Spotify: The Impossible Success Story

**Wouter Teunissen** (0:02)
It's summer 2010 in Stockholm. The Spotify team sits together on an island near the Swedish capital for a company offsite. The exec team is huddled together under a gazebo overlooking the calm and beautiful river. After four years of brutal fighting trying to keep the company afloat, the team thinks they are finally heading towards calmer waters. In reality, Spotify's business model was doomed from day one, they just didn't know it. Only a few weeks before the offsite, investor Mary Meeker had published a report on global business trends. It predicted that within two years, there would be more mobile phones sold per year than computers. If this report was true, they needed to force the labels to rewrite all the agreements to allow them to become a mobile-first business. If that didn't happen, that would mean certain death for Spotify, its 200-plus employees and its roughly a billion-dollar valuation. How on earth would Spotify survive this?
What follows in this podcast is the biography of Spotify. It is a story about Spotify's survival. It is a story about what happened during that fateful company offsite in 2010, how Spotify battled the music labels, reinvented its business model, and saved the entire industry that hated its very existence. This is the Spotify biography. To understand the Spotify story and what led up to that fateful company offsite, we need to go back in time to understand one of the two men who founded Spotify, Daniel Ek. Born in 1983 to a single mother, Daniel grew up in a rough neighborhood called Ruxvien. The suburb was a group of affordable houses built right after World War II in Stockholm. The area quickly grew overcrowded and became rundown. Locals prefer to call Ruxvien the more accurate name, Ruxvien, or Drugsfeld instead of Ruxfeld. Being raised by a single mother who worked at a childcare center wasn't exactly easy. No one in Daniel's family thought his mother could raise him to be a success. She was hell bent on proving them wrong. She wanted to raise Daniel to be well educated, well read, and to be able to escape the poverty they grew up in. So, she signed him up for everything. Things like horse riding, swimming, running, a drama club, and even an old girl gymnast club. She would often bring the young Daniel with her to run her errands. It was not unusual for Daniel to talk to adults. It could be a professor or the person next door struggling from paycheck to paycheck. When Daniel was 14 in 1997, he overheard that some adults were charging other adults $50,000 to make a simple web page. He thought that was crazy. You see, back when Daniel was 5, he was given a Commodore VIC-20 computer that he became obsessed with. By the age of 9, Daniel was given a PC and he began to code. Because of this, Daniel thought that making a web page really wasn't that hard, and he didn't hesitate telling people that fact either. Growing up, Daniel never felt like he belonged anywhere. He wasn't in our cast, but there was no place he totally fit in. He dreamed about becoming financially independent, so that he could start living life, start making friends and finally become more socially accepted. So when adults started to hear Daniel telling them they're making a web page was easy, they began asking the 14 year old for help. Daniel wasn't interested, but these adults were telling him they'd pay him.

**SPEAKER_3** (3:23)
So I told these adults, I'm not really that interested. They said, then your price.

**Wouter Teunissen** (3:28)
That's actually the voice of AI Daniel Ek, recounting the story to us.

**SPEAKER_3** (3:33)
And I said, $5,000 or something that sounded really crazy. I just said a number. Then the person said, okay, fine, let's do it. But now I needed to learn how to build web pages.

**Wouter Teunissen** (3:46)
So 14 year old Daniel didn't set out to make a company. He just wanted an interesting challenge. He was able to figure it out and build a web page as he promised. And the next time someone came around asking for a web page, Daniel said it would cost $10,000 this time. They didn't hesitate and they said yes. And from there on, it just kept growing. Daniel couldn't even keep up with the insane demand, so he had to hire other kids to help him. Everyone he knew who was good at math, he taught how to program HTML. Everyone he knew that was good at drawing, he would teach Photoshop. Before long, Daniel's entire class was working for him outside of school hours.

**SPEAKER_3** (4:20)
I started giving people iPods, cell phones and things like that. Kids really didn't care that much about getting cash. But on the other hand, video games were very attractive. I told people, if you make this really fast, I will give you a PlayStation.