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ON SEPTEMBER 27, 2008, SPOTIFY threw a huge launch party at Berns, a classic nightclub and concert venue originally built in the late 1800s to accommodate a rowdy variety theater crowd. The lofty salons and ornate galleries were decorated with oversized helium balloons in Spotify green, and guests were invited to play Guitar Hero. The financial crisis was raging, but Spotify had already secured its funding. Now the coworkers wanted to celebrate their launch in style. The only problem was that it hadn’t quite happened yet. A few licensing details remained unresolved.

News of Spotify’s funding round had leaked before the negotiations were done. Suddenly, knowing that Spotify had the money, the labels had started demanding better terms, according to one source.

During the party, though, Daniel and Martin held straight faces in their black suits. The group photo, taken in front of the main stage in the Grand Salon, shows just over forty employees, dressed to party. The head of marketing, Sophia Bendz, wore a beige dress. The programmer Gunnar Kreitz, however, saluted his alma mater by wearing his usual KTH t-shirt.

Sophia had seen to it that the party was sponsored by a beer brand and Xanté, a French brand of pear cognac. The drinks flowed all night as the staff mingled with friends, investors, and people from the music business. Shakil Khan worked the room, shaking hands with Spotify employees, but few understood what his role was at the company.

Spotify’s negotiators, Petra Hansson and Niklas Ivarsson, had been in final talks with the labels for months. The secret blueprint that had emerged centered largely around revenue sharing, creating an incentive for growth. Around 55 percent of Spotify’s revenue would go to the record companies, who own the recordings. Another 15 percent would go to the music publishers, who administer the rights of the songwriters. In theory, around 30 percent would be left over to finance Spotify’s operations.

But in practice, Spotify risked running up costs that would eat away at their 30 percent. In order to protect themselves against lost revenue, the record companies had negotiated all kinds of extra measures. For instance, they had demanded that a minimum charge per stream be met if Spotify’s revenues from ads and subscriptions dipped below a certain level. Spotify’s negotiators had also agreed to making advance payments on their expected payouts. If Spotify missed its targets, the labels would keep any unearned advance. The labels had also secured a significant amount of shares in the company, for which they paid next to nothing. It was a complex arrangement. In short, Spotify would be punished harshly if the service didn’t take off quickly, but the major labels would get paid either way.

During Spotify’s first few years of operation, the payments to the music industry would exceed the company’s total earnings. This meant that Spotify was turning a loss before they even started counting the expense of running the actual business. For years to come, a long line of investors would question if Spotify was a viable business.

Everything surrounding the deals with the music industry was top secret. Only a few of Daniel’s trusted officers knew the details. It certainly wasn’t a conversation starter during a festive launch party at Berns. The short answer was that the deals were basically done, and could you please pass me another shot of Xanté?

Spotify’s launch party became a boozy affair. One employee reportedly drank so much Xanté that he lost his keys, forcing him to break into his own apartment in the middle of the night, ending with a police interrogation.

The deals with the labels were signed a few weeks later and on October 7, Spotify’s head of marketing, Sophia Bendz, sent out a press release. It stated that the streaming service had now officially launched in Sweden and that a premium, ad-free version was available for ninety-nine Swedish crowns (around twelve US dollars) per month, but only to customers of the broadband provider Bredbandsbolaget. This was essentially a soft launch. Free subscriptions were still invite-only, and the premium deal with Bredbandsbolaget was a limited promotional offer.

The Spotify team gather to witness the commercial launch in October 2008. (Rasmus Andersson)

Around the same time, Sophia started calling the many journalists who had wanted to interview Spotify’s founders during the beta period. A few weeks later, near the end of October, one of us interviewed Daniel Ek and Martin Lorentzon while on assignment for Sweden’s biggest morning newspaper, Dagens Nyheter. Martin, who was more experienced in dealing with journalists, took charge of the interview. It was held on the sofa underneath the big Spotify sign in the lobby.

“This could become huge,” said the thirty-nine-year-old chairman, dressed informally in a white sweatshirt, with an intensity about his person. He then proceeded to describe Spotify’s mission.

“We want to be the best music player on the market. I think that within two to three years, we will have twenty million users,” he said.

