As we note in our feature on Spotify and its CEO and cofounder Daniel Ek, the streaming music service’s path to a leading position in the music industry was never certain and remains tenuous. How it got here–to 83 million paid subscribers and 180 million total monthly listeners–is a remarkable story.
2002: The idea for Spotify first came to Ek when Napster, the controversial file-sharing network, stopped working and Kazaa, a subsequent music-downloading service, became ascendant. “I realised that you can never legislate away from piracy,” he told the Daily Telegraph in 2010. “Laws can definitely help, but it doesn’t take away the problem. The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry. That gave us Spotify.”
July 2006: Having sold Advertigo, his adtech startup, and become a millionaire at 23, he had a quarter-life crisis, buying a red Ferrari and indulging in nightlife, but he hated it. ”We made money when we were incredibly young, and in the beginning we didn’t handle that well,’ he would tell the New York Times Magazine. “When you’re a computer geek, you think you want to be the guy with all the girls at the table,” he said. ”But I realized after a while that ain’t me.”
He follows his dream and founds Spotify with Martin Lorentzon, who acquired Advertigo. When Spotify announced that it had one million subscribers in 2011, Ek reminisced of the company’s early days “hatching ideas for a new music service in a tiny office-cum-apartment with a broken coffee machine” in a blog post. A couple of years later, the Guardian depicted Spotify’s early days in a three-room apartment above a coffee shop. [If they were working above a coffee shop, who cares if the office coffee machine was on the fritz? Or did they move to the place above the coffee shop because the coffee machine was busted? I don’t know, but coffee is great when you’re working on a big project.]
Ek may have needed a pick-me-up because he was trying to get European record labels to license their music to him. “The music industry was in the shitter,” says Ek. “What did they have to lose? On top of that, I literally slept outside their offices, coming in week after week, hammering them down argument by argument.“
October 2008: Despite the toilet-based state of the music industry, it took two years to make those deals with the record companies, but finally, Spotify launches in several European countries.
August 2009: Spotify is not available yet in the United States, though there were ways to download it from Europe. Facebook CEO Mark Zuckerberg was one of those clever people, and he posted on his Facebook wall, “Spotify is so good,” after Sean Parker tells him to check it out. The next day, Parker, who first made his name as one of the faces of Napster, writes Ek an email, saying, “Ever since Napster, I’ve dreamt of building a product similar to Spotify.”
November 2009: News circulates that Lady Gaga’s hit song “Poker Face” has been streamed one million times on Spotify, for which she received a royalty check for $167, raising questions about Spotify’s value to artists. The company responded that the numbers were misleading because of the way the royalty contracts work but those contracts prevented it from revealing more. Stories like this would continue to dog the company for years. The company did seem to have a sense of humor about the controversy: It would later name of its conference rooms after the song.
February 2010: Ek tells the Daily Telegraph, “The music industry is currently worth $17 billion (£10.8bn); it’s going to be $40 billion or $50 billion soon. There will only be four or five players left in a few years,” he says. “If that’s the case, we will end up with a company worth tens of billions.” Prescient!
March 2010: Ek makes a keynote appearance at SXSW, where people expect him to announce Spotify’s U.S. release. He doesn’t, instead saying that he expects it to happen perhaps in the third quarter of the year, prompting disappointment, because just a month earlier he’d said, “We’re in the final stages of setting up.”
April 2010: Spotify releases a desktop music manager, amplifying the drumbeat that Spotify is on a collision course with Apple and iTunes.
August 2010: Did Google and/or Apple try to buy Spotify? A rumor circulates that Google offered almost $1 billion, but Ek denies it, saying that Spotify has never been for sale and he’s never had acquisition talks.
November 2010: Spotify integrates with the music-discovery Shazam so every time you use Shazam to figure out who’s singing a particular tune, it populates a playlist with those songs. It’s a signal move in Spotify’s ambition to make Spotify “like water” as Ek was fond of saying, and an early effort that now sees Spotify integrated into everything from Starbucks to Facebook Messenger.
January 2011: Adele refuses to release her album “21” on Spotify, because it wouldn’t limit the album to subscribers only. Best I can tell, she’s the first big artist to do so.
