Spotify CEO Daniel Ek

It is impossible to flawlessly execute a podcast of this style, and that's the beauty of it. You come up with a bunch of stuff you want to talk about and then you end up having a real organic conversation. And then it turns into a product, and that product is totally different than what you envisioned in your head, but can still be great.

But I think the amazing thing is, unlike you talking to a journalist, etc.

Who got the truth? Is it you? is it you?

Is it you who got the truth now?

Is it you? is it you? is it you? Sit me down?

Say it straight, another story on the way.

Who got the truth?

Welcome to this episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

I'm David Rosenthal.

And we are your hosts. This episode, we sit down with Daniel Eck, the man who saved the music industry after Napster and the piracy era killed the CD business. Some of the stats are mind boggling. Spotify has paid $40 billion to artists over their lifetime. They're now the single largest source of revenue for the entire music industry.

That's crazy. Spotify also has over 500 million monthly active listeners, over 200 million of which are paid subscribers. Both of those numbers are bonkers.

And in today's conversation, we're talking about one. How Spotify managed to get to this 500 million number by stacking all these different expansion strategies on top of each other over the years? And two, we're going to dive into the current moment that Spotify is in. They've entered podcasting in a huge way. That has not only changed the experience for consumers, but Spotify's business and their future as a company. Which is, of course, very interesting to David and I, as Acquired's growth has really exploded on Spotify.

Totally, as I think we referenced early on in our conversation with Daniel. Over 60 of Acquired's audience is now on Spotify, which is up from basically zero four years ago.

It's wild. In fact, we were so interested in having this conversation that when Spotify asked if we wanted to fly to Stockholm and record in person with Daniel in the Spotify studio, we jumped at the chance. Daniel also foreshadowed some of what's to come with the cousin of podcasting audiobooks. We can't wait to hear what you think, come discuss it.

We wanted to start with like, something kind of incredible has happened in podcasting.

If you look at January 1st, 2019, we had less than a thousand listeners on Spotify.

Yeah, crazy. And now it's by far the majority of our listeners.

And unless you're us and you're looking at the data all the time, or other podcasters, I think it's easy to underestimate how seismic of a shift has happened in the podcasting ecosystem. Since. You guys dove in and I just wanted to, sort of acquired style, go to a moment in time and say, How did that happen? And how did you guys decide to become an audio company instead of a music company?

I like to say that there was probably this genius insight at some point in moment, but that's certainly not in the case of Spotify. True. It is often quite serendipitous. And for a long time, you know, I was kind of fighting the urge on this. But we were oftentimes trying to not think of ourselves as the users and customers. Because once you got through kind of a hundred million users, you're kind of like, Well, obviously, I shouldn't be the target demo, I need to kind of listen to what the actual users are telling me.

I mean, this was like, the you've talked about this before. The constellation of apps was the, you know, oh, the like, all the rage. Facebook's got all these different apps, and Apple has all these different apps.

And unless I'm a person who already defines myself as into podcasting, I'm never going to click a podcast app to try and get into podcasting. You can't expand the TAM if they're all in separate apps.

Which still was a super nerdy thing.

Even merchandising podcasting is a very different problem than music. And it's actually one of the things that we're still working on, trying to crack the code on. But that was probably the most contrarian, both inside and outside. But to us, it was probably the most obvious one because we had already seen the behavior happening in Germany.

And the phrase streaming did not exist.

Yeah, people were not talking about it, and people actually conceptualized more around sort of renting things. And why is that good for me? This is horrible.

And people care so much about their music, like their identity, like I want to own this, I want my record collection.

Yeah, exactly. And we were fighting against it, where it was so obvious to us that because I grew up with piracy, that No. Actually, all you want is access to it. And it was such a hard notion for people to get conceptually, because we've been spending 30 years just getting people into that. And I feel like most of the tech industry has spent a decade plus learning about having separate apps. And we kind of said, No, no, no, it doesn't really matter.

Where did that insight come from? Was it you as a user? was it elsewhere in the company?

Well, it was really a lot more of a first principles kind of thinking around it. It didn't really make sense. If you looked at sort of like, what are we trying to solve for? And was it truly so different in terms of a consumer experience? No, it was the same playing view, slightly different sort of modalities, but totally possible. And if you thought about it as a discovery, okay, well, that's a similar problem. Ubiquity of being able to play it on.

All right, let's go back to the radio days, talk radio and music and sports. They were all on the same device.

