{"id":98071,"date":"2021-02-05T12:47:28","date_gmt":"2021-02-05T12:47:28","guid":{"rendered":"https:\/\/www.musicbusinessworldwide.com\/?post_type=people&p=98071"},"modified":"2021-02-05T13:00:02","modified_gmt":"2021-02-05T13:00:02","slug":"daniel-ek","status":"publish","type":"people","link":"https:\/\/www.musicbusinessworldwide.com\/people\/daniel-ek\/","title":{"rendered":"Daniel Ek"},"content":{"rendered":"

Can Daniel Ek ever make Spotify a profitable company? Swedish billionaire Ek co-founded Spotify alongside Martin Lorentzon in 2006, launching the streaming platform as a fully-licensed service in October 2008 in Europe.<\/p>\n

Since then, over the course of 14+ years of existence, Spotify hasn’t turned an annual profit at any stage in its history. In 2020, Spotify posted an annual \u20ac709 million ($810 million) pre-tax loss<\/a> \u2013 equivalent to losing $2.2 million every day of the year.<\/p>\n

\"Daniel<\/figure>

“Eventually we will get to more of a point of maturity where we\u2019ll focus more on profit over growth, but for the next few years it\u2019s going to be predominantly growth for us.”<\/p>\n

Daniel Ek, Spotify (speaking in May 2020)<\/span><\/p><\/blockquote>\n

Not that such matters bother Ek.<\/p>\n

Since the launch of Spotify, the exec’s mantra has been one of growth at (literally) all costs. In May 2020, Ek said<\/a>: “Eventually we will get to more of a point of maturity where we\u2019ll focus more on profit over growth, but for the next few years it\u2019s going to be predominantly growth for us.\u201d<\/p>\n

It’s a strategy that has seen Spotify outpace all of its music streaming rivals on a global basis.<\/p>\n

At the end of 2020, Ek’s company had 155 million Premium subscribers; Midia Research suggests that, in Q1 2020, Spotify claimed a market share<\/a> of global music streaming subscriptions of 32%, nearly double that of nearest rival Apple Music (18%).<\/p>\n

\n
Daniel Ek: Pre-Spotify career<\/h6>\n

Daniel Ek was born in February 1983 in Stockholm, Sweden, growing up in the R\u00e5gsved district<\/a> of the city. Ek went on to study engineering at the KTH Royal Institute of Technology, but dropped out of his studies<\/a> to focus on his career in tech.<\/p>\n

After running a home business building websites in his teens, Ek worked at Swedish online auction business Tradera, which was founded in 1999 and sold to eBay in April 2006.<\/a><\/p>\n

“Daniel Ek’s most controversial pre-Spotify job was at notorious piracy-enabling platform uTorrent, which he joined after selling Advertigo in 2006.”<\/p><\/blockquote>\n

Prior to Spotify, Ek also worked as the Chief Technology Officer (CTO) of online fashion game, Stardoll, as well as launching his own digital advertising company, Advertigo, which he sold to TradeDoubler<\/a> in March 2006 for SEK 10 million (around $1 million).<\/p>\n

Ek’s most controversial pre-Spotify job was at notorious piracy-enabling platform uTorrent, which he joined<\/a> after selling Advertigo.<\/p>\n

Ek was briefly CEO of uTorrent, a role which came to an end when uTorrent was sold to BitTorrent in December 2006<\/a> \u2013 in the same year Ek and Lorentzon launched Spotify.<\/p>\n

Ek poached the founder of uTorrent, Ludvig ‘Ludde’ Strigeus, to lead the programming and development<\/a> of Spotify.<\/p>\n

“I’ve always done sort of impossible things” Ek said of his career path at a Pando event in New York<\/a> in 2012, adding: “I’m naive enough to think things will always work out and I don’t fully understand how hard things are.”<\/p>\n

\n
Daniel Ek: Spotify launch and move to cEO<\/h6>\n

Daniel Ek and Martin Lorentzon established Spotify AB in Sweden in April 2006, with Ek as CEO and Lorentzon as Chairman.<\/p>\n

