Spotify’s Daniel Ek on the Future of Music Streaming, Competing With Apple and Google

Spotify's Daniel Ek (right), being interviewed by Forbes' Steven Bertoni said he does not believe streaming will "be ruled by a few companies like Apple and Google." (Photo: Reggie Ugwu)

“If you’re a business now and you’re only on the PC, you’re going to have some serious problems.” That’s how Spotify founder and CEO Daniel Ek described the biggest challenge facing his company and others in the industry during a one-on-one chat Tuesday with Forbes associate editor Steven Bertoni. On the first day of the music portion of SXSW in Austin, Ek began with some news about Spotify’s growing position as the world’s leading music subscription service— it now claims six million paid subscribers worldwide— before delving into his views on what’s next.
 
“It’s not just about mobile. The way we look at it, it’s about connective devices,” Ek said. “TVs, cars, refrigerators— there’s huge opportunity for new business, but it’s also scary to navigate that transition.”

Spotify To Announce 6 Million Subscribers at SXSW

 

Ek differentiated Spotify from larger, corporate entrants into the streaming and subscription space by noting that Spotify is only focused on music and always will be.

“I’m not one of these people that believes the world will be ruled by a few companies like Apple and Google,” he said. “I think if you look at history you’ll see that the services and companies that have survived and thrived have been dedicated to doing one thing really well, whether it’s Netflix for movies or EA for games.”

 
Ek said Spotify succeeded, despite not being the first to attempt a streaming and subscription model, by coming up with the easiest and most convenient solution while also working out deals with the labels. He noted that because of Napster, the digital music industry was the first in history where the illegal model was better than the legal one.

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Despite his current fruitful relationship with record labels, Ek called some parts of the music industry “antiquated” and suggested that they would have to evolve.
 
“Licensing music territory by territory is not at all how it should work, it seems to me,” he said, citing one example. “If I license a song, that license should be valid all around the world.”
 
Looking to the future, Ek said that he believes the format of recorded music itself will evolve. He said artists will experiment more in adding interactive layers to their music.
 
“If you look at the Internet, it’s audio, it’s visual and it’s interactive,” he said. “But if you look at most content today, it’s audio/visual, but it’s not interactive. In the future, I think artists will add more of an interactive component.”
 
Ek also said that he believes artists and labels might offer as many as 30 different versions of an album, or songs with multiple endings. He acknowledged that some of these changes are difficult to imagine, but pointed to recent history for evidence of how quickly attitudes can change.
 
“Some things we are laughing about now, but it just takes time,” he said. “10 years ago no one thought people would buy clothes online. People said we were always going to go to the store.”
 
In the nearer future, Ek predicted that Spotify’s new “follow” feature, which rolled out earlier this year and allows users to get updates from their favorite artists, would become a powerful way for artists to reach fans.
 
“David Guetta already has 4 million followers on Spotify,” Ek said. “That means that whenever he posts a song, it automatically goes out to four million people who get a notification on their phone that lets them play it instantly. It’s a huge marketing opportunity for artists.”
 
In response to a question from the audience, Ek addressed criticism that Spotify does not provide reasonable compensation for artists. He said Spotify pays bigger royalties than Internet radio and YouTube, and he used the oft-repeated line of reasoning that streaming pays in perpetuity, as opposed to one-time-only downloads.
 
“The question artists should ask isn’t ‘How much am I being paid per stream,’ but ‘How many times could my song potentially be played?’” he said. “For major artists like Rihanna who get 1 million downloads for a song, that could mean up to a billion views on YouTube. Imagine if that was happening on a service that paid more like Spotify. It could be a significant form of income, maybe even more than iTunes. So the question is how do we grow the total number of streams.”