At the time, those figures seemed outlandishly optimistic—but he wasn’t too far off. It would take Spotify around four years to reach twenty million users. Martin also explained that Spotify’s free tier was the key to rapid growth.

“We believe that 2–15 percent of our users will be paying subscribers. The rest will use the free version,” he said.

Again, his prediction wasn’t far off. Spotify would grow quickly, but it would take many years before the level of paying users was high enough to appease skeptics in the music industry.

According to its chairman, Spotify would initially launch in eight countries. The number would later be dialed back to six, due to delays in Germany and Italy. Sweden was the first country to launch. In the UK, Spotify was rolled out gradually during 2009, closely monitored by various music industry bosses. The other early launches took place in Finland, Norway, France, and Spain.

The article in Dagens Nyheter was published on October 31 with the headline, “Swedes are Apple’s Nightmare.”

Spotify’s founders Martin Lorentzon and Daniel Ek around the time of the launch in October 2008. (Niklas Larsson]

The founders of Spotify and SoundCloud built their visions on software, but there were also Swedes who believed they could revolutionize the music industry through innovative hardware.

In the summer of 2008, one of them landed at the LAX airport in Los Angeles. His name was Ola Sars, and he was one of the founders of Pacemaker, a pocket-sized DJ gadget that could be used to share playlists and MP3 mixes online.

Ola Sars was a former management consultant who hung around some of the people who would form the DJ collective, Swedish House Mafia. He had traveled to Los Angeles to pitch his vision of a new community in which “tastemakers” shared music with “taste takers.”

“I’m here to see Jimmy Iovine,” he said at the reception of Universal Music in Santa Monica.

Jimmy Iovine was a big deal. He had founded Interscope Records, which had spawned the pop sensation Gwen Stefani, as well as Dr. Dre’s two celebrated albums, The Chronic and 2001. Recently, he and Dr. Dre had started a company, Beats Electronics, that would soon introduce its headphone brand, Beats by Dre. Their products would be a huge success, but they hadn’t reached the market yet and Jimmy was still open to new ideas. So, Ola found himself waiting outside the label boss’s office, nervously stroking the Pacemaker that sat in his lap. The AC was on full blast and the thirty-five-year-old Swede was freezing in his black t-shirt. Finally, he was called into Iovine’s office.

“The future of the industry will be all about lifestyle products,” Ola would recall the fifty-five-year-old Iovine saying in a thick Brooklyn accent.

Ola briefly demonstrated how the Pacemaker worked, but Iovine didn’t need to be convinced. He’d been thinking about digital music distribution for years and explained that he and Dre would love to be partners in Tonium, the company behind Pacemaker. Ola liked what he heard, but soon realized that Iovine wasn’t willing to invest actual money in his company. Any deal was essentially going to boil down to trading shares for promotional value. Still, Iovine was a master at promotion. He had helped Steve Jobs market Apple’s products with artists such U2 and 50 Cent. He could, Ola thought, have a decisive impact on the future of the Pacemaker.

Back in Stockholm, the investors in Ola Sars’s company weren’t seeing it. Why would they let the head of an American label become a shareholder at a bargain price? After a bit of back and forth, the negotiations fizzled out.

A few months later, when Jimmy Iovine and Dr. Dre launched their first products, the Beats by Dre brand became an instant phenomenon. Iovine used his connections to get artists and sports stars to pose with the fat headphones that sold for around three hundred dollars apiece. In 2009 alone, the company sold headphones for $180 million, which was about a third of the entire US market.

The Pacemaker never became a hit, but Ola Sars would be reunited with Jimmy Iovine three years later, when the Beats co-founder decided to take on Spotify.

Spotify’s launch with Bredbandsbolaget started on a small scale. But in early December 2008, Daniel Ek raised the bar in order to kickstart the company’s growth. He let the provider run Christmas ads promising half a million free accounts to its broadband customers. In a country with only nine million inhabitants, that was a high number.

It was only a matter of time before Spotify opened up its free version to all of Sweden. Still, the ad campaign caused a stir in the music industry. A business developer at Warner Music named Jacob Key was astonished to see the ads in the Stockholm subway.

“You can’t do this,” he yelled over the phone to his contact at Spotify, as he would recall.

“You can’t make money off of Bredbandsbolaget while letting them market Spotify as a free service. If you do that, we need to get paid as well,” he said.