Prior to Spotify, Lorentzon was the co-founder of TradeDoubler, which acquired Ek’s Advertigo company the month before Spotify was founded \u2013 March 2006 \u2013 for SEK 10 million.<\/a><\/p>\n

In October 2008, Spotify launched in a number of European territories, including the UK, Germany, France, Italy, Spain, Finland, Norway, and Sweden.<\/p>\n

In October 2016, nearly ten years after Spotify was first established, Martin Lorentzon announced he was stepping down<\/a> from his role as Chairman of the company.<\/p>\n

Ek subsequently took on Lorentzon’s former duties as Chairman of Spotify. Lorentzon remained on the board of Spotify as Vice-Chairman following the announcement.<\/p>\n

“We will end up with a company worth tens of billions.”<\/p>\n

Daniel Ek (correctly) predicting Spotify’s future in 2010<\/span><\/p><\/blockquote>\n

In an interview with the Daily Telegraph<\/a> in 2010, Daniel Ek said he was “never going to be interested in selling” his stake in Spotify, adding: “I’m just interested in building a company that doesn’t necessarily change lives but adapts people’s behaviour.”<\/p>\n

He also commented: “The music industry is currently worth $17 billion; it’s going to be $40 billion or $50 billion soon. There will only be four or five players left in a few years. If that’s the case, we will end up with a company worth tens of billions.”<\/p>\n

He was right: At the close of 2020, Spotify’s market cap on the New York Stock Exchange was worth $59.66 billion, according to YCharts.<\/a><\/p>\n

\n
Daniel Ek: Net worth of Spotify shareholding<\/h6>\n

According to Spotify’s annual investor report<\/a>, Daniel Ek owned 17.4% of Spotify’s ordinary shares on December 31, 2019 (see below).<\/p>\n

Martin Lorentzon owned a further 12.1% of these ordinary shares at the time.<\/p>\n

A 17.4% share of Spotify’s market cap at close of trading on December 31, 2019 ($27.57bn) would have meant Ek’s shares were worth $4.80 billion.<\/p>\n

\n
<\/figure>\n
\n

Ek and Lorentzon’s voting power was bigger than the percentage ownership of their ordinary shares suggests, however.<\/p>\n

According to Spotify’s annual 20F report<\/a>, filed with the SEC: “As of December 31, 2019, our founders, Daniel Ek and Martin Lorentzon, beneficially owned or controlled, directly or indirectly, ordinary shares and beneficiary certificates representing 33.6% and 43.8% of the combined voting power of all of our outstanding voting securities, respectively (or 77.4% in the aggregate).”<\/p>\n

\n
Daniel Ek: Spotify’s public listing and growth of “top tier” earners<\/h6>\n

In April 2018, Spotify floated on the New York Stock Exchange via the unusual route of a DPO<\/a> (Direct Public Offering) as opposed to an IPO (Initial Public Offering).<\/p>\n

In an Investor Day presentation in March 2018, Ek told analysts that, as of the end of 2017, Spotify counted 22,000 artists\/creators<\/a> within what Ek called the “top tier” of earners on the service.<\/p>\n

\u201cMy goal over the next few years is to increase that number of [\u2018top tier\u2019] creators to hundreds of thousands that have material success on our platform.”<\/p>\n

Daniel Ek, Spotify (speaking in March 2018)<\/span><\/p><\/blockquote>\n

This, said Ek, represented a 28% increase on the 16,000 artists who were in Spotify’s “top tier” at the end of 2015.<\/p>\n

\u201cMy goal over the next few years is to increase that number of [\u2018top tier\u2019] creators to hundreds of thousands that have material success on our platform,\u201d said Ek<\/a> at the Investor Day.<\/p>\n

Ek has been getting gradually closer to that goal: In July 2020, Spotify announced that<\/a>, at the end of Q2 that year, it had 43,000 artists within its “top tier” of earners, up from 30,000 one year prior.<\/p>\n