Yeah, I mean, that's the thing with audio books, too, right? Like, what's the difference between an audio book and a podcast? Well, you would say chaptering and some of those stuff.

I mean, we think of ourselves as, like, right on that line between a audio book and a podcast.

Actually, we'd love your help trying to solve this for ourselves. So we have recently realized that acquired is the canonical episode, Nvidia episode, or TSMC, or Taylor Swift. These are more like conversational audio books between David and I than they are podcasts. They're four hours long, they drop infrequently. How does that kind of fit into what you imagine?

My view, I guess, is the boundaries are from a format side is definitely being blurred quite a lot and for the right reasons. But the better way to think about audio books and podcasting is it's really around a business model mostly, so one way to frame it instead would be podcasting is ad supported audio, and audio books is paid audio. So for you guys, I mean, I also happen to know you spent so much time and effort on the research of that side. You could imagine that in the future, you have the ad supported side of your podcast, be certain types of episodes. And you'd have for your subscribers the unlock where they get access to these kind of deep dives, etc.

Which is so interesting to us. We've lived this over the past eight years. What podcasting has unlocked? And now, with Spotify bringing so many more people to the medium that weren't consuming before, is a mass audience for niche products. If we were authors and we wrote a book and we get pitched all the time on writing a book. The business model for us does not make sense anymore. Given the audience size that we have and the particular type of audience, we monetize so much better with the ad supported content. But like to make that unlock happen, it needed to become a mass medium.

Yeah, and obviously our view is we eventually think audio books should be much, much larger than what it is today. Hundreds of millions of people who are actually listening to audio books because the content is great, rather than today. What's tens of millions of people?

Is that the market size today of audio books?

Yeah, we believe it's like tens of millions. It's one of the fastest growing categories, which makes it interesting. But it's again, fundamentally, it's both a business model problem, it's again a discovery problem and all those other things.

You either got to pay a lot of money for a one-off purchase, or you need to have a pretty expensive subscription to a service that you may or may not use that and get value out of.

It reminds me of music in 2008.

You guys are exactly right, and there probably needs to exist a different business model for all of these things, but you could, even in your case. I mean, you guys have probably right now a pretty defined audience, I would guess, and probably a very high value audience. Which makes ad supported monetization probably better than the average creator for you guys, just given the type of audience that people want to get to. But you could even contemplate some of your deep dives.

Which is terrifying, yeah.

Well.

Yeah, exactly, but I mean, it is one of the areas that I'm kind of the most intrigued about. I think Ben Thompson had this piece very recently, I think he called it like the unified content business model piece. I don't necessarily agree with everything, he said, but I think his main takeaway is obviously that all media models ought to move to freemium. It's as someone who's been saying that for 15 years, I obviously agree with him there.

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Thanks, Servicenow. Speaking of the podcasting business model, there's the potential for podcasting to be a far better business at scale than music streaming. Obviously, with music streaming, you take 30 and you share 70 with the labels. With podcasting. There's the potential for real operating leverage, especially if you own the content to build a fantastic ad network, or however you want to monetize it. But you actually can take advantage of the scale of your audience in a way that it's sort of hard to outrun your costs in the music world.

Well, I think it was a bit of both. And you have to contemplate that if you're making moves. Like, certainly of our size, because many of these investments that we're making are multi-year ones and pretty substantial. From a signaling point of view, too. And obviously, public market investors want to know, like, well, is this ultimately a good business? and why do you think that is? And for me to have said, well, we've bought a bunch of companies, but I don't really know what kind of business it'll be. It's probably not going to be the right answer.

You can aggregate a fragmented market.

Yeah, you can do the aggregation theory, that's all good, great. We don't really contemplate all that much. It's obviously there's other challenges for that business model.

Great at scale, expensive at small scale, yes.

But even at scale, if you think about it, is the cost increasing or decreasing? And if you think about right now, obviously AI will come in and it will be massive. But I think at one point in time, Facebook, or now Meta, had over 100,000 content moderators actually working for them.

100,000?

I believe so I don't know an insane amount of people.

So it's tempting to believe that that's a fixed cost and that they're running this unbelievably high gross margin advertising business and they can outrun those fixed costs. No problem. But in reality, what you're saying is actually they build up a whole bunch of variable costs, too that don't fit into this platonic form of ideal social media business model.

Yeah, for sure, and even today, if you think about it, so all right. Well, maybe that's not 100,000 anymore. Because they've been able to automate some of that process. But it's kind of a mouse game as well, so the other side is now using quite sophisticated AI.

