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Daniel Ek

The Spotify founder is looking to what the future of the music industry will hold, and how he can play a leading role in transforming it.

Music, computers and entrepreneurship have coursed through Daniel Ek’s veins from a young age. He got his first guitar at four, his first computer at five, started his first business at 14 and was earning more than his mother and father combined at 16. It then came at little surprise when, at the age of 25, he launched his online music streaming service Spotify in 2008. Only five years later, it seems that Spotify has forever changed the way we consume music.

The young entrepreneur is part of the first generation that truly came of age on the Internet. Ek was also lucky enough to grow up in Stockholm, where fast broadband and mobile connections arrived a decade before they were widespread in New York. “I saw it 10 years before everyone else did,” says Ek. He says that it’s this insight into the behavior of a new generation of consumers that pushed him to take risks later on, even when industry heavyweights mocked his ideas.

He sold a start-up online marketing company to TradeDoubler, another Internet marketing company, in 2006. When Ek stopped working for himself, he quickly found that it wasn’t his cup of tea. It is during this period that he, along with TradeDoubler’s founder Martin Lorentzon, met a Ludvig Strigeus, a developer who had built a file-sharing client called uTorrent.

Anxious to get back out on his own, Ek quickly partnered up with Strigeus to begin developing their new idea. While Strigeus began working on what would later become Spotify, Ek briefly served as uTorrent’s chief executive. The challenge with Spotify, however, was not so much technical as legal.

Geek turned Lawyer

When Ek first approached the recording industry, they were still locked in legal battles with file-sharing sites like Napster, which had become synonymous with the downfall of an industry. “When I walked in there and told them that they should give away their music for free, hop[ing] someone would eventually want to pay for it,” he remembers, “that was a pretty tough proposition.”

Ek, though, has never been one to stand down when a challenge presents itself. When he was turned down for a job at Google as a young man, Ek decided to start his own competing search engine. “That obviously turned out to be a lot harder than I’d thought,” he joked later on.

Spotify argued that that they could supplant piracy, but the industry was concerned that the company’s subscription revenue stream could not offset cannibalised CD sales and digital downloads. Ek’s bet was that if Spotify offered high quality streaming music to users for free, they would pay money for the convenience of having advertisement free streaming and mobile and off-line services.

Spotify was finally launched in Europe in 2008 offering users a vast array of some 20 million songs. Persuading record labels to license their songs for the US took longer, the service not launching for another three years in 2011. By last count in March 2013, the service had 24 million active users in the over 30 countries where the service is currently available, including 6 million subscribers paying up to €10 per month.

After a decade of sales declines in the music industry, the downward spiral appeared to bottom out in 2011 with executives hoping that 2012 would mark the end of record labels’ darkest period. However, Nielsen statistics show a 4.6% decline in overall sales for the first half of 2013, as well as a 2.3% decrease in digital sales during the same period.

It’s becoming increasingly clear that music downloads will be replaced by streaming alternatives. Even Spotify dispensed with the download service it initially offered because of low download volumes. Spotify and other services, such as the French Deezer have stalled music downloads. Even Apple is tapping into the streaming craze with the recent launch of Apple’s radio service.

Despite the dizzying success of Spotify, Ek is not one to cash in early. “What I want to do with Spotify is complete this thing,” he says, “we’re just at the beginning of this journey … This is the time to invest.” Ever conscious of staying in tune with emerging generations, Ek is not shy about going against his own gut when young employees disagree with him about something.

His younger brother, who has just turned 20, has a completely different understanding of online behavior, he says, even though less than a decade separates them. For example, his brother is a strong proponent of wearable technology, such as Google Glass, while Ek is unconvinced to say the least.

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