\n
<\/figure>Daniel Ek: Public spat with Taylor Swift<\/h6>\n

In October 2014, Taylor Swift released her most successful album to date,\u00a01989<\/em>. Yet it did not appear on Spotify.<\/p>\n

Explaining her decision to keep the record off Daniel Ek’s service<\/a>, Swift said at the time: \u201c[The] landscape of the music industry itself is changing so quickly that everything new, like Spotify, all feels to me a bit like a grand experiment. And I\u2019m not willing to contribute my life\u2019s work to an experiment that I don\u2019t feel fairly compensates the writers, producers, artists, and creators of this music. [I] just don\u2019t agree with perpetuating the perception that music has no value and should be free.\u201d<\/p>\n

A month later, in November 2014, Swift\u00a0pulled her entire catalog from Spotify<\/a>\u00a0as an act of protest against the service\u2019s ad-funded \u2018free\u2019 tier \u2013 specifically, the fact that artists (at this time) couldn\u2019t chose to only release their music on Spotify\u2019s paid for Premium offering.<\/p>\n

“You can\u2019t look at Spotify in isolation \u2013 even though Taylor can pull her music off Spotify (where we license and pay for every song we\u2019ve ever played), her songs are all over services and sites like YouTube and SoundCloud, where people can listen all they want for free.”<\/p>\n

Daniel Ek in 2014, responding to Taylor Swift’s decision to pull her music from Spotify<\/span><\/p><\/blockquote>\n

Spotify said in a surprisingly upbeat statement at the time<\/a>, borrowing from Swift’s own lyrics: \u201cWe were both young when we first saw you, but now there\u2019s more than 40 million of us who want you to stay, stay, stay. It\u2019s a love story, baby. Just say yes.\u201d<\/p>\n

The fallout between Swift and Spotify was whipped up by Wall Street Journal<\/a> op\/ed from Swift published in July 2014, which read: “It\u2019s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album\u2019s price point is. I hope they don\u2019t underestimate themselves or undervalue their art.\u201d<\/p>\n

In November 2020, Spotify CEO Daniel Ek wrote a public blog responding to Swift’s criticism in which the Swedish exec said<\/a>: \u201cYou can\u2019t look at Spotify in isolation \u2013 even though Taylor can pull her music off Spotify (where we license and pay for every song we\u2019ve ever played), her songs are all over services and sites like\u00a0YouTube\u00a0and\u00a0SoundCloud, where people can listen all they want for free.<\/p>\n

\u201c[That\u2019s to] say nothing of the fans who will just turn back to pirate services like Grooveshark. And sure enough, if you looked at the top spot on The Pirate Bay last week, there was 1989<\/em>\u2026\u201d<\/p>\n

Referencing the marked difference she\u2019d witnessed\u00a0between Apple and Spotify in reaction to her public critique of their services<\/a>, Swift told Vanity Fair in August 2015: \u201cI found it really ironic that the multi-billion-dollar company reacted to criticism with humility, and the start-up with no cash flow reacted to criticism like a corporate machine.\u201d<\/p>\n

(That \u2018startup with no cash flow\u2019 was Spotify.)<\/p>\n

By the release of Swift’s Lover<\/em> in August 2019, all had been forgiven. Swift’s Lover<\/em> landed on Spotify on day one of its release \u2013 with Daniel Ek’s service even paying for promotional billboards<\/a> for the album in Times Square.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Daniel Ek story \u2013 from Advertigo to uTorrent and, ultimately, Spotify becoming worth tens of billions of dollars<\/p>\n","protected":false},"featured_media":101623,"template":"","class_list":["post-98071","people","type-people","status-publish","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/people\/98071","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/people"}],"about":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/types\/people"}],"version-history":[{"count":0,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/people\/98071\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media\/101623"}],"wp:attachment":[{"href":"https:\/\/www.musicbusinessworldwide.com\/wp-json\/wp\/v2\/media?parent=98071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}