Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.

Spotify CEO Daniel Ek

Spotify CEO Daniel Ek

Wed, 17 May 2023 17:32

We sit down with Spotify CEO Daniel Ek live in Stockholm at Spotify’s amazing HQ studio (check out the video version of this episode — which plays natively on Spotify!). This was an incredibly special and timely conversation: for those who haven’t been paying attention over the past few years, after revolutionizing music Spotify has now ALSO completely transformed our own industry in podcasting. Starting from way behind with ~zero market share in 2018, Spotify has now aggregated the listener market and amazingly surpassed Apple as the world’s largest podcast platform — including close to home with the Acquired audience, where it has 60%+ market share among you all!

We discuss the origins of this “second act” strategy with Daniel, the vision to move from a music company to an audio company, and what’s coming next with Spotify’s entry into Audiobooks. And of course we relive some key moments from the Acquired canon that Daniel was involved in, including his pivotal conversations with Taylor Swift and her team convincing her to come back to streaming following the release of 1984. Tune in!

ACQ2 Show + LP Program:


Thanks to our fantastic partners, any member of the Acquired community can now get:


Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

Listen to Episode

Copyright © Copyright 2023 ACQ, LLC

Read Episode Transcript

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 talk into a journalist, et cetera, it's truly a conversation one, and the second part is there's enough time to actually elaborate on the thought and the idea. Whereas you have to be so succinct in how you express your idea, and truly get it across in 30 seconds, or like you lose the moment in a journalist want to move on, Brian Chesky is an example. He's like the master on it, and he just switches it on, and he's like so good. For some reason, he and I always end up getting on the same panel, so I'm like, it's game over even before it started. You're gonna have all the great stuff. 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. 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 after you listen to this episode in the acquired Slack, slash Slack. You should subscribe to our interview show, our second show, ACQ2. You can find it in any podcast player and we've had some killer back-to-back discussions with the CEOs of Retool and Angelist, both about AI. Now without further ado, this show is not investment advice, David, myself, and our guest may have investments or many shares in the companies that we discuss, and this show is for informational and entertainment purposes only. Now on to our conversation with Daniel Eck. We wanted to start with something kind of incredible has happened in podcasting. If you look at January 1st, 2019, we had less than 1,000 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 where 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 acquire 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, 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 100 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. And there's some parts that's true with that. But then more and more, what I've realized is also that actually internally, we probably have the best sounding board of a quite representative Spotify user and what they might like. And so one of my favorite topics is how often people gain more platform. For instance, in Germany, unbeknownst to us, but one of the sort of crazy things that ended up happening was just people started uploading audio books because it turns out that these musical labels actually own a bunch of audio book rights. And so as the platform was taking off, they realized what else can we put on this platform that gives us a leg up and creates more revenue for us. And they realized that they have this catalog of audio books sitting on there. So I think that was kind of one realization where we kind of realized, hey, this platform, it doesn't seem to matter all that much what we're putting on. And people just like consuming content. And then I and others that Spotify, we were big podcast listeners ourselves. And we love that. But we hate the fact that we had to switch app from our normal one. We hate the fact that we couldn't get the recommendations working. We hate the fact that we couldn't get this work on my car speaker or my home speaker and all these things that we spent literally a decade building for the music industry. So it kind of dawned upon us that podcasters have sort of the same problems that the music creators have. And we should be able to play a pretty big role. And all the primitives that we built for music should work really well in terms of discoverability in terms of ubiquity that we call, which is sort of our ability to play on any device. And of course, our freemium model where the ad supported and eventually paid models as well should be able to all work together. And so the craziest thing in the beginning was probably when we started talking about it as building it in the same app. That was what the biggest resistance was. Because the common wisdom at the time was obviously, well, podcasting has to be a distinct own thing. I mean, this was like the, you've talked about this before, the constellation of apps was like, 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 gonna 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 is 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 once we had tried on loading it for ourselves so that we could play around with the product, it was kind of obvious that this would be a great experience. And it's probably been the most interesting one for me where, and what I often tell other entrepreneurs is like, well, the fact that people doubt you in the beginning, you kind of need to pay attention to that and hear what valid concerns they may have. But a bunch of that is just like they're not used to the concept and it's going to change. But by the time it changes, it will have already passed over and not that you were right, but actually, well, of course, this is kind of obvious, right? So my favorite one obviously is streaming music where when we began doing it, I always got this sort of pushback of like, why would I want to rent my music? I want to own my music. 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 that means that technically, what happens if you guys don't want to have that song anymore that song disappears and people feel. It's so much about their music, like it's 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 had spent a decade plus learning about having separate apps. And we kind of said, no, no, no, it doesn't really matter. We can put it in the same app and actually people will love it even more because we're solving the same sort of user needs. 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 that 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. You bit quickly being able to play it on all these speakers made a lot of sense of having the same thing search. All of these things were basically shared infrastructure that we could utilize. And again, if you're searching for content, why you don't really care all that much about it on YouTube. And on one end, you're listening to music on one side, you had all these other short form videos and sports and so on. You don't think that those are distinctly different behaviors. So why do you think about it that way? And it's because you really think podcasting is a different format. But actually, it's audio, 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 audiobooks too, right? Like, what's the difference between an audiobook and a podcasting? Well, you would say shactoring and some of those stuff. We think of ourselves as like right on that line between an audiobook and a podcast. Actually, we love your help trying to solve this for ourselves. So we have recently realized that acquired is the canonical episode and video episode or TSMC or Taylor Swift. These are more like conversational audiobooks between David and I than they are podcasts. Yeah. For hours long, they drop infrequently. How does that kind of fit into what you imagine is the job to be done by audio? And is it an audiobook? Is it a podcast? My view, I guess, is that boundaries are, from a format side is definitely being blurred quite a lot and for right reasons. But the better way to think about audiobooks and podcasting is it's really around a business model, mostly. So one way to frame it in set would be podcasting is ad supported audio and audiobooks is paid audio. So for you guys, I mean, I also happened 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, et cetera. And obviously, the subscription