Spotify Founder Daniel Ek Talks Russia, Apple and Beats in Q&A

Daniel Ek
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Spotify CEO Daniel Ek

Spotify chief Daniel Ek closed out Fortune magazine's annual technology conference, Brainstorm, today with a 25-minute Q&A called "Making Cents of Music." He was interviewed by one of the magazine's senior writers, Jessi Hempel, about what the company is focused on now that it has reached 40 million users in 57 countries.

Although the discussion didn't yield much breaking news, it revealed some of the CEO's interests going forward, namely penetrating a remaining market of one billion people who listen to music via small piracy programs and social media websites that don't require them to pay a cent. According to Ek, they are the music industry's biggest financial opportunity. Rather than pit streaming services against one another and the labels for a bigger slice of the pie, he reasoned, the goal should be to "grow the pie, it's not nearly as big as it could be."

"In Russia, the largest music site is VKontakte, the Russian Facebook," he said, noting that Korea's is also a social network. "If we can turn those people into paying customers, the music industry would thrive."

Ek skirted a question about naming a company that he sees as direct competition, but was candid when pressed about Apple, which recently bought Beats Electronics and Beats Music for $3 billion and hired record label king Jimmy Iovine and Dr. Dre to steer the ship. Ek said he wasn't sure how serious Apple is about streaming music.

"Apple is becoming more of a lifestyle company," he said. "If you look at the executives they've hired, so many of them come out of fashion. I can't think of a consumer electronics company that's more associated with fashion than Beats."

The company isn't nearing an IPO, he said, but is aiming to collaborate more with record labels - majors and indies - in breaking and promoting new artists. The platform has become a major promotion tool in recent months, and Ek said Spotify's viral playlists can give emerging stars a major boost. He credited much of Lorde's U.S. rise to being included on Sean Parker's Hipster International playlist -- an interesting point, and a far reach.

Audience members questioned Ek about how users' behavioral patterns have shifted since the service was launched in Sweden in 2008. He pointed to vastly increased experimentation thanks to the site's base-fee model, as opposed to iTunes which requires users to pay by song. When users have already paid, he explained, the cost of experimentation is virtually free. But when users are forced to throw down cash for every single track, they tend to stick to safe bets and big brands.

"We've gone from an ownership model to an access model," he said, "which has profound shifts in the industry. It means people listen to more music than they've ever done before, and more artists than ever before."