They use Open AI too.

Yeah, exactly, to do that, and that means that your AI models have to be a lot more sophisticated, and that still adds cost. So I think the best case scenario, I was looking at this. This is very old data, but I believe at the time of Facebook's IPO, it was something like the cost for Facebook to onboard. A user was like, a dollar a user or something like that in like, hardware costs and all that stuff. Basically, to have lifetime value of a customer. And so at that time, obviously the monetization wasn't as advanced, so that was what was burning cash for quite a while.

You worked with Facebook for a long time.

Yes, that, too. So we had relatively good idea of what type of problems we would encounter.

And to give you some credit for listeners, I think at the time you probably had maybe 200 million people on the ad supported tier who weren't in premium. When you launched podcasting, maybe something like 150 million. But you had a gigantic scale advertising business, you just didn't have user-generated content, being the content that it was advertising against.

Yes, that's accurate. And the amount of inventory obviously that we were monetizing it against was relatively small. And one of the big things right now is obviously this is a huge thing, perhaps even more so than music, for us to offer monetization to a lot of these podcasters that, perhaps, unlike yourself, can't sell ads.

Unless you're in a niche like ours, if you're subscale, you're never going to be able to access Unilever or P&G or Coke on your own or Nike.

So I want to ask you about that because I saw the episode you guys did with David Senra, by the way, oh, David's the man. And he's interesting. Because, in my opinion, he seems to almost dig in more in what made him successful and tries to not at all veer to broadening the base. So how do you think about that? Because you could just go serve your niche even better, or you could try to, like, well, let's try to include other forms of content.

Oh man, we are right in the middle of figuring this. I mean, you always said, for a long time, you're like, I would rather not have growth and keep our audience who they are.

I'm not sure I'd go that far, but I would rather saturate our niche and then at some point stop growing, then expand the niche.

And then?

Which I think we have three to four X headroom on our current.

Yes, we still can expand it. But then we did our Taylor Swift episode, we did the NBA, we did the NFL, and then we did LVMH and LVMH. We got 40,000 new subscribers.

Wow.

And we were like, Okay, so to your point about like, something is hacked here, like there's a new phenomenon happening.

So we have had to redefine what acquired is basically once a year. Since we started, it used to be technology acquisitions that actually went well, and then it was acquisitions and IPOS.

We would never be talking if it was still that.

And then it was.

I think it's brilliant how you're able both to satisfy your own curiosity, I guess, and at the same time, it doesn't seem that far-fetched some of the ideas you're trying. Obviously, I would probably assume the Taylor Swift one was more out there than something else, but the LVMH one actually felt to me supernatural. And it's funny how well talked about it's been, even among what I would have not assumed would have been your crowd.

I mean, it's kind of like, it's a very, very different scale and different business, but it's a little bit like the Spotify adding podcast to a music. But like, we have this audience that is like, traditionally very tech focused, we have this format that we've refined. And now we're like, well, okay, if we bring something else into it, is that going to expand it?

Yeah.

But I will say, unlike Spotify, which you can by virtue of being a tech platform, you can aggregate a bunch of different audiences and then let them choose their own adventure on a really broad platform.

We choose the adventures.

We create these serial episodes and so if we go on a bender and do like, we just did Lockheed Martin, and it hasn't, hasn't come out yet, as we speak. But we could have done eight Lockheed Martin episodes. And we chose two particular stories to tell, and we called that the Lockheed Martin episode, yeah.

We did two and a half episodes on Nintendo, two on Nintendo, one on Sega and we had a blast. And people who love video games had a blast. But by the time the Sega episode came out, the people who don't love video games and video game history had stopped listening. Right, right?

But sort of diving deeper on that, I'm curious, then would it have been that much more effort for you guys to produce the eight, or did you have the content? But it just didn't make sense from an audience point of view.

I think we had high level concepts in our head for eight, but it turns out most of the work is the last 10. Yeah, yeah, it's like that, it's like software engineering, where, like, there's the first 90%.

The last 10 20, yeah.

There's usually one thing on the cutting room floor, though, so we're playing with this idea of shorts. What we did for Sega? If in approximately one hour, can we take one thing that just we couldn't squeeze it in and tell one more story?

Yeah, I was just thinking about sort of touching upon where we sort of were a little while ago, about sort of paid versus ad supported. I bet you that there would be a very small one, but there would be an audience that would listen to all eight. Whether you want to spend all the time doing the eight is a totally different question. It seems to me like the best creators just pursue whatever they're interested in.