thing could be as simple as like, hey, you're part of our other network and it doesn't cost money or you could pay gate it all the way through. But I think it's more of a business model that's the big format differentiation. Because as we said, like the quality, the mics we're using relative to an audiobook, there's no difference here. You're using like high quality camera equipment. Also very similar to more professional-styled and sort of do it yourself kind of equipment, editing, all these things. It's getting more and more blurred. Which is so interesting. So we've lived this over the past eight years. What podcasting is unlocked, and now it's 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 in a particular type of audience, we monetize so much better with the ad-supported content. But to make that unlock happen, it needed to become a mass medium. It's interesting to think about, would that change if audiobooks can access a mass audience in the same way? Yeah. And obviously our view is we eventually think audiobooks should be much, much larger than what it is today. Hundreds of millions of people who are actually listening to audiobooks because the content is great rather than today what's tens of millions of people. Is that the market size today of audiobooks? Yeah, we believe it's like tens of millions. It's one of the fastest-grown 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've 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. Exactly. 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 add-supported monetization probably better than the average crater 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. I've heard actual hedge fund investors literally have that as the sole input to their entire process. Just terrifying. Yeah. Well, not investment advice. 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 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 someone who's been saying that for 15 years. I obviously agree with them there. But I think that's true in all formats. Like, as I said, I think what's the difference between audio books and podcasting? There are definitely differences. But the formats are blurring. But the main one is the business model, as I said. So it's just it's talk audio, but with a paid or an add-supported business model. And I guess my advice to you guys would just be, I think you should kind of like explore both and see to an extent what's possible. Yeah. For our first sponsor of this episode, we have one of our favorite companies on acquired Statsig. Statsig is a feature management and experimentation platform that helps product teams ship faster. The founder, Vijay, was a VP and one of Facebook's most prolific engineers for over a decade. And the Statsig platform is based on the world class product tools they built in-house over at Facebook. It's unique because it combines smart feature flags with automated AB testing and accelerates results with advanced statistical methods like sequential testing and Cupid. Statsig is also the only player in the market that offers a full stack experimentation platform that's data, warehouse, native, and agnostic, giving product, data science, and engineering teams a flexible platform that works no matter what your data infrastructure is. Yeah. Like so many of our favorite companies on acquired Statsig is the epitome of the Bezos Maxim that companies should focus on what makes their beer taste better. Their core value prop and differentiation and use best in class third party tools for everything else. And Statsig is definitely best in class. Companies like Notion, Brex, OpenAI, Vanta, Versel, Cruz, Univision, and more all use Statsig to increase their product velocity. Plex, for instance, saw over an 8% increase in new user registrations with their very first Statsig experiment. And Notion uses it to manage their entire awesome new generative AI feature set. So with Statsig in your modern product stack, you can build a culture of data-driven decision-making with less overhead and focus on what makes your business truly unique. So if your company could benefit from increased conversions and engagement by leveling up your product infrastructure and really what company couldn't, Statsig is generously offering acquired community member companies 5 million free user events per month, plus a white glove onboarding experience, including migration support. Yes, go on over to slash acquired or click the link in the show notes to learn more and 10x your experimentation velocity and just tell them that Ben and David sent you. Thank you, Statsig. Thanks, Statsig. 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 in 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. I'm curious how early in your sort of dreaming about becoming a podcasting platform, did you start thinking about that, or was it purely product driven? 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 upset, 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 gonna be the right answer. So obviously we contemplated that and we thought about that, but the reality is, there's a lot of the grasses greener on the other side when you go too deep in that. So obviously on the one hand, if you deal with a lot of licensed content, and in this case, from some major labels, and obviously a lot of Indies as well, but still relatively supply constrained from some big ones, the natural tendencies for you to think, well, this is much better because all of a sudden, you have this sort of much wider scope of different creators, the matters, it's great, you, that means. To aggregate a fragmented market. Yeah, you can do the aggregation theory, that's all good and great. We don't really contemplate all that much. It's obviously, there's other challenges with that business ball, moderation. All of a sudden becomes a massive thing. You have to build an actual ad network that probably done the scales. So in theory, yes, you write, you may have an opportunity to gain more margin over time in this model, but fundamentally you have to do many more steps along the way. We don't have to contemplate, contemplation as much when it comes to music. We certainly don't have to have these very elaborate systematic processes about what constitutes speech and violence. And we knew that because I'd seen enough of these obviously platforms, but it is important because if you think about it from a P&L, so on the surface of this, these models are great, right? Because very high gross margins and so on and so forth. Great at scale. Great at scale. That small scale. Yes. But even at scale, if you think about it, is the cost increasing or decreasing? And if you think about, you know, 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. What 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 like 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, sorry, well, maybe that's not 100,000 anymore because they've been able to automate some of that process. But it's kind of 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 has 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 or a user or something like that. In hardware cost 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. And then eventually their growth rate probably slowed down enough where their monetization started kicking in and kind of scaled up enough where those two effects kind of took out each other and they became very profitable. But if you look at it now, I don't know what the cost would be, but if I would guess, if I would start a social media company today, the cost may be an order of magnitude more. Because of all the other things you now have to do. The ad platforms are way more sophisticated than you have to build. The moderation tools are way more sophisticated. Now, the good news, so you may then come to this and say, well, was that a mistake then? Well, we knew a lot about that going in. And we weren't entirely new. It wasn't like we were starting an ad business from the scratch, right? So we had already made it. We've worked with Facebook for a long time. Yes, that's true. 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 launch 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 sub-scale, you're never going to be able to access Unilever or PNG 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. So David's men. 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 throttling the base. So how do you think about that? Because you could just go serve your niche even better. Or you could try to, well, let's try to include other forms of content. How do you decide what type of content to go after? 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. Yes. 