Spotify is not the first internet music service. There's Pandora, Rhapsody, MOG, Rdio, Zune, iTunes, Amazon Music, Google Music, and plenty of others. Yet despite not having a product in the US, Spotify became legend. A musical unicorn.
Now, finally, after years of rumor and speculation, Spotify has its greencard, with a product not unlike the one in Europe. It doesn't do anything truly unique from any of these other services, but where each of the other services approaches the market from a different angle, Spotify tries to combine all the best features into one product.
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Daniel Ek sits in his Manhattan office, which shares a building in Chelsea with the likes of Google and Barnes and Noble, and whose 11th story position provides a view of the entire city. Having finished lunch, he slouches with a calm, casual demeanor most executives lack. For a man whose product poses the most immediate threat to iTunes, he doesn't seem very affected by the hype.
Spotify is the latest subscription music service to reach the American masses. What sets it apart from its counterparts is its unique freemium model—you get 10 hours of catalog access each month, with the ability to listen to each song a maximum of five times—and its ability to integrate your local files into its desktop and mobile apps seamlessly.
Ek says that he's consumer-minded "first and foremost." His decidedly anti-corporate appearance—he's wearing polo shirt, jeans and running shoes—doesn't speak against his claim.
Somewhat predictably, Ek says that he wanted to get into the streaming music space and launch Spotify out of necessity—due to the declining music industry. He noticed that it was just as easy to pirate music as it was to go and purchase a track from a music store, which was often of inferior quality, and not always in a universal format (*ahem*, Apple, *ahem*)
"It's not really that strange that people were pirating that much, so we started thinking about how we could create a product that was better than piracy." Ek explained.
Speed and simplicity are Spotify's main goal. Ek says they can deliver a song in under 200 milliseconds.
Discovery was Ek's other main goal. He noticed that he had friends with really bad taste in music, and he wanted to help them discover better music. Thus, Spotify was born in Europe. A weird, hybrid service that will let you stream a limited number of tracks for free, and then once you pay, gain unlimited access to those tracks on your computer and on mobile devices (online or offline).
What sets Ek apart from his peers is that he understands that the subscription service cannot satisfy all needs. He realizes that there will always be a certain number of tracks that you'll have to go outside the service to obtain. And this was something that Ek had to sell labels on while negotiating.
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"It's not like there was anyone who didn't want to be in. There was no reason for the order in which labels agreed to terms, it was more just the way each individual process worked its way out."
It was never a matter of if Spotify would launch in the US, it was just deciding when. And when hinged around having a full and complete catalog of songs for Spotify to use on their terms.
"There were points where we could have gone for it and launched in the last year, but we wanted to wait until we could deliver the complete experience for the user."
Despite the fact that Spotify has been around for the last three years overseas, the company only started looking seriously into a US launch a year ago, when they realized they had consumer buzz and momentum on their side. And judging from the way Ek talks, his team wanted to prove that their product worked in Europe first before bringing it to the larger US market.
"Subscription music has been around for more than 10 years, and while people are excited about the model, no one has showed that it's working. But in the last 18 months in Europe, we've become the biggest and fastest growing company. We now have more subscribers probably than most US companies combined. So I think we're proving the model."
While Spotify has proved successful in Europe, launching the service in the US has been a long and arduous journey. Hundreds and hundreds of discussions were held in the past 18 months. "There were definitely points in the process where you want to just go home and sleep," Ek lamented.
Wooing the labels began with getting out there and talking to them. Generally the initial meetings required going through distributors and label reps. The talks branched out from there.
Ek says that getting the labels to agree to their terms required him to convince and ultimately educate the industry folk that his consumer-centric company could also generate revenue. Being an internet guy, Ek thinks he underestimated the amount of music industry knowledge it really took to launch such a service.
"The whole education process comes down to 'how is this going to work.' If you look at everything from the inception of the music industry, it's all been 'how do you sell the most units.'"
Over the course of the negotiations, Ek said he talked to at least 100 people at every record label. "I sometimes feel like I've talked to everyone from the Janitor to the C.E.O."
Ek says there was no dramatic moment where there was a breakthrough in the discussions. It was just a matter of hammering out little details, as opposed to the big ones. And it's a process that took a long time.
"Music licenses take a very very long time to get. To this point, I still haven't met anyone that can get it done in less than six months. I think the only company that does it faster is Apple. I don't know how they do that, but I'd love to find out."
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Now Spotify is finally ready for the US where consumer demand seems to be at a rabid peak. But where does the service go from here?
One thing we asked Ek about was the global future of music. A key problem that the internet has exposed in the music industry are regional distribution deals. One country—or continent, or area—will release an album, while the rest of the world has to wait months (maybe years) for it. Now that the average music listener is far more savvy to the international state of music, they'll find themselves not able to stream their favorite artists from around the globe. Ek is optimistic that services like his own will eventually globalize music on the business side.
"I really hope so, I think we're getting closer and closer to that," Ek opined. "I think label deals and distribution models will become global—not just because of Spotify, but because of YouTube and everything else out there on the internet."
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