It's funny. U.S. Joe Rogan Lex. At the same time, that short form is having a breakout moment, extreme long form is also having a breakout moment.

We want your views on this, on our very small scale. Like we're struggling, like we haven't acquired TikTok, we're on YouTube shorts, we post on Twitter, and like, none of that drives the needle for us.

Or, in many cases, we do know it translated to a single new subscriber.

A single new subscriber?

Welcome both of you.

Thank you for staying with us. At the same time, you are at least on the podcasting side, the home of long form content, and you just launched the new Wall Street. All thinks it's the TikTokification of podcasts.

It's the new home screen.

The new home screen, Yes.

Yeah, yeah, both extremes seem to work. I believe one of the biggest problems we have in this new creator economy is the one of attribution, right? So many creators, like you have or try many of these different platforms and use it. But, you know, and they can see on each individual platform how well they're doing. But it's very hard for them to understand what actually drives what.

Unless it's a radiohead song.

That is true, that is true, but you probably then know the brand and you know how to give it the time and attention to it. Because you're like, Well, I love Radiohead. I'm going to give this song a chance, and maybe not just one chance. I'll listen to it a few times before I make up my mind.

It's a much bigger commitment, though.

It is a much bigger commitment, for sure, but I may give it 10, 15, 20 minutes, right? Because I have that relationship. But if I've never listened to you guys before, that one hook that gets me in. How many people you, you know, in marketing, you usually had? And in early Spotify, we had eight people needed to have heard about Spotify before we were able to sign someone up.

Oh, interesting.

And so we realized that the geographical density in which that happened was actually a key sort of contributor and a timeline. So much of our early marketing efforts were in college cities in the U.S.

That makes sense.

You have, like consumers who are probably more attuned to music being a big part of their life. Small geographical areas. So we kind of bombarded it. We did a bunch of different things. It was hugely successful.

In retrospect, now, you know, God, how long, 15 years later, was it almost like a benefit that you had to launch geographically, specifically because of the label? Negotiations like that, you could really saturate Sweden, the UK before moving.

Oh yeah, for sure. We all believe that these like sort of internet companies that go global. Day one, that's like the right approach. I actually think 99.9. This is just untrue and false. The entrepreneurs have to revise.

You told the stories of, uh, you believed, and you told investors like, Oh, we're going to be live in the U.

Yeah.

You must have been so stressed.

Yeah, uh, well, I had many, uh uh, many of those episodes, and it always followed with enormous weight gains, uh, and hair loss, that was basically.

You literally ripped your hair out.

Yeah, pretty much like I started. when I started, I had hair, and then like, two, three years later, I didn't have hair.

When you started Spotify, you had hair, yeah.

Whoa, yeah, there's like old pictures, um, of me with hair, like from the first um year or something, and then it kind of all disappeared. Wow.

Was it worth it? was it worth the trade?

Um, well, uh, so uh, obviously I, I, I, I think it has been, but obviously I, I can't recommend. Um, it is an emotional rollercoaster. You guys know this. Being an entrepreneur, it's not for the faint hearted. And I think every really successful entrepreneur, in my opinion, has had at least three near death experiences with their company. Right where you just feel like, I'm not sure whether this thing is going to work, not work, uh, whether we're going to be alive tomorrow or not.

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Um, this was 2014.

2014.

Weirdly enough, no, uh, that, that's, that's the crazy part. Uh, with it, it, it. It was one of those where if you'd asked us, uh, externally, it felt like this massive vent. But if you, if you were inside of Spotify at that moment, uh, there was no one who thought that. That was sort of the defining moment we certainly worried about. Okay, well, is this the beginning of, like, more artists, um, sort of pulling out, et cetera? Um, for a few days, um, and and then, you know, I spoke to a lot of artists. But, um, I think, uh. There were certainly a lot of skepticists about Spotify at the time. But but generally speaking, there had been enough things in Europe where people really saw, like, no, actually, this kind of works.

Yeah.

Uh, but she was certainly one of them.

Was that because of the demographics of her, uh, audience?

I think so. But also she on her own, um, can basically control the zeitgeist, right? Like she can decide that this is a big cultural moment. Taylor Swift Yes.

I stayed up till midnight.

Yeah, a lot of, uh, I don't know if it was hundreds of millions, but certainly tens of millions of people. Literally waited and sort of, she got them in on the hour, uh, and it was like each hour was another sort of gift. So she played that to perfection, um, and she's really remarkable at understanding how to speak to her audience, um, and she does it authentically.