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 the niche. But then we did our Taylor Swift episode. We did the MBA. We did the NFL. And then we did LVMH. And LVMH, we got 40,000 new subscribers. And we were like, OK, to your point about something is hacked here. There's a new phenomenon. It's 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. You would never be talking about that. You're still that. And then it was. And so at some point, we expanded beyond just tech founders and engineers. It became venture capitalists also. And then it became their LPs. There's a bunch of university endowment folks that listen. And now we're realizing, as long as we keep making these really deep, really long, really esoteric stories and analysis, you can create smart content for smart people that is not scoped to a particular industry. And I think that that's our new definition of the job to be done from acquired. Yeah. I think it's brilliant how you're able to both 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. It's been even among what I would have not assumed would have been your crowd. I had a bunch of really old school value investors that I honestly didn't even realize. Listen to podcasts. They've been pinging me about it. And have you listened to this one? Which is pretty cool. So I think there's a way where there's probably some overlap between the audiences but also clearly attracts a new audience. I mean, it's a very different scale and different business. But it's a little bit like the Spotify adding podcast to a music that we have this audience that is traditionally very tech focused. We have this format that we've refined. And now we're like, well, OK, 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, Block Eat Martin. And it hasn't come out yet as we speak. But we could have done eight Lock Eat Martin episodes. And we chose two particular stories to tell. And we called that the Lock Eat Martin episode. If we went on a bender and did eight, then we were underserving a lot of our other niches. 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. 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 eights 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%. It's like software engineering where there's the first 90%. Then there's the second 90%. And I think so much of the work is the last 10%, 20%. There's usually one thing on the cutting room floor at those. So we're playing this idea of shorts, what we did for Sega. 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 eights is a totally different question. It seems to me like the best creators just pursue whatever they're interested in. And some of it will work. Some of it won't work. They don't really seem to care all that much. Obviously they'll learn from what seems to be resonating and not. But that's the cool part. We're living in an internet where on the one hand, everyone talks about this 15 second kind of clips thing and everyone's sort of getting down in that rabbit hole. But then at the same time, you could have like three, four, five hour long conversations in super aesthetic, very, very deep topics. And people love that too. It's funny. Us, 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, we're struggling. We have an acquired TikTok. We're on YouTube shorts. We post on Twitter. And none of that drives the needle for us. We've had videos on TikTok get a couple million views. And we don't know if it translated to a single new subscriber. Right. To the hotline. In many cases, we do know it translated to a single new subscriber. It's a great new subscriber. Welcome both of you. Yeah. 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. 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. So many creators like you have or try many of these different platforms and use it. 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. And I actually see both. I see some creators who are like under investing in other platforms that probably too sing literally just because they have success on one, they kind of ignore all the others. Which might advise to all of those is that feels kind of dangerous to do. Because if there would be an algorithm change or any of the kind, even unanticipated by the platform, because they may see that something resonates, watch time resonates, better with some other metric. It doesn't have to be skewed. It's an evil thing. It just could be something that actually benefits the user. But if you built your entire livelihood of that one platform, that could be a big problem for you. So I see them under investing in other platforms. And then the other one also be true, which is they're over investing in too many and not realizing that actually they probably would do better in just focusing more on one or two. And so I think that there's two different problems. I believe that for us and why we care about this and certainly why we designed the home feed, the way we did is because fundamentally how we merchandise content has to be very different for music than it is for an audio book or a podcast. And if you think about it, it's kind of logical. Because in a song, it's a three minute commitments of your time. And you can actually probably tell within the first 10, 15 seconds whether this is worth investing your time in or not, 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, love radiohead. So 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. And obviously, if you now think about that with podcasting, I mean, if I'm listening to you guys, and even if it's a topic I don't necessarily know that I'm interested in, I might give it a shot because it's you guys. And I trust you because I built up this report with you. 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 know, I'm 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 US. That makes sense. You have 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 that were hugely successful. In retrospect now, 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 to that? Oh, yeah, for sure. We all believe that these 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 the revise. We all are benefited from constraining ourselves to finding what our first audience is. And it could be geographically niched. It could be that it actually is, again, a subset of a demographic or whatever. But more often than that, it's actually geography helps limiting yourself to a city, to a state, to a country, whatever it might be. And so that was a huge part. I can tell you definitively, Spotify would not have been alive today. It had not been that we couldn't launch in the US as our first market. And if you ask me at the time, it was like a huge step back to say, well, I can't launch in the most biggest market in the world. And I'm running an internet company life. Come on. You told the stories of you believed and you told investors, like, oh, we're going to be live in the US in like three months. We're having the conversations. And then it was three years later. Oh, yeah. Yeah. You must have been so stressed. Yeah. Well, I had many of those episodes. And it always followed with enormous weight gains and hair loss. Basically, you literally ripped your hair out. Yeah, pretty much. Like, 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. There's like old pictures of me with hair, like from the first year or something. And then it kind of all disappeared. Wow. I don't know anything. Wasn't worth it. It wasn't worth the trade. Well, so obviously, I think it has been. But obviously, I can't recommend. It is an emotional role that comes to you guys know what 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, whether we're going to be alive tomorrow or not. And I kind of hate how media portrays this and sometimes how entrepreneurs were supposed to be sort of like we're so big, we understood everything from day one. It's certainly not been my journey. Like my journey was, I had a lot of luck. I worked in seedly hard to get to even half of where we were today. And then it's been a true sort of emotional rollercoaster. And it is true, what you say. But for me, had you told me how hard this would have been, I would have never done it. I'm happy I went through it, but I would have never done it. It's time to talk about another one of our favorite companies in the acquired universe vouch, the insurance of tech. Today, we are talking about vouch and artificial intelligence. Vouch is by far the best and fastest way to ensure your startup at day one. And because they're the only insurer that really gets tech companies, they're also the right way to stay insured and build your coverages as you scale. They have deep partnerships with and are recommended by Y Combinator, Carter, Brex, Vanta, and of course, acquired itself. Now, as you can imagine, there are all sorts of new business risks that accompany the incredible opportunities unlocked by generative