Representatives from Universal and Sony also complained. They all resented that music was ostensibly being given away for free—and was marketing the very broadband subscriptions that were killing their industry.

Soon, their criticism had reached Andreas Liffgarden, the business developer behind the deal with Bredbandsbolaget. He quickly learned to be careful when using words like “free” or “free of charge” in ad campaigns with telcos and broadband providers.

Yet it was clear to Andreas and Daniel that the larger telcos of Europe could play an important role for Spotify. To most customers, they offered services that looked the same. These companies urgently needed to differentiate themselves and partnering with Spotify could be the perfect way to do so.

The labels would soon push for Spotify to prioritize growing the number of paid customers. At Warner Music, Jacob Key demanded that Spotify’s promotional deals with broadband companies result in paying customers. He also pushed for those subscriptions to be renewed automatically at the end of a promotional period in which Spotify’s monthly fee may have been bundled into some sort of package deal.

These principles would prove important as Spotify approached an even bigger broadband provider.

In February 2009, Spotify became broadly available in the UK, gaining a million British users in just over two months. The founders soon opened a London office located on the fifteenth floor of Centre Point, a skyscraper on the eastern end of Oxford Street, adjacent to Soho. Daniel Ek would also introduce himself to the British public.

“I’ve created things that millions of people have used before,” the twenty-six-year-old CEO said in an interview with The Independent in Stockholm, “but this is the first time people have started to recognize me in the street.”

The article describes Daniel’s early years at Stardoll and lets him pontificate about the future of the music business. In it, the founder describes Spotify as a potential tool for launching artists in new markets. He mentions that the Scottish rock band Glasvegas started being played on the radio in Sweden as a result of their music being on Spotify.

“Record companies need to think about the way they break artists internationally. Why not just make the music free everywhere and see where it gets picked up?” Daniel is quoted as saying, airing an idea often used to defend file-sharing that must have irked people in the music industry.

In London, the Spotify CEO would often hang out with Shakil Khan, whose role ranged from friend to investor to fixer to paid consultant. Shak liked to do people favors, knowing that he might be able to ask for something in return.

Daniel and Shak would eat and work late in Spotify’s office, with views over the river Thames and the Tower Bridge.

“The user experience is beyond even the best web based streaming services like LaLa, MySpace Music, and Imeem,” the website TechCrunch wrote in early 2009, explaining in detail, how to access Spotify via proxy servers. That way, listeners based where the service wasn’t available could cheat the system and gain access.

“It acts like a fully stocked iTunes, with everything hyperlinked to easily find related music. Creating playlists is a snap,” the article read.

One evening in their near-empty office, Daniel and Shak received a visit from someone looking to partner with Spotify— Joe Cohen, who had encountered a then-unknown Daniel Ek at the Essential Web conference a few years back.

The trio sat down and Daniel began to wax lyrical about the challenges ahead for Spotify. They casually exchanged business ideas before Cohen got to the point. He wanted Spotify to partner with his company, Seatwave, an online marketplace for concert tickets.

As he argued his case, Cohen noticed the interaction between Daniel, the introverted boss, and Shak, the extroverted dealmaker. The two appeared to be acting almost in unison, as if they were two parts of the same person. Finally, Daniel put his foot down.

“Listen, the thing is, you guys are selling tickets on the secondary market and that would just piss off artists and labels. I can’t be in the business of pissing off artists and labels,” Daniel said, sounding assured.

Spotify had launched in the UK using the words “instant, simple, and free.” But the blowback from the labels was severe, and Daniel was now carefully avoiding anything that could be seen as his succeeding at the expense of the industry. It was important for Spotify’s operations, but also for raising much-needed capital.

Back in Stockholm, Spotify’s developers had done their part to clean up the company’s act. They had just carried out what was internally known as “The Big Clean,” a purge of the last pirated files from the Spotify catalogue.

In February 2009, the entertainment industry was set for a decisive victory against the piracy movement. The founders of The Pirate Bay were brought before the Stockholm district court.

During the seventh day of trial, representatives from the creative industries were due to testify. Per Sundin, now head of Universal Music Sweden, hopped in a cab and headed to the court. On his way there, he noticed that the driver had a small plastic case of what looked like blank CDs stuck in the sun visor of his car. After a polite inquiry, the driver admitted that he often listened to pirated music.