Was there something that changed between 2014 and when she came back on Spotify? Uh, where it may have made sense for her not to be here in 2014? But then, in 2017, or whenever that was that, she came back, that the world had changed enough where it did make sense. And how did the relationship between, like, did you actually talk to her? like, how did that all go down? yeah.

I think the predominant thing that changed, uh, was streaming just became the majority of the industry in a bigger way. So, uh, if the option was like, Hey, am I on streaming or not on streaming? Do I think she could have reached number one at that point? Without streaming? Probably not would have been the answer. And and she's super smart.

Um, and kind of to your point. Like, even in 2014 in Europe, that had already happened, but it hadn't happened in the U. S.

No, it definitely hadn't happened. In the U S. we were much earlier. I mean, Spotify at that time was like, shy of three years. in the U S. streaming penetration was relatively low. Radio was like the the predominant thing.

The intersection of Like Charlie Munger and Little Wayne and Costco.

Costco sells more chickens than anyone in the U. S. in the world. Costco just is an unbelievable distribution channel if you can get it.

Yeah, and we were talking about it before, but, uh, Starbucks and Howard Schultz was actually one of the biggest retailers of CDs. Uh, in the U S. That's actually how I met him the first time. Oh, really, yeah, because they were, they were, um, uh, becoming a partner of ours.

That's right, you did a partnership with Starbucks.

Um, exactly at that moment and got to know him. Um, spend some time with them. So, yeah, I mean, the world just looked very different, uh, back at that time, and I think that changed. And, and yeah, I mean, uh, ever since, uh. She's been great with the team and and she's super smart.

That was our big takeaway from the episode was just like, she is really, really smart.

David and I were talking before this episode. Are there other artists that you've got an interface with where you walk away? And you're, like, better business acumen than any founder I've met, any investor I've met.

We've kind of become obsessed with, like, who are people who are top of their game artists and top of their game business people?

There's quite a few of them, um, because I actually believe. These days, if you consider a mega artists of that stature, it's like they're their own enterprise and they're the CEO of that enterprise. There's, there's, there's, certainly have people who help them, but at this level today, there's almost no one of them. That's not very active as well on the business side. And understand deeply what their audience wants, what's authentic to them. Um, by making Move X, how does that affect that relationship? And what's super cool to me is that, you know you, you have everything from from the Taylor Swift's of the world. Um, and then you have, um, something like BTS, which is like, insane.

And how are they different? Cause they're reason, they're same order of magnitude scale, right?

I don't pretend to know all of Taylor Swift's business sides and who's involved in everything. Um, but from from what I would guess is, she probably runs with a pretty lean team.

That's what we heard when we were researching the episode.

Yeah, um, and that's certainly been our interaction with her. It's like, very tight, uh, very lean, um, and then if you think about, um, uh, something like BTS. But I actually quite a lot of the Korean artists, it is like an industry, it's huge.

The talent development, too, like the pipeline to go from you enter into the k-pop system to you become a member of XYZ group is, uh, yeah.

Well, that that that could be your next deep dive. Because honestly, it is fascinating how they do it and the 360, how they think about it. Not just from sort of maximizing their recorded side, but actually thinking about sort of fan development. Uh, all the digital platforms, they have their own developers, uh, programmers building specific platforms, it's it's pretty cool.

One thing I'm really curious on that we hadn't thought about before we came here yesterday to Stockholm, when we were talking with other folks on the Spotify team. I'm curious, in this lens, what, uh, the past few years have been with Bad Bunny and Reggaeton, and I've heard you talk about that. Like, you knew from the data on Spotify that this was going to be huge, and now I think it's the largest genre on Spotify.

And many of our listeners will not know either of those two terms. You just threw out.

And I think this is a broader trend, right? We're now living in a very global world. Uh, when it comes to culture, um, at the same time, there's still a lot of local nuances, right? So, um, it's this extremity that we talked about on the one end. Um, you have this super, super niches, um, that exists, but then once every blue moon, one of these niches kind of develop into something that's actually quite sizable.

Because before a platform like that, obviously like it could happen, and maybe there are examples where it did, but like, that's like, it's just so, maybe maybe the acquired audience. Not as many people know Bad Bunny, or, like, know the lyrics to his songs. But, like a large portion of non-Spanish speaking Americans, and like non-Spanish speaking people around the world, know all the lyrics in Spanish to Bad Bunny's songs.