March 2011: Ek announced that Spotify has one million paying subscribers.
July 2011: Spotify launches in the United States, a year after Ek’s SXSW projection and six months after the company’s “end of 2010” mantra for much of the previous year.
September 2011: Spotify announced two million paying subscribers, picking up as many new customers in the previous two months as it had in its first two and a half years.
September 2011: Facebook announces new Open Graph, which allows for a lot more user activity to be shared on the revamped Facebook Timeline. Spotify is one of the major partners (along with a lot of other music services, but Spotify got a bit more play than rivals). As users listened to Spotify, their Timelines would publish their listens, as well as top albums, playlists and artists, and people could listen to that music within Facebook. It created a huge backlash (as is typical with every Facebook expansion), but it was the first (and a rare) instance of Spotify annoying its users. A week later Ek rolled out a “private listening” mode that wouldn’t share every song you play.
There was one more bit of infamy from the Facebook launch: Sean Parker threw an afterparty for 400 people, including Zuckerberg and Jonathan Ive, where Snoop Dogg, Jane’s Addiction, and The Killers played.
November 2011: Spotify announces its own platform for developers to build experiences on top of Spotify, for buying concert tickets or reading reviews. Two months after the Facebook integration, Ek says Spotify has 7 million more users and now has 2.5 million paying subs.
December 2011: In a CNN interview, Ek says, “I don’t think we see ourselves as the savior of the music industry. We are passionate about making it so that users enjoy the music that they want to enjoy but at the same time fairly compensates artists. That’s not the same as saving the music industry.”
February 2012: President Obama releases a Spotify playlist in the early run-up to that year’s Presidential campaign. The 41-song playlist features tunes from Aretha Franklin, Beyoncé, Wilco, and James Taylor.
April 2012: Spotify partners with Coca-Cola to extend its marketing might, create a new revenue source, and in exchange power Coca-Cola’s music experience.
May 2012: Sean Parker tells All Things D conference that he believes Apple used its relationships with record labels to stall Spotify’s U.S. launch.
October 2012: In a rare interview on Swedish radio, Ek reveals that he felt like he was “about to have a breakdown” when Spotify ran into problems before its launch in 2008, saying that the service nearly ran aground because of problems with the mobile phone maker Nokia, which he did not elaborate upon.
December 2012: Metallica, the band who sued Napster and helped put it out of business, agrees to have its catalog streamed on Spotify. Band leader Lars Ulrich appears on stage with both Ek and Sean Parker to bury the hatchet publicly, and Ek reveals that Spotify now has 5 million paid subscribers and 1 million U.S.
February 2013: “Thrift Shop” by Macklemore and Ryan Lewis reaches number-one on the Billboard Hot 100 chart after 16 weeks. The duo credits both iTunes and Spotify for making the song a slow-burn hit.
March 2013: Spotify launches its first TV ad campaign, in an effort to reach mainstream music fans. Plus, speculation that Spotify might launch a video service! But Ek shoots that down in the near term.
May 2013: Spotify makes its first acquisition: Tunigo, which already helped users find, create and share new music and playlists on Spotify. Turned out to be a good one! It still underpins the company’s editorial playlist strategy to this day, and Tunigo’s Nick Holmstén is soon to become Spotify’s head of creator services, replacing Troy Carter.
July 2013: Thom Yorke of Radiohead pulls his band’s music from Spotify, reigniting controversy over royalty payments. Yorke is also accused of being hypocritical given that his own “pay-what-you-want” album experiment in January 2009 was also blamed for devaluing music. Undeterred, Yorke upped the ante a few months later, calling Spotify “the last desperate fart of a dying corpse.”
August 2013: Ek tells the Wall Street Journal: “I think a lot of people just look at the financials and say: Oh wow, losses, that’s really, really bad. Thats not at all how we see it, we see that we’ve actually now proved our business model. The difference between what we pay out in royalties and what we actually take in in revenue is increasing, which is positive.” Regarding the artist controversies, he says he’s “not surprised, but saddened. All they see is millions of streams, and they see, you know, not millions of dollars in the end, but thousands of dollars, and they think that a million streams is comparable to a million downloads, which it obviously isn’t.”
