.

DK: Absolutely.

FC: When I talked to Tim Cook, he said music does not need to be a money maker for Apple. How does that affect your strategy?

DK: It really means you have to be twice as good, right? Music’s been essential in society for thousands of years, one of the very few things that billions of people around the world enjoy every day. Did I ever believe that we are going to be alone [in providing it]? No. And that’s fine. Competition really drives development. Apple is one of the biggest companies, incredibly successful in a lot of things. But everything we do all day, all night is about providing a platform for musicians and fans around the world. We have thousands of people who are focused [on that], and I believe that ultimately that focus, that clarity is the difference between the average and the really, really good.

As an aside, one of the largest challenges right now is about platform neutrality. I don’t care as much that they [Apple] have a music service. All I care is that we’re fighting on equal playing ground, that we have access to the same customer.

FC: You’ve said that others do the real work at Spotify, that you do nothing. But when I ask around the company, I get the opposite answer: that you do everything.

DK: I like to be involved in a lot of things, but I don’t actually do a lot of the work. My work is about being the editor. It’s about reaffirming the culture, the values. I’m narrating a story about where the company is going. My style, I’ll provide people a rough direction. I won’t provide them all of the things that they need in order to get there.

You lead the company in a very different way as it gets bigger. I didn’t used to have town hall meetings for the whole company. My leadership style was management by walking around. I just figured whoever saw me could talk to me. Then we went on this hyper growth journey, growing 30, 40% a year on number of employees. I realized all of the sudden that [my management approach] didn’t scale. Until this year, we’ve had over half of our workforce that haven’t worked with us for a year. What does that mean for culture? What does it mean for you as a leader?

Your communication needs to be much, much better. I’m still not a very good presenter. A lot of leaders are way more charismatic than I am. I’m an introvert. So it was a real battle with myself. Did I even want to do that part? When I have one moment with someone, on our team or outside, I need to make an impression–and that doesn’t come easy for me by nature. I don’t get energy from meeting other people. So I need to get that energy from somewhere else, and I need to have the stamina to do that.

I’ve recently gotten to know the hockey player Mats Sundin; he was the captain of the Toronto Maple Leafs. One day he said, you don’t just become a captain and end up on the all-star team. I said that I realized that it must take a lot of work. “But people get it all wrong. People think it’s about performing at your peak. It’s really not. It’s about having your lowest low be higher than someone else’s high.” His thing was, even when I have a shitty day, I still need to be better than everyone else.

I think about this in the context of what I do. If I’m having a shitty day, there may be someone who’s worked in this company for three years and this is the only time they get to spend an hour or even 15 minutes with me. What impression do I leave? For someone who’s not a natural leader, that’s super tough. But that’s what I’m working on, mental things, listening to Headspace, getting in the right mood.

I had to change things about myself that I wasn’t really comfortable changing. I did a lot of soul searching. I got a lot of feedback on what I wasn’t good enough at.

FC: Did you consider bringing in a partner, to provide some of the things that weren’t natural for you?

DK: A lot of people are very enamored with the Facebook model of Sheryl Sandberg coming in. I know Mark [Zuckerberg], and I know Sheryl, and I think I know what what made that relationship work. Ultimately Sheryl manages the business, and Mark runs the product, and the sides don’t have an awful lot to do with each other. I don’t mean that in a condescending way. I think Sheryl’s doing an amazing job, she’s an amazing leader, I’ve learned a ton from her. But you don’t need to run the business in order to run the product. Obviously they talk a lot, and I’m not suggesting that they don’t work closely together. But it’s a setup which works incredibly well for them.

But if you look at an Airbnb, at an Uber, and at Spotify, the business is the product. Take Uber for example: The product is the customers’ experience. So much of the actual business is optimizing the price, so you get enormous demand and you can utilize drivers in the perfect way. Airbnb, it’s very similar: managing supply and demand.

I am interested in the business side, because I know it impacts our mission and it impacts artists greatly. The more we’re able to monetize them, the more the music industry grows, and the more people can sustain a living off of it. That sort of balance is incredibly important.

I realized that I didn’t have to change who I was in order to do well. But I needed to more clearly and succinctly explain myself. I tell people when I’m uncertain about something or where I think I screwed up. Those are things that the old me wouldn’t have done necessarily. I’m a very private person, but yet I’m sitting here talking about transparency. Why is that? Well, it’s what I believe in. But I still struggle.

FC: I’ve heard about the bets board at Spotify. Can you explain that?

DK: One of my big mistakes was I adopted the thousand flowers bloom strategy. I believe in decentralized decision making. So I allowed a lot of things to happen without much involvement, just general context setting. We started hundreds of projects, but we didn’t finish a lot of them. For many of them, my analysis ended up being it’s the right thing to do, but it’s the wrong time to do it. The sequencing was off. Plus we didn’t have the resources to fully do 100 projects at once.

Now we have 10 bets going at any time, never any more. About 40, 50% of the company’s resources are on those things. I manage the big bets. I check in every two weeks on what the performance is, speak to those leaders who run those bets, which are usually cross functional. You troubleshoot when necessary, shift resources, whatever you may have to do. But how those bets are implemented, the team handles.