AI. And most traditional insurers are nowhere near equipped to cover them. But not vouch. They are adapting coverages to offer protection for generative AI risks. Just as one example, vouch is building solutions to close the gaps in your tech errors and omissions policy for generative AI mistakes, which is something most other insurers not only can't do, but many specifically exclude it, meaning that if a customer or a user sues you for a mistake generated by your AI stack, you're out in the cold and responsible, not only for the damages, but also on your own for the cost and process of litigation in this brave new world of AI legal landscape you do not want to be on your own. Yep. Vouch is already by far the leading AI company insurer with over 350 companies covered, and they're just getting started. That you might say, hey, that's cool, but I'm not a generative AI company. The reality though is whether you realize it or not, you probably are, because many employees are using chat, GPT, and other services to help with their work. Yes. And when it comes to insurance choosing a partner like Vouch that deeply understands AI in this brave new world will ensure that you can get all the benefits of it while still being protected. Head on over to slash acquired and save 10% on your first policy. Or just tell them that Ben and David's AI avatars send you. Thanks, Vouch. Thanks, Vouch. We wanted to ask about, I wonder if you consider this one of those near death moments, but because we did the T-Sweft episode, we talked a lot about it on the show. The week that 1989 dropped, and Taylor pulled off the platform. Do you consider that one of those moments? This was 24. Yeah, 24. Weirdly enough, no. That's the crazy part with it. It was one of those where, if you'd asked us externally, it felt like this massive event. But if you were inside of Spotify at that moment, there was no one who thought that that was sort of the defining moment. We certainly worried about, okay, well, this is the beginning of more artists sort of pulling out, et cetera, for a few days. And then I spoke to a lot of artists, but I think there was certainly a lot of skepticism about Spotify at the time. But generally speaking, there had been enough things in Europe where people really saw, like, no, actually this kind of works. Maybe it doesn't work yet in the US. Maybe it's better for her to do this thing. But there was enough people that believe that that time, that it was only a matter of time before the US would be majority streaming too. The sort of way it's been portrayed oftentimes with Spotify in particular, has been like this sort of dogmatic, it has to be all in with me or not. And actually, that's not how I advise artists or creators. I always tell them like this kind of, and it's kind of unusual thing because everyone wants to build their own platform. And so on. But my firm view is that truly, I believe, and open as the model at its core. And so my view has been like, there's some artists that at that time, I don't believe it's true anymore, but like the Adales of the World, that probably benefited from physical scarcity. That probably didn't need to be on streaming. That probably should have done a windowing type model. The number of those artists were going to be very, very small. Yeah. But she was certainly one of them. Was that because of the demographics of her audience? I think so, but also she, on her own, can basically control the site guys, right? Like she can decide that this is a big cultural moment. Taylor Swift. Yes. It is remarkable. Not a lot of people in the world can get hundreds of millions of people around the world to wait for a moment. And she did brilliantly with this album launch too. I stayed up till midnight. Yeah. A lot of, I don't know if there was hundreds of millions, but certainly 10s of millions of people literally waited and sort of, she got them in on the hour. And it was like, each hour was another sort of gift. So she played that to perfection. And she's really remarkable at understanding how to speak to her audience. And she does it authentically. So she can do that. And there's definitely other artists that can do the same. But was rare is for her to have that kind of site guys and connection with that deep connection with that audience, the fan base that she has, how vigorous and how intense they are at that scale. That's the unique thing, right? Was there something that changed between 2014 and when she came back on Spotify, where it may have made sense for her not to be here in 2014, but then in 2017 or whatever 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 was streaming just became the majority of the industry in a bigger way. So 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 she's super smart. So she understood that. And kind of to your point, like, even in 2014 in Europe, that had already happened, but it hadn't happened in the US. No, definitely hadn't happened in the US. We were much earlier. I mean, Spotify at that time was like shy of three years in the US. Streaming penetration was relatively low. Radio was like the predominant thing. At that time, physical sales, I was still very big. I remember, I think it was Lil Wayne. That sold like three million albums in that year on Costco out of all places. Yeah. Yeah, it's some sort of demographic connection thing was going on. I love that, the intersection of like Charlie Munger, Lil Wayne and Costco. Costco sells more chickens than anyone in the US. Yeah. In the world, actually Costco just is an unbelievable distribution channel if you can get it. Yeah. And we were talking about it before, but Starbucks and Howard Schultz was actually one of the biggest retailers of CDs in the US. That's actually how I met him the first time. Oh, really? Yeah. Because they were becoming a partner of ours. That's right. We did a partnership with Starbucks. Exactly at that moment and got to know him, spent some time with him. So yeah, I mean, the world just looked very different back at that time. And I think that changed. And yeah, I mean, ever since she's been great with the team and she's super smart. That was our big takeaway from the episode, just like she is really, really smart. David and I were talking before this episode, are there other artists that you've gotten 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 because I actually believe these days, if you consider a mega artist of that structure, it's like they're their own enterprise and they're the CEO of that enterprise. 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 by making move X, how does that affect that relationship? And what's super cool to me is that, you have everything from the Taylor Swift's of the world and then you have something like BTS, which is insane. And how are they different? Because 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. But 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. And that's certainly been our interaction with the North-Hers, very tight, very lean. And then if you think about something like BTS, but actually quite a lot of the Korean artists, it is like an industry. It's huge. Just on the songwriting side, it's the difference between, if in Taylor Swift's camp, it's like two, three, four, maybe at the top. In some Koreans, it's 200 writers involved. And that's like a small part. And then you have everything from merchandising, there's another few hundred. 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. Yeah. Well, 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 maximizing their recorded side, but actually thinking about sort of fan development, all the digital platforms, they have their own developers, programmers, building specific platforms. It's pretty cool. One thing I'm really curious on that we hadn't thought about before we came here yesterday to talk on when we were talking with other folks on the Spotify team. I'm curious in this lens, what the past few years have been with Bad Bunny and Regaton. 