Once again, Sundin felt the indignation rise within him. When the taxi pulled up outside the court building, he told the driver that he wouldn’t be paying the fare.

“You know, I’ve paid for so many cab journeys in my life,” he said, getting out of the car.

Outside, the hordes of journalists and young protesters with Pirate Bay flags made him reassess. Grudgingly, he paid the driver and made his way through the crowd.

In his testimony, Per Sundin said that file-sharing had essentially cut the record industry’s sales in half. The trial made front-page news, and many Swedes were sympathetic to the young hackers that appeared to be bullied by “Hollywood lawyers.” Swedish artists, like the rapper Timbuktu, grabbed headlines by praising the technology behind The Pirate Bay. Some experts questioned the whole premise of the case, claiming that file-sharing could not be blamed for declining CD sales.

But attitudes would soon be shifting. On the same day that Sundin testified in court, the Swedish parliament passed the so-called IPRED law. Authorities would now have a broader mandate to take action against the unlawful sharing of music and video files.

The four defendants in The Pirate Bay case lost in the district court, and later in the court of appeals. In the election to the European Parliament, in June 2009, many young voters showed their dissatisfaction by voting for the Pirate Party. But soon, the prevalence of streaming services like Spotify would mollify the public debate. Five years later, when the Pirate Party was voted out of the European Parliament, the issue had been all but forgotten.

With the launch behind him, Daniel Ek started focusing his attention on building a mobile app. Many of Spotify’s competitors were already offering music on handheld devices. The Finnish mobile giant Nokia had just launched a massive marketing campaign for its service, Nokia Comes With Music. Its Swedish competitor, Sony Ericsson, had a music service called Play Now Arena, and Sweden’s biggest telco, Telia, had the Telia Music Player.

But Daniel didn’t want to compete with regional players. He wanted to challenge Apple’s iPod head on, and he felt he had found the right man for the job: Gustav Söderström, an athletic KTH alum with blond hair, blue eyes, and a chiseled jawline. At thirty-two, he had already amassed some personal wealth by founding and selling a mobile internet company to Yahoo!. He was up for a new challenge and, short of moving to Silicon Valley, Spotify seemed like the coolest job around.

Daniel wanted Gustav Söderström to build an app that worked wherever the iPod worked. The Spotify CEO explained that it needed to have an “offline mode” so that it would work on airplanes and without access to 3G. His theory was that users would pay not only for music, but for access and ease of use. The app needed to sync automatically with Spotify’s desktop client. If you put a track into a Spotify playlist on your computer, it needed to appear on the phone as well.

The app would require new licenses from the music industry, but Daniel had reason to believe they would cooperate. He was leaning toward making the app a premium feature, thus creating a new incentive for users to pay for the service. The math was simple: Paying users generated almost all of Spotify’s revenue, and more revenue meant higher payouts to the industry.

Gustav signed up as Spotify’s new head of mobile, insisting on handpicking his own team, which would include some of Spotify’s best engineers. Daniel gave him his blessing.

Gustav Söderström was used to getting what he wanted. While doing his mandatory military service as a young man, he led a ski battalion in the northern municipality of Arvidsjaur. The soldiers were loyal, following his every lead. Leading a new project at Spotify would, however, turn out to be more like herding cats.

Spotify’s engineers had good reason to be proud of their work. They had built the world’s best streaming player from scratch and felt that their indie spirit had paid off. They had pulled off some impressive feats with mobile apps, such as hacking into Nokia’s Series 60 operating system and Apple’s first rendition of the iPhone. So, when Gustav started poaching engineers to build a new mobile team, he was met with resistance.

In a podcast interview, Gustav would recall how he was forced to hold endless email conversations with some of the more stubborn engineers. Eventually, he managed to wear down his critics. The experience seems to have shaped his outlook as a manager. For years to come, he would send long emails to the staff, at all hours of the day, about where Spotify was heading and what they needed to do to get there.

Within a few months, the mobile team had built an app that met Daniel’s specifications. Gustav had flown to London with Niklas Ivarsson to negotiate with Sony and Universal. Daniel had been right; the app was approved without too many questions. After all, a strong premium service meant more revenue for the music industry, and higher personal bonuses for its executives.