They may not know what the lyrics are about. Yeah, that would be a very different thing. There's a lot of local cultural things that seems like, what is talk about? You know, someone cheating with this one, all these kinds of relationship stuff?

It's clearly they're tapping something innate to humans, independent of culture, which absent data. If you were to ask me and say, hey, do you think that someone is inventing a brand new genre of music today? Do you think it's going to appeal to people similar to them, or all humans equally? In some way, I would probably tell you like, no, it's more about nurture than nature.

Yeah, yeah, it's like we're talking about on the Nintendo episode. Like, there are always only going to be a handful of Shigeru Miyamoto's in the world. But until recently, and in the gaming industry, it's still pretty much the case. Like, you need to also have the luck of being be in the Venn diagram of a Shigeru Miyamoto who happened to be the arcade cabinet designer at Nintendo. In order for, like, the possibility of Mario and Zelda to happen, and like, in music and podcasting.

I think that's so interesting. I was talking to Ted Sarandos about this, he's on our board and this was a number of months ago. But like, if you think about filmmaking, it's still. As you said, one of the things about Nintendo is you have to have the resources enabled to build a game, and that's still not cheap.

Yeah, very socially connected people hanging out in back lots in L..A. part of the studio.

And it probably mattered a lot not to diminish any of their talent, but it probably mattered who you knew was an integral component and having talent. So you kind of had two different things. But in the last few years, as the budgets have expanded. And certainly in the Netflix case, it would have been physically impossible to just keep this same set of producers, directors, et cetera, right? Because they're just trying to make so much more content.

There are a lot more people who are failing, but there are also a lot more people who are succeeding. Like, the total pool is so much bigger.

Yeah, and I think that's podcasting is like much earlier in its maturity, yeah, so we may not hear it, plus we don't have this sort of.

Having a whole orchestra is the AAA game equivalent.

Yes, exactly, and so obviously, very few could do that. But also the process, the creation process, was insane because you needed to do so much. And then, you know, you move forward. And think about sort of the era of playing instruments and take jazz, which is highly technical, right? Every single member in a jazz band is excellent at their instruments, right?

It turns out that technical musical proficiency may or may not be correlated with making great music.

Exactly exactly my point. But he actually had a different tool, he had software, right, and he's actually he was really good at that software.

Oh man, we were like having just like our faces lit up. We walked in this studio. And we're like, we think we are like highly technical podcast producers, we think we're like top 0.1 of them. Well, I think we are, I think we are.

Yeah, we're very fortunate and it's a lot of fun because artists love just hanging out here, too. Because we've got kind of everything that they like to use and to do. But my point is, I mean, if you think about it. It is a kind of a very technical workflow that takes a lot of time to get into. And some of the parts of that workflow. You'd have to watch probably hundreds of hours of YouTube videos to even decode or how to do it and like, start getting into it.

And it might be less capex and less equipment. I mean, you hear the rise of the apartment music producer on the laptop. But it still takes an enormous amount of self-training, mastery, creativity.

My opinion is it takes a little bit too much to get started, like it's quite a barrier to entry. Still. I mean, if you just want to make something like Super simple, it doesn't take a lot, there's all Smule and all these other apps, you can probably make something.

How do I install the PHP server? Yeah, exactly, I got bad news for you.

Yeah, it's changed a lot, right? And so the amazing thing is I, just for the fun of it, like, wanted to start doing stuff and I asked Chatgpt to help me. And pretty much on a few hours on a Sunday afternoon, I was up and running. And because of that sort of starter help, I had my own sort of environment set up, I was contributing code.

Did you contribute code to the Spotify code base?

No, they won't let me do that yet. So I got a little bit more work to do before they allowed me to do it.

You gotta pass a coding test.

Yeah, I think, out of spite, they probably won't let me do that anyway, they pride themselves on not. I don't have any access to any of the actual systems. But it was such a liberating feeling because it made the re-entry for me so much easier and so much more enjoyable. And so I think about that.

This is kind of like already happened over the past few years in podcasting, too, right? I don't know. you probably know better than me, millions of podcasts out there, right?

Two million.

Two million plus, I'm sure at this point.

It's about a little bit more than double that now, really. Yeah, yeah, whoa.

So it's kind of like, these are numbers, like, you're talking, there are four to five million people out there that are like, I can make a podcast.