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 in. And I think this is a broader trend, right? We're now living in a very global world when it comes to culture. At the same time, there's still a lot of local nuances, right? So it's this extremity that we talked about. On the one hand, you have this super, super, niches that exist. But then once every blue moon, one of these niches kind of develop into something that's actually quite sizable and you kind of start realizing that maybe this has a global appeal on top of it. So in Latin, as an example, gospel music is quite big and funk music is also quite big. Okay, well, that's probably not what you associate with popular music, but there are real things. And obviously they exist in microcosms elsewhere. Like you could probably guess in the South in the US, gospel might be a larger genre, et cetera. So it's not like it's totally kind of isolated and just happening there. But there's something that creates a sort of cultural resonance with those types of styles. And then you have something like Reggaeton. And it usually starts pretty small. And then actually in each cluster, it kind of like starts developing more broadly. And when you really look at it, like it has oftentimes a pretty huge diaspora outside of that sort of near region as well. So I mean, the Hispanic population, the US would be kind of an obvious one, right? And so many years ago, we kind of started seeing them breaking out of their natural clusters and becoming a pretty big thing. And it was for me at that time, it was just pretty obvious that if we invested in that genre on a global basis, we thought that that would have a global appeal. And yeah, because before a platform like that, obviously it could happen. And maybe there are examples where it did, but like it's just so maybe the acquired audience, not as many people, no 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 and Spanish to bad bunny songs. They may not know what the lyrics about, right? That would be a very different thing. There's a lot of local cultural things that seems like what? He's talking about someone cheating with this one and then all these kind of relationship stuff. That's the sort of local nuances. But yeah, I mean, yeah, that's the fascinating thing, right? But at the same time, you probably wouldn't have imagined MSG being sold out and like 20,000, if not more, people singing Korean lyrics that doesn't look Korean, by the way, like, and know every word to every lyric. And that's the amazing thing, right? Like when things catch on, it's music. It makes people feel there's something about the artist, there's something about how they're communicating, that resonates with you as an individual. And it is the foundational storytelling. We've always used music. It is so hard to describe art, right? Like we can objectively describe, oh, there's art, but how you feel, why do you feel a certain way when you're looking at a painting, why do you feel a certain way when you're listening to a song? It's really hard to describe that. And that's the amazing thing about what we're able to do. And the really cool thing is you're able to take the artist that otherwise, you know, perhaps, may not even have been able to be professional. And now they have a global audience. I don't know how to express it, other than that they have some sort of God-given talent. That's the best way I can describe this kind of genius when they're able to express these things in a way that it just resonates with people all over the world. Which, instantly, it's like, how do you do that? It's clearly they're tapping something in Nate 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, know it's more about nurture than nature. Yeah. Yeah. It's like we were talking about on the Nintendo episode. Like, there are always, I'm thinking of be a handful of cigarette mea-motoes in the world, but until recently in the gaming industry, it's still pretty much the case. Like, you need to also have the luck of being being the vent diagram of a cigarette mea-moto who happened to be the arcade cabinet designer at Nintendo in order for the possibility of Mario and Zelda to happen. Yeah. And in music and podcasting now in this world, like, everybody has the opportunity, not everybody's a cigarette mea-moto, not everybody's a bad buddy. Most people aren't. But you have the opportunity to be one. I think that's so interesting. I was talking to Ted Sarandas 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 in able to build a game. And that's still not cheap. And it's expensive. And back in the day, maybe you had to build the entire console in order to even have a chance of doing it. But these days, you still, like, a AAA game is a few hundred million dollars. Yeah. Very big productions. Five years. Very big productions, right? And sure, you can build an indie game and so on and so forth. But it's still a very limited number of people that are able to do that. But even in filmmaking or in TV series, the amount of people that used to be able to be showrunners or producing or directing these things, it was fairly limited group of people, right? Yeah. Very socially connected. People hanging out in back lots in LA, part of the studio. And it probably mattered a lot, not just to diminish any of their talents, but it probably mattered who you knew was an integral component and having talents. 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. So one of the interesting things is the same thing is happening now where there's lifetime directors and producers, not just doing sort of local productions, but actually now coming to Hollywood and doing that as well. And I've seen it in my case, there's been a bunch of Swedish writers and producers and actors now that are getting into Hollywood productions. And it's been fun to see. And not just the usual names, but actually like some more unknown talent making its way as well. And there are more people trying, but there are also also more opportunities. And then obviously, as you mentioned, on the podcasting side, the same is through there, but it's true on both sides. That's a crazy thing. But there's also more competition, which is, I think when people are talking about spotifying, criticizing it, that's the part I think is the biggest misconception. Because they hear so many people who are trying and it doesn't work where they're not making a lot of money of it. They're naturally sort of drawing the conclusion that, hey, there has to be something wrong with the model this model can't work. But in reality, both things could be true at the same time. Right. There are a lot more people who are failing, but there are also a lot more people who are succeeding. Like this 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. We don't have this sort of, I'm not sure a podcaster sees it as it's sort of given that monetization is there. And it needs to be there from day one. Whereas I think obviously with the professionalization of music, that's a much bigger part of the expectancy. But that's actually a kind of relatively limited part of our human history. It's not been, you know, it's probably the less than 100 years that we've had recorded music and it being a forum. And yet it's part of the copyright regime. It's part of like some pretty important loss. So I think it comes with a different expectancy. And I'm not saying that's wrong. I'm just saying just the arc of history. And I was actually going to latch on to something he talked about sort of being creative to. One of the things I often think about when you think about sort of the history of music, going back to it at the time of Mozart, if I wanted to create music, the reality is I had to be a musical genius. Because I needed to hear every single tone in my head, every single note. I needed to hear all the different instruments, how they would all play together. I could write them down, but I could never hear them all being played at once. Right? Many times the composers of that era, they were only able to listen to their actual compositions like a few days before the actual concert that they were doing and then making small tweaks. But by that time, it had to be pretty perfect. And so sure, they could play a little bit on the piano, but then they'd kind of needed to visualize but somehow internalize what that ended up being. So having a whole orchestra is the triple A 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 move forward and think about sort of the era of playing instruments and take a jazz which is highly technical, right? Like every single member in a jazz band is excellent at their instruments, right? Like really excellent. And it's really hard. Like it's really hard to be that good of a musician and play jazz. And then, you know, fast forward a little bit more and take someone like Swedish, of each of us an example. He was a brilliant composer, he truly was. But he didn't really know how to play any instruments. 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 tour. He had software, right? And he's actually, he was really good at that software. And you know, all the knobs and plug-ins and all that stuff and how it worked. And a lot of musicians are that way today. Like if you actually look at the workflow, it's very technical. It's very detailed, despair-new and it's like, I have this thing that I do where I probably shouldn't admit this, but like I said on YouTube on the evenings I look at music producers, they're workflows. And like when they get into the weeds of like decoding how they do stuff. 