December 2013: Spotify adds free streaming on mobile devices, a long-awaited feature (read the inside story of the events that led up to this moment in our cover story), expands to 20 new markets (giving it 55 overall), and adds Led Zeppelin’s music to its catalog.
February 2014: IPO rumors start in earnest.
March 2014: Spotify acquires The Echo Nest, a startup that specializes in using machine learning to make recommendations and predict the type of music users will want to listen to, generating playlists from that data as well as helping advertisers reach those music fans. This also was a great acquisition! It underpins the algorithmically generated playlists such as Discover Weekly.
May 2014: Spotify announces that it has 40 million listeners and 10 million subscribers, despite (or because of?) Beats Music debuting early in the year and rumors that Apple was starting to flex its muscle to try to get exclusives to thwart streaming rivals. Weeks later, Apple would buy Beats.
October 2014: Jimmy Buffett confronts Ek while he’s onstage at the Vanity Fair New Establishment Summit, saying he needs to give artists a raise directly. Irving Azoff, the panel moderator and legendary music manager and entrepreneur, tells Buffett to “sell one of [your] planes.” Buffett says he was sticking up for young artists. Ek deflected, again, to the fact that he deals with the labels and songwriting publishers and then they have the contracts with the artists that dictate how much they get from streaming. Which, you know, is something you’d think Buffett, as well known for being an entrepreneur as a musician, might have already known.
November 2014: Taylor Swift leaves Spotify, saying that valuable things need to be paid for and diminishing Spotify as a “grand experiment.” (Previously, Scott Borchetta, her label boss, stated that streaming was a marginal revenue source for indies like Big Machine.) Ek mounted a personal defense, which was mostly seen as positive. As we explore in our cover story, Borchetta and Swift have largely come around.
March 2015: Jay Z and a consortium of superstar artists, including Rihanna and Kanye West, launch Tidal, a rival streaming music service. The rollout event is widely mocked, but Tidal is seen as a direct attack on Spotify and its freemium business model.
this is like an illuminati business meeting #TIDALforALL
— ???????? (@hc5495) March 30, 2015
May 2015: Spotify expands into podcasts, video streaming, and news radio, making deals with Vice, Comedy Central, ESPN, and the BBC, and it introduces the ability to match your music to your running pace. Ultimately its most important news from that day is that it had integrated mood- and time-based playlists into the service.
June 2015: Apple introduces Apple Music. Summing up the feelings of millions of people who watched the WWDC keynote during which it was rolled out, Ek tweeted his initial reaction: “Oh ok.” He quickly deleted the tweet but days later, Spotify announces that it raised an additional half a billion dollars. It also releases new user milestones–20 million subscribers out of 75 million listeners–which indicate that although freemium is controversial among record labels and some artists, it works.
April 2016: Daniel Ek and Martin Lorentzon write an open letter to Sweden about its housing crisis, saying Spotify will leave the country if it’s not addressed.
June 2016: Spotify hires music manager Troy Carter (who had represented such artists as Lady Gaga and John Legend) to be its liaison to artists and recording companies.
January 2017: In a meeting with the former ambassador to Sweden just weeks before leaving office, President Obama reportedly joked, “I’m still waiting for my job at Spotify.” Since his 2012 playlist, Obama had made several more. In response, Spotify jokingly created a job listing looking for a President of Playlists.
February 2017: Spotify launches original music-themed podcasts from Gimlet Media and Panoply in its latest effort to diversify its offerings.
April 2017: Spotify announces a new deal with Universal Music Group, one of the big three record companies, to license its music. A key component of the deal is that some new music will only be available to subscribers for a brief window of time. The concession, cheekily called the “Taylor Swift clause,” is seen both as an essential step in Spotify getting all of its record deals done and in preparing for its rumored IPO.
June 2017: Taylor Swift returns to Spotify for the first time since her public 2014 breakup with the service.
December 2017: Spotify and Tencent invest in each other. Again, the deal is seen as another key pre-IPO move, but it’s more than that. Spotify establishes a strategic relationship with the largest digital service in China, particularly in music streaming, and the value of its stake in Tencent Music, which is also expected to go public, could wipe out all of its losses and then some.
February 2018: Spotify files to go public in a direct listing that will not raise any additional funds.