In July 2009, Daniel stepped into Soho House on Greek Street in London, a dimly lit members’ club full of designer furniture. He approached a familiar journalist named Rory Cellan-Jones, who was a tech correspondent for the BBC.

“I have something to show you,” the Swedish CEO said, with a wry smile and an iPhone in his hand.

Rory Cellan-Jones was used to getting daily news tips from startups, but Daniel’s pitch was special. It was the hot Spotify music client, inside an iPhone. The app was still in beta and would crash occasionally, but it carried several impressive features. For one, you could download your playlists to the phone and listen to them on the subway, where the 3G signal was crap.

The BBC journalist tried the app over the course of a few days, concluding that it would prove the Swedish’s company’s big breakthrough. Soon, he had broken the news of Spotify’s forthcoming mobile product.

Toward the end of July, Gustav’s team submitted the app to Apple’s App Store. Many staffers were afraid that Apple would find an excuse to block it. After all, they were asking Steve Jobs to open the door to a competitor.

In early 2009, Spotify resumed negotiations to launch in the United States. Fred Davis and his team were gradually becoming less involved, with Daniel Ek relying more on Ken Parks, Petra Hansson, and Niklas Ivarsson.

Late in the summer of 2009, Daniel received a long email that gave him renewed hope. It came from Napster’s co-founder Sean Parker, who had made a killing off of his shares in Facebook and would soon become a billionaire.

“You’ve built an amazing experience,” Sean wrote. “Ever since Napster I’ve dreamt of building a product similar to Spotify.”

Sean Parker had moved on from Napster, becoming Facebook’s first president at the age of twenty-four. But in 2005, police found cocaine in a vacation home he was renting. He wasn’t charged, but the arrest rattled investors and led to his resigning from Facebook. Now, Spotify had become his new obsession.

Sean had recently met Daniel’s personal envoy, Shakil Khan, at a private barbecue in New York City. The American had asked about the music coming out of the speakers. It turned out that Shak could offer him a private demo of a service that had yet to be launched in the US. Shak gave Sean one of Daniel Ek’s secret, prepaid invites.

In his email, Sean waxed lyrical about the service, which he felt was completely superior to iTunes.

“You’ve distilled the product down to its core essence,” he wrote, before he opened the door to Facebook’s founder and CEO.

“Zuck and I have been talking about what this partnership should look like,” he wrote.

To Daniel, the email was a gift from above. At the very least, it could help his company launch and grow in the US.

During the spring and summer of 2009, the global economy was suffering. Just a few months earlier, America’s new president, Barack Obama, had pushed through a gigantic stimulus package, but the markets were still reeling from the financial crisis as Spotify started preparing its next round of funding.

The music service was adding tens of thousands of users daily, but the business itself was very risky. Spotify was paying more for its music than it was pulling in revenues, the company still had no US licenses, and the app had not yet been included in the App Store.

Daniel Ek now had seventy-five employees on his payroll. The finance team had been told to fetch a valuation of $250 million, a level that few investors found reasonable. Once again, Spotify had to raise capital based on an optimistic projection of their future growth. Their pitch centered around the famous hockey-stick graph, the idea that the company’s modest growth would shoot up once they had more money to hire staff, enter new markets, and keep growing.

Several high-profile US funds passed on the deal, but the finance team—led by the CFO, Daniel Ekberger—found a willing trio of investors from Europe and Asia. The group consisted of London’s Wellington Partners, German investor Klaus Hommels’s firm Lakestar, and Li Ka-shing, one of Asia’s top business magnates. Together, they invested around $25 million in a deal that valued Spotify at $270 million.

One summer night, Daniel Ek was awakened by a loud buzz in Vasastan in Stockholm. He grabbed his phone and tried to make out the number on the display. It appeared to be a call from Asia.

“Our chairman would like to speak with you,” a voice said at the other end, as Daniel would recall.

The chairman in question was the eighty-one-year-old Li Ka-shing himself. He was on Spotify, struggling to find his favorite song. Daniel Ek had to perform customer service duties over the phone to please his new investor.