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, we're like, 21% of the, I think we are. I think we are. You know better. And then we walk into this studio here, you know, in Stockholm and we're like, this is just a scale beyond our imagination. Yeah, 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'd 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 a lot of these today's composers are experts in their workflows, right? Like they've kind of have their plug-in sets, they've got like these 16 things that they see shamed together in order to create that one effect that defines them and so on and so forth. So the barriers still, like if you said today, I want to start making music. And I want to make something that sounds pretty good. It still look quite high that barrier. And it's getting lower and lower and it's getting easier and easier. But I would still argue the bar for you to make something that sounds professional would actually be a high quality song. It requires a lot of time and a lot of effort. And it might be less cat-backs and less equipment. I mean, you hear the rise of the, you know, apartment music producer on the laptop. Yep, but it still takes an enormous amount of self-training, mastery creativity. Yes. 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 smooth and all these other apps you can probably make something. But from there on to actually compose something, getting into the the ID of the workflows, the plugins, all that kind of concepts. It's quite a lot to master. And I think that's the potential power with something like AI obviously, right? Which is we're most likely going to have another order of magnitude of simplicity. You know, on a personal level, if you liken that to coding, I used to code, but I haven't now for about 10 years. And so probably a little bit embarrassing to admit. But the barrier to entry or re-entry for me was so high with all, you know, node, all of these different frameworks, even setting up my own workflow for me to be able to do something in the Spotify ecosystem. There's hundreds of hours probably for me to kind of re-acquaint myself with all the stuff, right? How do I install the PHP server? Yeah, 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 Chatsgie BT 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. I was iterating. Did you contribute code to the Spotify code base? No, they won't let me do that. Yes. But I got a little bit more work to do before they allowed me to do it. You got a passive 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 reentry for me so much easier and so much more enjoyable. And so I think about that. So if you think about the world of music now, there are tens of millions of people in the world that probably are recording stuff. But there's 100, 200 million, something like that, that's playing some kind of instrument and expressing themselves musically. There's nothing to say that it wouldn't be possible for those 100 million plus people to make something that actually sounds pretty good. Now, again, what is that going to do with the music industry? And is it really going to be that all of a sudden, everything becomes commoditized? I don't believe so, because we've seen time and time again, the quality rises to the top and actually becomes even more valuable in that world. Photography being the key reference point. When Instagram came, oh, no one's going to want photography. But price of fine art photography actually increased, not decreased. So my view is you're going to see both extremes. You're going to see the middle-getting wipe that more people participate, but the very, very top is probably going to increase in value as well. And they'll figure out other things to do with this technology. But it is pretty cool for humanity. And we talked about that being able to relate and express some ideas. Every permutation of every cultural idea will finally be able to be expressed. We've never been in a world where that's been possible before. And it'll be really fascinating to see what that means for our understanding of other cultures, our ability to relate to other people, some really cool stops. This has kind of like already happened over the past few years in podcasting, too. Like there, I don't know. You probably know better than me millions of podcasts out there. Two million. Two million plus, I'm sure, at this point. Oh, it's a bit more than double that now. Really? Yeah, yeah. So it's kind of like, these are numbers to link your target. There are four to five million people out there that are like, I can make a podcast. And yet, the very, very top ones are still like, of a quality bar that is so high and getting higher. Yep. But like I've heard you guys talk about this that you now can take shows that are in a specific language in a specific region that you can identify based on the data. There's something really cool happening here. Yeah. And then bring them to other around the globe to other audiences. 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. But there's no reason technically why you guys and I, this podcast couldn't be done right now in Chinese with our voices. What I was gonna say as a, so you have X now, the AIDJB that speaks many languages. Well, we've had him speak Swedish for sure. And obviously it 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. So if we were training the models on specific languages and not just X voice per se, I think that would have been totally possible. And again, the largest problem today is the cost per minute would be too high for most podcasts. I think you guys could actually support it probably with your model, but the average podcast it couldn't. You know, I don't know if you guys seem this, but like Mr. Beast has like a Spanish language. Shadow, I don't know if he has like a French one, et cetera. But we certainly has a Spanish language. Computer translated or humans re-recording? I think it's humans re-recording 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 Elvim H episode and make it all in French? Whatever. It'd at least be in French. Yeah. It's time for another one of our favorite companies here at Acquired Pitchbook, which I used heavily in preparing for this interview. So here's some of the data from the Pitchbook page on Spotify itself. You might remember that one of the early breakout moments for Spotify was a 2009 email that Sean Parker sent to Daniel talking about how he loved the idea for Spotify. He wanted to invest. He saw social media, specifically Facebook as the distribution channel. And Sean Parker at the time was uniquely qualified to a pint on this because he was mostly Sean Parker of, you know, Napster fame. And also. And also president of Facebook. Yes. Yes. The best person in the world to offer that opinion. So ironically, while social was the first, Spotify would go on to have concentric circles of growth strategies over time, again, reaching that over 500 million people now, including being the fastest way when they first started to listen to music by basically inventing modern streaming, then going freemium, then figuring out social distribution, then podcasts, now audio books, browsing Pitchbook, jog my memory about the early Facebook strategy that Sean Parker then at Founders Fund invested in 2009 and 10 again, found both in Pitchbook, which led to a lot of the discussion on this episode about the importance of distribution channels. Pitchbook has all the financing events over the company's history, including pioneering the modern direct listing when Daniel and Barry McCarthy took the company public in 2018 without raising any new capital because they didn't need it. Barry McCarthy rides again. Indeed. In addition to the individual company data, Pitchbook also has industry data like financing trends. So I went in and generated a graph of financing activity in music tech startups in the US and Europe from 2010 to today. The last four years, just to cut a level set where we are today has averaged about $400 million of investments in music startups. But if, yeah, especially compared to back in 2010, that number was about a third, 131 million total. And if you look just at Europe where Daniel was, it was just 33 million in only 13 companies. And this was actually two years after Spotify launched, which really shows how crazy Daniel and the Spotify team were at the time. So Pitchbook is awesome. There's an insane amount of data. You can slice it and dice it in every way possible. Basically, every VC and PE firm has it. So if you don't, it's essentially a competitive disadvantage at this point. So if you want to sign up for Pitchbook, they are offering a free week trial for acquired listeners. Go to a slash acquired to get all the details and just tell them that Ben and David ad acquired sent you. Thanks, Pitchbook. 