Yeah, and right now, obviously that's a manual process where we have to hire voice actors that reenact that. We have to kind of tweak the script a little bit to make it culturally relevant. And obviously, this won't be news to you, but perhaps to some of your listeners that, I mean already, probably today. It won't be as high quality and the cost would be too expensive to express this.

Well, I was going to say, as a so, you have X now? The AI DJ that speaks many languages.

Well, we've had him speak Swedish, for sure, and he obviously doesn't know Swedish. But it's only today available because the intonation is a little bit off, so it's really only English language content. And honestly, that's probably just a training problem.

Computer translated or humans re-recording?

I think it's humans re-recording it at the moment, but it's huge. I think it may have like 15 20 more subscribers, additional subscribers, not more than what the English language one has. So it's like a really big deal and I think that's like the next step, right? Like, where, where you know in your case, like, why wouldn't you take the LVMH episode and make it all in French or whatever?

It should at least be in French.

Yeah.

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I've been uncomfortable until now using any sort of AI for any seconds of audio. In our podcast, we always played around with the descript replacement of certain words, but then we never shipped it to production. Because I was always like, Eh? It doesn't sound quite as good and everything should be hand mastered and acquired. And then, for the first time on a recent episode, we used an AI tool that our editor found. It dramatically increased the sound quality of the episode based on the mic that the guest was using. And once you start doing that, you're like, Well, I mean, shouldn't AI do all sorts of things to our audio?

Yeah, I mean, I think we're only in the beginning, obviously, and that's hugely exciting for creators like yourself. But it's also scary, right? Because it's totally possible for us to make an entire episode where we're saying totally different things than what we're saying now. And it, at some point in the future, might be virtually indistinguishable from the real thing.

And platforms probably have a role to play in verifying authenticity like that actually raises the value of platforms because platforms like Spotify, YouTube, you actually can point to. We know for a fact that this was created by the creator, and we can stamp it and say that this, you know....

Or approved by the creator. Yeah, yeah.

No, no, I think you're entirely right. Which is why, you know, there's been a lot of sort of debate around the Elon Musk, the subscriber thing. And actually, as usual, when you tease it out, there's many different things in that controversy. But perhaps the most potent and most interesting one has been the one around the notion and idea around like staking as a way of reducing the bot thing. And I feel like so much has just ended up being sort of, hey, do I have to pay in order to reach my audience now? That kind of switcheroo?

Twitter's so interesting that we were talking with a friend who's a creator peer, but his platform is Twitter, and you can't monetize Twitter like there's no rev share traditional social platforms like that. You've kind of got them on one end of the spectrum, you've got Spotify, well, maybe Spotify podcasting, and then Spotify Music at the far end of the spectrum, and you've got YouTube kind of in the middle.

Yeah, I mean, our goal is to be the best partner of creators, not the only partner, but just the best. And win by basically not forcing the creator to do something, but just offering a really good way for creators to work. Low friction, but also lots of potential to customize their business the way they would like to. I think for some creators, the monetization aspect is absolutely critical. They may even be a gatekeeper or a gate between them, doing something on that platform or not.

Well, you have to. You can't have a business model on Twitter.

Yeah, you can't do that, but the question is if that's truly a creator, or you could argue VCS. A lot of them have Twitter as their marketing channel, right? Just top of fun.

And podcasts.

Yeah, there are many different ways and the needs are different. Which is why, for some of them, they would probably happily forfeit all the monetization because they feel like they have such a strong other business model on the backend.

Customization Point is really interesting, too, and I think that's the really interesting nuance about YouTube. Because on the one hand, I think YouTube for creators is amazing. Because you can completely abstract the business, you just make the content and they take care of the business and you get a check. On the other hand, I can't even remember if we have YouTube ads on acquired content, I think we don't, because do we want a sprite ad in the middle of this?

Most of us, as platforms go, we have to start out very simple with our models, right? And it takes a long time to then change that default setting. But I mean, as I even talked about in music, it had to be very binary, you had to be on or you had to be off. There was kind of no in between.

Almost assuredly, no.

Right, as evident, actually, by shorts, that works a little bit different on their platform, right? and they're all different, too, because shorts, obviously. You have many more potential impressions over a shorter period of time, and an average YouTube video has been x minutes.

What's cool is this is true at scale now, too. I mean, Taylor Swift monetizes through everything you're talking about, the same way Mom-and-Pop coffee shop does, she just does it at scale.

And it's necessarily had to be, because streaming, while at first it looked risky and then turned out to be.