Soon, the financial press reported on Spotify’s new valuation and a user total of two million. The label bosses followed the progress closely. At the same time, many artists were skeptical of the streaming service, some even refusing to take part. Music by Metallica, Pink Floyd, and The Beatles was notably lacking in Spotify’s otherwise steadily growing catalogue.

In early August, a tall, slender man entered the Sony Music offices on Derry Street in London. It was Bob Dylan’s legendary manager, Jeff Rosen, who had come to learn more about this new European streaming service. His job was to ensure that his client was getting a fair share of the company’s revenues.

Jeff Rosen was an astute businessman. He had masterminded Bob Dylan’s Biograph, one of the record industry’s first CD box collections from the mid-1980s. Later, he convinced artists like Eric Clapton, Stevie Wonder, and Sinéad O’Connor to perform at a tribute concert for Bob Dylan in Madison Square Garden. The concert was broadcast live on pay-per-view, and was later released as a double disk DVD. In short, Rosen had made a ton of money for Columbia Records, which was now owned by Sony, and he demanded to be treated accordingly.

After the usual introductions, he ended up in a meeting room with glass walls and thick drapes, across from three mid-level managers at Sony’s digital division.

The heads turned to the only Swede in the room, Samuel Arvidsson, who did his best to describe how the service worked on a technical level. He explained the difference between Spotify’s free tier and its premium subscription service. He said that the record companies were paid a share of this revenue that they would then use to compensate artists. After a few minutes, Rosen cut in.

The room fell silent. The three label managers glanced nervously at each other. A widely quoted Swedish newspaper article had recently reported that the record companies, in secret, had been allowed to buy shares amounting to 17 percent of the company for next to nothing.

“Sony owns shares in Spotify, right? Now I’d like to know how many of those belong to my client,” Rosen said, as Arvidsson would recall.

The Sony Music trio knew that their label owned shares in Spotify, and they strongly suspected that Bob Dylan wasn’t entitled to a single one of them. But they promised to make inquiries. According to one account, one of the managers sent an email to Thomas Hesse, Sony’s Chief Strategic Officer in New York. He would not recall receiving a clear answer.

A few days later, Bob Dylan withdrew all of his music from Spotify. The news sent a wave of fear through Spotify’s office on Humlegårdsgatan. Having a legendary singer-songwriter like Bob Dylan leave the service was bad enough. But what would happen if Bob Dylan got Eric Clapton, Stevie Wonder, Sinéad O’Connor, and all his other buddies to do the same? If enough big names boycotted Spotify, the service could quickly become irrelevant.

The press broke the story of Bob Dylan’s boycott in mid-August 2009. Reporters at the Swedish tabloid Expressen made calls and reported that several other musicians were considering the same move. The well-known Swedish pop star Magnus Uggla, signed to the same label as Bob Dylan, wondered aloud why Sony Music would be allowed to buy several percent of Spotify for the paltry sum of a few thousand dollars.

“It’s because Sony has sold out their artists,” Magnus Uggla wrote on his blog before launching into a colorful attack on his own label and its Swedish managing director, Hasse Breitholtz.

“One thing is certain. I’d rather be raped by The Pirate Bay than fucked in the ass by Hasse Breitholtz and Sony Music. I will therefore remove all my tracks from Spotify and wait for an honest internet service,” the artist declared.

The reporters at Expressen tried to reach Spotify for comment, to no avail. They then paid a visit to Spotify’s office on Humlegårdsgatan, where they were denied entrance. Finally, Spotify’s press people sent out a short statement where Daniel Ek described his company as “a significant digital revenue source” for the industry. The reporters also reached Hasse Breitholtz at Sony Music.

“Both Spotify and the record companies pay royalties to the authors—Pirate Bay pays nothing,” the label head was quoted as saying.

The tabloid reporters also reached out to Per Sundin at Universal Music. They asked how much artists were paid each time someone streamed a song. It was a straightforward question. But Spotify’s secret deals with the record companies were so complicated that it was impossible to answer in kind. Therefore, Sundin couldn’t offer a clear explanation.

This chain of events would repeat itself many times over the coming years. An artist would make a public statement about Spotify ripping off creators, and Daniel would react by stating how much Spotify was paying the industry as a whole. But neither Spotify nor the record companies would go further than that. One reason was that Spotify’s revenue sharing agreements with the industry, while pegged at around 70 percent, would fluctuate wildly depending on a variety of variables. Another was that the labels had their own agreements with artists that they wouldn’t discuss in public. There wasn’t a neat figure to sum up the payout for every stream.