Many of the bets have been around internal capability systems. We used to run an ERP system which stopped being supported 2012, clearly not a good idea. It would take us two months to close the books, not an ideal situation if you want to be a public company. So we had to re-engineer everything, rebuild the whole process. We migrated to Google Cloud from what we were doing alone. A lot of these under-the-hood things, massive projects. GDPR, the data protection law here in Europe, another massive project.

I don’t think I fully appreciated how much of your product roadmap gets impacted by going public: There’s so much plumbing you have to fix. Now it feels like we’re finally now getting back to focusing all of our resources and all of our attention on building things for our customers.

FC: You’ve had some pretty successful consumer rollouts, like the Discovery Weekly personalized playlist.

DK: I would have killed that if it was just me, 100%.

FC: Why would you have killed it?

DK: I never really saw the beauty of it. I questioned them two, three times: Are you sure you really want to do this? Why are we spending all this time and energy? For awhile, we didn’t give that team any more funding in terms of headcount, but they kept working on it anyway. All of a sudden they shipped it. I remember reading about it in the press. I thought, oh, this is going to be a disaster.

And then obviously it turned out to be something really successful. It’s one of the most loved product features that we have. There are lots of things in this company that I didn’t think were good ideas that turned into some of the best things. One price promotion for the holidays, three months for 99¢, I’m like, this is so fucking dumb. People are just going to cancel after three months. That thing has been so successful.

I usually judge a leader on the basis of, if I’m able to come up with a better suggestion or solution to a problem. If not, it’s the right leader. If I am, then there’s a problem and we have to replace the leader.

FC: You’ve been more of an internally facing CEO than external. Why?

DK: My firm view is that the best talent in the world is at least 10 times better, if not 50 times better, than the average person. I’m incredibly fortunate to come in and learn from some of the smartest people in the world. So I love being internal and just learning from people, seeing what kind of things that they’ve picked up. The most important thing I can do is direct those resources, push them in a direction. The external part has been less of a priority of mine.

FC: What do people underestimate about Spotify?

DK: If the first 10 years for us was about fixing the consumer experience, the next 10 years is about an equal amount of focus on making sure that the music industry sees the same transformation that the consumer side has seen. That’s the next phase of the mission.

At the all-time high, the music industry was about $45 billion globally. Today it’s still half that. But I don’t think the market necessarily is purchased music. I think the market is much larger than that. I think it’s audio. Two billion people listen to radio. Most of that today isn’t monetized very efficiently. It doesn’t get back to the artists in any real form. And it’s kind of unclear who gets what. If you think about commercial radio, today, conservatively, that’s a $50 billion industry globally. The U.S. industry is $17 billion. What do people listen to? Primarily music. The market is much bigger than most people think.

On average today, customers listen to four hours of audio per day, mostly radio. It’s in line with television in terms of actual viewing. Spotify is a fraction of that. We’re well over an hour a day, but we still have a lot of room to grow. If you have two hours of someone’s time per day and on our platform artists can communicate directly to fans, what are the opportunities? It’s a very different market. Artists could up-sell to their shows on our platform. The problem with concerts today is not super big acts, it’s the 1,000-to-2,000 seaters, because there is no efficiency in marketing those shows. But if you had your audience and you could segment, here’s my super fans, and I’m not even going to book that show until I get 900 people who have said they’re interested in it, all of a sudden you’ve taken that risk out of it.

You can start seeing that the market is actually very different than what most people think it is, and the way that future creators will engage. It’s not one-size-fits-all anymore.

FC: What is your personal mission right now?

DK: I want this company to impact culture, positively impact it. I can’t tell you exactly what that means. I haven’t been more precise about it, but I want it to be widely known that we’ve had a positive influence in the world. If you build something that is valuable to people, then you’re going to build a valuable company. My cofounder said a few years ago, that the value of a company is the sum of all solved problems and that’s kinda how I think about it now.

The problems we’re solving in this world and the value we’re building, this will be reflected in the company’s value. Will it be valuable every quarter? Probably not. People will trade you up and down, but that’s sentiment. What I’m focused on is the long-term thing, having a billion people inspired by that creativity, creating new ways for people to express themselves.

FC: What will it take for Spotify get to that long-term?

DK: Look at Netflix. People think that because Netflix now owns more of their own content, it’s like a defensible moat. The premise is just very, very faulty. I think that Netflix is winning for a different reason than what everyone else thinks. They’re winning because they’re simply moving faster than everyone else.

There’s nothing sustainable or unique about what Netflix is doing, and in fact, I would argue that if they kept doing what they’re already doing, they will start failing. Amazon, Apple, Google–you have a bunch of these people now entering the same arena. The pace of innovation is greater at Netflix than their competitors and therefore they’re winning.

I think long term, we at Spotify have some defensible moats, but success for us will be determined by our ability to move faster than everyone else in the space. And just keep on innovating.

Source: Fast Company