Spotify CEO Daniel Ek: Once the Music Industry’s Slayer, Now Its Savior
The Swedish entrepreneur built his business by proving its value to artists and record-label executives
Days before Spotify Technology SA would debut as a publicly traded U.S. company, its Chief Executive Daniel Ek retweeted Taylor Swift.
In 2014, the singer had pulled all her music from Spotify in a dispute over streaming revenue. On Thursday, she tweeted: “New video for
#Delicate at midnight EST tonight. Only on @spotify.”
Mr. Ek added a few fire emojis.
Ms. Swift’s decision to release a video solely on Mr. Ek’s Spotify is perhaps the ideal endorsement for investors in the music-streaming service and a sign of the CEO and founder’s rare ability to turn even his most ardent critics into allies.
“Daniel’s true genius as an entrepreneur is his unique ability to have moved from the disruptor of an industry to the savior of it,” said Gregg Lemkau, co-head of the investment-banking division at Goldman Sachs Group Inc., GS 1.00% one of three banks that advised Spotify on its nontraditional IPO.
At an investor meeting in New York during the run-up to Tuesday’s IPO, Mr. Ek described the company’s mission as the “hard work of helping one million artists live off their art.”
With Spotify going public, that work will be done under Wall Street’s magnifying glass. The 35-year-old Swedish CEO faces the daunting task of making his company profitable while fending off streaming competition from tech giants such as Apple Inc., Alphabet Inc.’s Google and Amazon.com Inc. Investors are counting on Mr. Ek to innovate and differentiate Spotify’s offerings and gain a foothold in scaling the service onto users’ smartphones in new markets.
Mr. Ek and other Spotify executives declined to be interviewed for this article, citing, among other things, a SEC-mandated quiet period ahead of its IPO.
The music industry’s overall revenue declined 40% between 1999 and 2014, but it has rebounded since then. Mr. Ek, who speaks softly but directly, told potential investors that is largely because of Spotify.
The service, which has 71 million paid user accounts, has paid more than €8 billion (about $10 billion) in royalties to artists, music labels and publishers.
Business partners, friends and associates say Mr. Ek’s message about Spotify’s value proposition for artists and consumers—and his low-key persona—have stayed consistent since he founded the company in Stockholm in 2006—well before he signed Spotify’s first contract with a music label.
“When I first met him, he could completely articulate how this could affect the music industry and what the world would look like,” said John Lindfors, managing partner of DST Global, an early Spotify investor, and previously the partner in charge of Goldman Sachs’s European tech franchise. “I was shaking my head about his crazy ambition, but what he said at a meeting in 2007 has turned out to become true.”
As a teenager in Sweden, Mr. Ek played guitar and wrote computer programs for money. By 2006, in his 20s, he had achieved a fair degree of wealth—and minor celebrity in Stockholm—through his work in the tech industry and selling an internet company he built to a larger competitor.
People close to him say he is steadfast in his belief that technology and transparency will win over the old-school music business. He avoids the limelight, sometimes pulling a hat over his face when walking around his home city.
“The record-industry executives were cultural icons in their own right,” said one former business associate. “Then there’s this soft-spoken Swede who is a complete tech nerd coming in to change the industry.”
Mr. Ek’s plan has been straightforward from the beginning: Consumers would pay a monthly fee or listen to ads for access to essentially all the music in the world. Spotify would negotiate with labels and pay royalties to stream their artists’ songs. But there was no precedent for a model of music consumption that didn’t rely on consumers buying and owning their music.
Musician and tech investor D.A. Wallach joined Spotify in 2011 ahead of its U.S. launch and was tasked with getting artists on board.
He said Mr. Ek was willing to endure long negotiations with skeptical musicians and music executives. The sticking point in those deals has been Spotify’s free ad-supported tier, which delivers significantly less revenue for the company and musicians—but attracts many more users—than the premium service. People close to Mr. Ek say he rarely compromises on things he is convinced of, the free tier being chief among them.
Mr. Wallach said Mr. Ek understood that the best way to woo the industry was with paychecks.
“Daniel really set the tone to just put up numbers,” he said. “And he’s delivered on the promises.”
Ms. Swift and others in the music industry have criticized the amount of money Spotify doles out to artists. Some musicians still hold out entirely from streaming services, and others, including Ms. Swift, have temporarily withheld new music to bolster album sales first.
Some in the record industry remain critical of Mr. Ek, frustrated with recent high executive turnover—particularly those responsible for striking deals with labels—at Spotify. Negotiations, people familiar with the matter say, sometimes stall to the point where Mr. Ek has to come to the table to reach a deal. Following the most recent chief content officer’s sudden exit from the company in January, Mr. Ek has assumed those responsibilities, according to people familiar with the matter.
Investors, bankers and business associates say Mr. Ek, who sometimes conducts meetings from a sofa, is much more accessible than most CEOs of highly valued private tech companies. He is known to respond to emails and texts at all hours, and they say his “egoless” personality and focus on his family distinguish him from most U.S. tech entrepreneurs.
He is often seen at playgrounds near his home with his children in the evenings and values family time. People close to Mr. Ek have raised questions about how Wall Street will view his leadership style when Spotify is traded publicly in the U.S., where expectations around executives’ work habits can be extremely demanding.
Scott Borchetta, the CEO of Big Machine Label Group who traded public jabs with Mr. Ek alongside Ms. Swift, said he and Mr. Ek mended ways when they met about 2½ years ago.
“There are a lot of things we actually agree on. We’re just going about them in different ways,” he said. “For there to be a healthy Spotify and Apple and Amazon they’re all going to have to figure out the value proposition—they have to convince people to convert to paid subscriptions.”
As for the music industry, he added: “We can’t put the streaming genie back in the bottle. We’ve got to accept and embrace the way that people want to listen to music.”