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, 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 increase the quality, 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, we shouldn't AI do all sorts of things to our audio. Yeah. 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. Yeah. 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, you can trust this. Or approve by the creator. 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. But I think the more interesting one was kind of like, well, forget about if it's paid or not, but just increasing the cost of spam, but also increasing kind of the quality of verification and being able to truly understand what's what in the end. Twitter is 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. Yeah, like there's no revs there. Traditional social platforms like that. You kind of got them on one end of the spectrum. You've got Spotify, what maybe Spotify podcasting and then Spotify music at the far end of the spectrum. And then you've got YouTube kind of in the middle. How do you think about what role for monetization, maybe especially on the podcasting side? Spotify should play for creators. Yeah, I mean, our goal is to be the best partner of creators. Not the only partner, but just the best. And when 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. And maybe they have switching costs relative to what other stuff they're doing. Think about a creator that's in a traditional media ecosystem. If they want to take their thing, OK, well, maybe my, this will, I will be less valuable on cable or whatever other thing I'm on. That would be one end of the spectrum, right? And then you have another creator that may have an entirely different business model. I don't know about your other Twitter creator friend, but perhaps that creator either has a different business model somewhere else. 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 account. That's true, right? Just top of that. And podcasts. Yeah, there are many different ways and the needs are different, which is why, you know, for some of them, they were probably happily for fit all the monetization because they feel like they have such a strong other business model on the back. The customization point is really interesting too. And I think that's the, that's the really interesting nuance about YouTube because like on the one hand, I think YouTube for creators is amazing because you can completely abstract the business. Like you just make the content and they take care of the business and you get a check. Yep. On the other hand, like, you know, I can even remember if we have ads on, YouTube ads on a quiet content, I think we don't. Because like, do we want to sprite add in the middle of this? Like, no, we want creative control. And like you lose that in a, if the platform is like too opinionated about what's happening with monetization. Yeah. 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 like very binary. You had to be on or you had to be off. There was kind of no in between like, well, let's do windowing, let's do this and that, et cetera. Because that was the only way, my biggest problem was getting everyone off of piracy into this other model. And I needed the consistency of user experience. That was the model. Now, the next decade of music may look very different. It may look like something where there's going to be a lot more options for what a creator chooses to do. I certainly would hope so. And we're certainly going to work towards that avenue. But any change that we're doing with the scale that we're having is going to be, there's going to be winners of losers. It's almost impossible to find a single thing we could do that's just universally going to help. And that naturally creates the constraints that it's more of a one-way door than a two-way door where we can kind of iterate and invest on it. So I'm fairly certain in that, like what you're seeing now in this world of platforms and crater ecosystem says, if you asked YouTube, like, hey, if you could redesign the platform right now, would you just make all the same decisions you made about discovery and monetization all over again? The answer would probably not. Almost assuredly. No, yeah. 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. And that means more interstitial lads. And then we have host red ads where the equivalent of sort of more native ads or paid promotional ads that both Instagram and YouTube at. So we're living in an ecosystem where on the one end, 10, 15 years ago, we were very primitive in terms of monetization. And today, it is very, very different. And I kind of think about it in a way, like this is not too dissimilar from mom and pop shops. They're sort of like coming up in the US as a cultural norm. You know, on the one hand, you had physical infrastructure, urbanization, driving these kind of things where we both created these mega wall marks of the world as a direct consequence. But actually the complete opposite was also true. We had this hyper local thing, et cetera. And if you think about it today, these mom and pop stores, the ones that are still around, they're hyper distinct in what they're offering. They're really focused on community, many cases, really knowing your customer, they're offering events around their stores, they're offering obviously online things through Shopify and so on and so forth. And in our way, I think about it in a very similar way for the creator economy too. We had to start very simple. It was based on a very simple model where there were free platform, ad supported platforms and paid platform. All of that is kind of not merging together. In addition to that, just monetizing the content in itself, it's probably becoming an auxiliary revenue sources around them 360. Very similar again to mom and pop shops like where you could do live events. You could be doing merchandising. You could build another business like Kylie Jenner or something on the side of it. It's cool as like this is a true at scale now too. I mean, Taylor Swift monetizes through everything you're talking about the same way a mom and pop coffee shop does. She just doesn't at scale. And it's necessarily had to be because streaming while at first it looked risky and then turned out to be, I don't think it's blowing smoke to say, you guys save the music industry. Like it is the thing that while the industry was in dramatic decline ended up making it so that the music industry now generates more revenue than it ever has before with by far the largest thing being streaming. At the same time, if you're a Taylor Swift or you're any big artist, you're not making as much money streaming as you would have on CD sales in the CD sales heyday. So you sort of have to figure out what the new business model looks like as a creator and you have to figure out what you're a sort of unique constellation of revenue streams are because it's not just gonna be Walmart or Target is gonna cut me the check from selling CDs. Yeah, the music industry's 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 dried 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. Yeah. Right? Like the heyday of the CD era, right? Yes. True back in the radio era. And so the question is what's the analogy was that like 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 prevalence, 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. And my goal is just like I think these people generally, whether you're a podcaster, whether you're a musician, are insanely creative people. And I love seeing people like yourself, or David, or Sandra, or Taylor Swift, or whoever. Like a Doregane. Or a Doregane or whoever that are like 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. Well, 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 it, 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. But it was hard to scale to that. And then you think about how many artists today get to be heard by a billion people. And actually that number's way higher. And it's way faster for you to do it. Now, but because it's not a scarce anymore, perhaps the societal value slash monetary value, whatever you want to put it on it, maybe it's not the same because it's not a scarce. But as you said, if you're smart in how you do it, and this is the sort of the side guys on how you execute it, it doesn't work when it's not authentic. So you take the Rihanna example, it worked because she had a way to do it, which was authentic to her, but also authentic to her audience. If she would have tried to slog something else that she didn't care about, it probably wouldn't have worked. And that's the unique thing when you realize it, and you think about it yourself as an enterprise, and JC, I'm a business man. Exactly. He showed his own champagne company and LBMH, recent, or 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 100 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. And B, I sort of thought that, well, they just let compounding do its thing. But I think you guys, it's not well understood by the public, or certain wasn't by me, how you change strategy in order to go get that next group of people each time. And I'm curious as you reflect back, what advice would you have for founders who are scaling to sort of continually stack these S curves on top of each other and do completely new different business activities while maintaining the cohesiveness of one platform? 