Yeah, the music industry is healthier than it's ever been before, but certainly when you think about it from a singular artist point of view. There was a point in time where the majority of the revenue could be derived from recording music. But the challenge to that? What I would say is that the time in history where that was true was actually very, very short, right?

It was the heyday of the CD era, right?

Yes.

It wasn't true back in the radio era.

And so the question is, what's the analogy? Was it that that's the right model, or was it actually that having multiple revenue models was always the answer? But there happened to be a moment in time where recorded music was sort of the prevalent revenue source. And I don't know, I mean, I certainly don't say that to try to shy away from sort of our role.

Or Joe Rogan?

Or Rogan, or whoever. That are really deep on whatever they're passionate about, and they're able to get across the microphone and having lots of people that can resonate with them.

That opens up like so much more opportunity. One of the things we learned on the LVMH episode is that Rihanna became the first female recording artist billionaire because of Fenty Beauty. And like, imagine that in the CD era, like that wouldn't have happened. Oh yeah.

And that's the insane part, too, right? Because that fame, in a way, it doesn't necessarily. If you think about Elvis Presley, what time did it take for Elvis Presley to get to a billion people that had heard him? I don't know, but I would venture to say it probably took a decade, at the very least maybe two, for him to do that. And sure, it was worth a lot that billion then.

Which J.C. sold his champagne company to LVMH recently. 50 stake.

Yeah, but back to that. They're incredibly talented artists and they're incredibly talented business people as well.

Yeah, well, as we start to wrap up here, there's one question that I've really wanted to ask you, which is, as I've studied Spotify over the last month and a half, preparing for this. It seems like you guys have been very intentional about the way that you grow and having a completely different strategy. To add. Each next hundred million users, you guys are now over 500 million users. A I didn't know the scale of that before I started researching. It's pretty unbelievable.

Yeah, I think it's a very astute observation that you're making. And that it's not been sort of being able to just ride on this macro tailwind and just do that. But actually, it's been many different things that's driven the success of Spotify. And the way I oftentimes talk about it is if you think about an exponential curve, if you really zoom in on that exponential curve. It actually is like a lot of different linear curves stacked on top of each other, that creates that kind of exponential curve. And this will sound like a little bit of a cliche, but what I've really realized, perhaps even in just the last two, three years more. I knew that I could talk about it, but I hadn't truly internalized it is to be intentional about the culture you're building.

You got on stage to the public and said, we have audiobooks. I don't think it's great right now.

Yeah, and it's true, and it's not great right now, but we will make it great. But that's a different culture and that's one where we're iterating on.

The common wisdom was anybody who's starting an online music thing, it will die. And I think you sought advice from hundreds of people who all told you don't do this. This category is toxic.

Yeah, you're exactly right. But also because we were kind of doing this in Europe for the first few years, we started getting some real first learnings. And I think this is like, really key. Because if you think about the ones we talk about as iconic companies, the Apples, the Amazons of the world. We all tend to forget a few things. But one is that many of them are quite old at this point.

Thought from you, because it so matches something that surprised us from the LVMH episode. It's just like all of those brands which are like, you know, the most iconic things, you know, both owned by LVMH and ones that aren't like Hermes. And you know, they are all end of one, you can't copy them, they don't copy anybody else.

Anybody else? Yeah. And I have to imagine it's hard for you internally and that it takes a decade or two to figure out what it is. That makes you special, too, because when you started, you were the company that figured out how to make it so.

Yeah, and that's why I said, I mean, I used to talk about culture. But I would honestly say it was probably two, three years ago where it really clicked for me. Like, oh, that's what it actually means. It's not 20 work time, that's just an expression of a culture.

Well, Daniel, thank you so much.

Thank you guys for coming, really appreciate it.

Thank you for hosting us.

Of course.

Well, listeners, thank you so much for tuning in for this conversation with Daniel. We'd love to hear what you think. Of course, in the slack at Acquired..fm Slash Slack, where we're always hanging out discussing episodes after we release them. But there's a new Spotify feature that we've been playing around with, too. David, What is it?

Yeah, Spotify just launched this at Stream On recently. There is a question on the page in Spotify app for this episode that says, What did you think of this episode? And you can reply and leave your thoughts right there.

Awesome. Well, thank you so much. Listeners, check out in any podcast player ACQ2 with awesome recent interviews and many more to come. I think we have the best interview lineup that we've ever had here on Acquired Coming Up, so subscribe to ACQ2 to get access to that.

We'll see you next time. Who got the truth? Is it you? is it you? is it you?