The artists had many legitimate reasons to complain. In 2009, Spotify’s payouts were still relatively small—and would continue to be as long as the overwhelming majority used the free version. The artists could argue that Spotify was growing at their expense, while the record labels had a vested interest in the success of the service. After all, they owned shares. Another complicating factor was that streaming services had a much longer payout cycle. Customers paid for CDs and downloads upfront, while streaming revenues trickled in gradually over many years.

Certain artists now started demanding that their music only be available to Spotify’s paid subscribers, but Daniel refused. He made it clear to the record companies, and to his staff, that every artist would join Spotify on the same terms. The full catalogue had to be available both to free users and paying subscribers. Otherwise the whole business model would fall apart.

While the commercial launch had made Spotify’s communications more open, the spat with Bob Dylan made the company pull back. One former employee would recall how, around this time, Spotify’s head of marketing, Sophia Bendz, began to demand that they conduct themselves more like an American tech giant. The company would communicate on its own terms when it had something to say, and make few comments beyond that.

Over the years, Spotify’s founders would often feel that they were misunderstood and mistreated by the media and the outside world. Martin Lorentzon generally felt that journalists were out to get him and often got the facts wrong. Daniel—known to buy thick stacks of magazines before boarding a flight—appreciated a good read, but saw much of the coverage of Spotify as sloppy. He would try to limit his appearances to reputable news outlets where he could deliver strategic talking points.

As a result, Spotify adopted an “us against the world” culture. The employees were told not to speak to the media without explicit approval. Among journalists, Spotify would become known as an exceptionally opaque company. At parties and gatherings, Spotify employees would clam up at the mere mention of a journalist being in the room.

In the months after Bob Dylan’s defection, Daniel and his team carefully examined Spotify’s user data. The boycott didn’t affect the figures to any great extent. Users did not appear to abandon the service, and new ones continued to join at an undiminished rate. Nor was there a major string of boycotts from other artists following the singer-songwriter’s lead.

Many famous artists would abandon Spotify over the years, but the record companies would generally succeed in luring them back. As much as they disliked the business model, abstaining from the service didn’t do them much good either. Their CD and download sales largely did not increase when they left Spotify; they just missed out on a revenue stream that was growing in importance. Bob Dylan was no exception. Less than three years later, his music was back on Spotify.

Whether artists would share any of the profits from Spotify shares, however, would remain hotly debated for many years to come. It would resurface with a vengeance ahead of Spotify’s IPO, nine years after Bob Dylan’s original boycott.

In late August 2009, a few dozen Spotify employees met up by Nybrokajen, a small dock lined by boats in central Stockholm. They boarded small recreational motorboats and headed out for an evening in the archipelago. Martin Lorentzon, who loves Swedish traditions, was laughing in the back of one of the boats and fiddling with his phone.

“What do you think, is Apple going to let us into that goddamn App Store?” he said, grinning. “Who wants to bet a thousand crowns?”

They anchored the boats in an inlet called Skurusundet. The coworkers unloaded picnic food, beer, sausages, and disposable grills and held a simple barbecue together by the water in the evening sunshine.

When the sun finally started setting, they returned to the city for a night on the town. They anchored their boats in the canal by Djurgården and made their way to Utecompagniet, an open-air restaurant on the Stureplan square. Martin ordered drinks and champagne and suddenly, made an announcement.

The Spotify employees exploded with joy and started toasting and congratulating each other. The drinks kept coming and emotions ran high.

The evening is said to have ended abruptly after one employee emptied a champagne bucket of ice water over Martin’s head. The Spotify co-founder lost his temper. The employees finished their drinks and parted ways.

For the rest of the world, the news became official on August 27. Daniel Ek confirmed it in a tweet.

“We’re happy but have had a great dialogue with Apple all the way. They’ve been great!” he wrote.

Behind the scenes, the atmosphere between the two companies had been less than perfect. For years, Spotify would have a hard time getting new versions of their app approved by the App Store. The developers would often complain about how Apple was making things more difficult by changing or reinterpreting their own guidelines.