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 this 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 it and I could talk about it, but I hadn't truly internalized it is to be intentional about the culture you're building, right? There are many different cultures that can be successful, but there are trade-offs with each cultural expression. And oftentimes today, what I see with younger entrepreneurs is that they're unintentional about what type of culture they are. So they flip flop between them. So as an example, we all, many years ago, I was certainly enamored with Google, right? Like the 20% projects on all these different things. Those are cultural expressions. It's not the culture itself, but it's the cultural expressions. So that's where the early innings of Spotify's culture was like I'm sure almost every Silicon Valley company of that era. And then we all switched, maybe became Facebook for a while and we all kind of took that, of like moving fast and breaking things and so on and so forth. And then you had like an Amazon kind of model where on the one end, it was incredibly long term, but also maybe a little bit more bottoms up innovation than top down. And then you see another cultural expression with like a Tesla, where it incredibly top down, incredibly focused company actually for this type of scale that they're doing. And my point is, I think the most important thing is to really, really think through and be really, really diligent about the culture you create. And we certainly were victims of that as Spotify because we had taken all these different things. There were certainly things that were Spotify, but we kept talking about all these other companies and we're like, well, we like this thing that Amazon's doing so we should copy that. And then oh, we like this thing that Google's doing so we should copy that. And actually what ended up happening was we were at one point in time almost like a little bit of a Frankish nine monster because we had some of the stuff from everyone and we had some of the bad stuff from everyone too instead of sort of really leaning into that. And then sort of without really being intentional about it, we started iterating and improving on that culture. And I often get this question. So for instance, when we launched certain things, people are like, well, this thing wasn't very great. And they have a mental model of what they expect of Spotify. And the mental model may be, hey, your music app is so amazing. How come in 2019 your podcast just sucked? And so that must mean that podcasting will work having a separate app must be the right thing to do, et cetera. And what people didn't realize is we're actually one of these companies that happily will release something out that's not great. It's probably have the right strategy but execution isn't super crisp and perfect. You said this about audiobooks at Streamon. You got unstaged 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, right? And that's one where we're iterating on. But then the flip side of that would be something like AIDJ where actually I think it is really high quality and unlike a lot of other products that are AI where it's really kind of wonky. We've made something that's actually working and is working on very large scale. Probably one of the most popular AI products out there now in terms of reach. We don't really tout it all that much, but it's huge in terms of like moving our metrics in a pretty substantial way. Like discover a weekly huge? Yes. And I think it'll even outdo discover weekly. So it is really cool, but we had to be super intentional about it because we knew that it was an area where we had to think through the consequences of this because it would be highly scrutinized. So as you can imagine, one of the benefits by choosing to do it for music and not for podcasting was obviously that it would have been horrible if we somehow summarized or said something based on a podcast that wasn't safe or culturally attuned to say. And yet with music, it's kind of the primary candidate plus it's the one where we have a huge audience listening in the background every day and there really wants more context. And my point being is understanding when to do which and understanding that both of these cultures are perfectly fine, but just being very intentful about when you're choosing to do what and having the right mental models and not sort of becoming half-assed in everything but actually become really good at what makes you you. And I would say that probably other thing that's been hugely important and that I wish more people talked about is there are not many of us, but there's a few of our few companies like Spotify which in a ways been heavily influenced by Silicon Valley but we are not Silicon Valley first. So that sort of notion of being on the side and watching and sort of iterating in a corner Spotify's definitely sort of not the overnight success. It's been a sleeper for many, many years. And when you started, the common wisdom was anybody who's starting an online music thing, it will die. And I think you saw advice from hundreds of people who all told you don't do this. This category is toxic. Yeah, you're exactly right. And 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 really key because if you think about the ones we talk about as iconic companies, the apples, the Amazon's of the world, we all tend to forget a few things but one is that many of them are quite old at this point, they're 20 plus years old. So they've had a time to refine their cultures and getting that right. And the other thing is they almost started in empty ecosystems. And Amazon sure there was Microsoft but they started an internet company in Seattle, right? Where there was a software company that was really big but it's not the same culture. They didn't start it in Silicon Valley. They didn't start it in Silicon Valley. And I like to believe that that culture became very distinct also by having to figure out its own things from first principles and from learning rather than just being able to gather through osmosis. And that might have been going slower in the beginning to then go faster. But I think it's been hugely important for Spotify's journey. And where I feel like we're just right now getting into our own of like what is our culture in a very unique way. And that it's probably the most exciting thing for me at the moment. Still being here. It's Spotify 17 years. This is so cool. I love this as a final 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 the most iconic things both owned by LVMH and ones that aren't like Hermes and they are all end of one. You can't copy them. They don't copy anybody else. They are their own thing. If you're going to be around for 400 years, that is by necessity the case. You are not taking from 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 music felt like it was on your hard drive and play fast when it wasn't through a hybrid of pure to pure and client server solutions. And that's not at all. Thank you for your time. I'm summarizing that. So, basically, by the way, it has to be a very like methodical individual journey to figure that out. 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 you 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. The more interesting thing is the true culture of what makes Google or an Amazon, Amazon, et cetera. And I don't even know whether that's possible to change going a decade forward. That's probably the most exciting thing for me to still contribute to and work on as the culture. And I think that's what's driving at the moment, pretty much every major decision we're making. 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, 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 StreamOn recently. There is a question on the page in the 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. And I think that's it. Listeners, thank you so much. Thanks to Spotify and Daniel. We'll see you next time. We'll see you next time. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hello.