Apple Buys Beats

TO FULFILL HIS PROMISE TO investors of large-scale success in the United States, Daniel Ek needed to offer more than a searchable music database. The blueprint he had inherited from Napster held a natural appeal to anyone who had sat by a desktop computer in the 1990s and browsed millions of music collections via online chat rooms. But Spotify’s user base skewed young, and by the early 2010s, most teens had found alternate ways to discover tracks online.

A powerful player in the United States was Pandora, a steaming service that would switch on like car radio and play songs with similar musical traits. It would become clear that Spotify needed to expand its repertoire and offer more of a lean-back experience, as product designers in Silicon Valley would describe it. This was a clear departure from Daniel’s original vision in which users were assumed to be actively searching for music, building playlists, and sharing them with others. At times, he seemed surprisingly reluctant to let that version go.

“We should never tell anyone what to listen to,” Daniel told one of his colleagues as late as 2010.

Soon he would be singing a different tune. Spotify would revamp its radio feature and draw users toward activity-based playlists such as “Italian dinner” and “Dubstep workout.” Slowly, it would build out an à la carte menu of playlists designed for specific moments in the lives of its users. Competitors—such as Jimmy Iovine’s Beats Music—would push them further in that direction.

FM

In September 2011, while on vacation in Tennessee, the young programmer Erik Bernhardsson received a call from Spotify’s CPO, Gustav Söderström.

“We need a really strong radio function. And you know how that stuff works,” Gustav told the twenty-seven-year-old over the phone from Stockholm.

The bespectacled coder had recently finished a brief stint at a hedge fund in New York City. There, he had used advanced math to help optimize the fund’s high-frequency trading instruments, with the purpose of shaving milliseconds off of each trade in order to beat the market. Since leaving the hedge fund he had accepted a position at Spotify’s North American headquarters in New York. While waiting for his new US work permit, he’d decided to travel south and, like Paul Simon in the famous song, stop in Memphis and spend a few hours at Graceland, the palatial home that Elvis once purchased in the late 1950s.

Just a few days in, Erik Bernhardsson’s vacation was cut short. Gustav wanted him to head back to New York as soon as possible, promising to compensate him fairly once he had a work permit and could start receiving payouts. Spotify’s head of product had just experienced a moment of clarity and was in a hurry to build a new genre-based radio feature. The idea was to start siphoning users from Pandora, whose listeners could simply pick a song they liked and lean back while being served similar music on an infinite loop.

Erik hopped in a cab and took the next flight from Memphis to New York. The next morning, he stood outside 111 Eighth Avenue, admiring Spotify’s US offices in Chelsea. The massive brick building took up an entire city block and had, for decades, belonged to the city’s Port Authority. Its new owner was Google, whose New York headquarters claimed several floors of the building.

Erik took the elevator to the eleventh floor and was greeted by a handful of colleagues in the otherwise empty office. Furniture and boxes lay in piles on the floor. Large windows ran along one side of the space, with the view stretching northeast over the landmarks of Midtown: the Empire State Building; the MetLife building, which appeared to shoot directly out of Grand Central Station; the piercing, metal spire of the Chrysler Building; and Rockefeller Center on 50th Street.

At this time, Pandora had thirty six million users who listened every month. That made their service three to four times bigger than their Swedish foe. On the New York Stock Exchange, the digital radio company was valued at over $2 billion, around twice as much as Spotify.

Erik found an available desk and got to work. The millions of user-created playlists, he figured, were a treasure trove in Spotify’s growing data set. The title of each list might say something about the type of music it contained. A playlist called “Chillwave” would be likely to feature contemporary, electronic dream-pop while “Uptempo House” probably contained fast-paced dance music. Within a few hours, Erik had written code that analyzed playlist titles and the songs chosen to fit together in each list. He deployed the code and, as a first test, found eighty four songs that seemed to belong together. That morning, he laid the groundwork for what would become Spotify’s new radio feature, which the company would eventually patent in the United States.

Three months later, at the Le Web conference in Paris, Daniel Ek walked on stage in a black polo shirt, carrying a water bottle. He launched the revamped Spotify Radio, explaining how users could now choose a song and ask the player to queue a selection of similar music. He made sure to point out that unlike Pandora, his new radio feature allowed for “unlimited skips and unlimited stations.”

“It was a big use case that a lot of people were asking us for. Today, we’ve covered that use case,” said the Spotify founder.

A few hours later, when the New York Stock Exchange opened, Pandora suffered a five percent drop in its stock price, wiping out around $70 million from its market cap.

Spotify Radio was not perfect. Over the coming years, picky listeners would mock the song selections, calling them predictable and simplistic. But the new feature did mark the beginning of the end of Pandora’s dominance within digital radio in the US.

Viva Las Vegas

While Spotify was testing the waters in the US, Jimmy Iovine was hard at work building a new type of streaming company, with its roots in the music business.

In January 2012, a few weeks after Spotify Radio launched, the Brooklyn-born record executive found himself in Las Vegas. The sun was shining on the City of Second Chances, and it was time for the annual Consumer Electronics Show, CES.

The board of Beats Electronics had convened in a conference room at The Wynn, a five-star hotel on the northern end of The Strip. One item on the agenda was “Daisy,” the streaming project that was still under wraps and, for now, shared its name with Beats president Luke Wood’s dog. Trent Reznor, frontman of the alternative rock band Nine Inch Nails, was seated at the table. He had been tapped as chief creative officer of the project and had worked on a conceptual pitch with the Swede Ola Sars, who was the chief operating officer of “Daisy.”

The duo’s presentation expanded on the concept of “human curation,” with playlists by Beats-affiliated stars such as Dr. Dre, Will.i.am, and Gwen Stefani. One aspect that really piqued the board’s interest was a feature called “the sentence,” which Sars and his team had cooked up in Stockholm. The idea was that the listener would describe their setting and mood, and let the streaming client set the soundtrack. A listener who was “in a house,” “with their friends,” and felt like “starting a riot” might be served a rowdy song by The Beastie Boys or DMX.

The executives in the conference room were impressed. At this time, Spotify’s partnership with Facebook was still fresh. The Beats concept felt like a natural next step. The room was in agreement: their blueprint was already better than anything those “robots in Sweden” had cooked up. The presentation ended in cheers, with Dr. Dre clapping loudly.

Runnin’ Down a Dream

In a matter of days, the elated mood in Las Vegas had dissipated. Jimmy Iovine seemed impatient and displeased since he, much like Daniel Ek, was only really at ease when things moved fast. The energetic music executive had thought that a Beats streaming service could be ready to go within a few months. That might be possible, Ola Sars would tell him, but only with non-interactive licenses. That would make Beats’ new product a radio service in the style of Pandora, not an on-demand player that would compete squarely with Spotify.

Sars had, by this time, recruited his former colleague, the previously skeptical Fredric Vinnå, as the project’s Chief Technical Officer. Vinnå moved to Los Angeles and quickly became close friends with Trent Reznor. The two had a lot in common—the long-haired Swede also liked to dress in all black and talk about product design. They would hang out in Reznor’s modernist home in Beverly Hills and frequently return to the idea of a streaming service with a heart and soul. The duo convinced Iovine to take the time to build a fully functioning streaming service. They wanted to challenge Spotify, which the Beats team thought resembled a glorified FTP server: a modest improvement on file-sharing software like Napster, but too technical, and hardly culturally relevant.

Time was of the essence for the Beats team. To buy some, they figured they needed to acquire an existing streaming company. One option was Rdio, which had its head offices in San Francisco. Jimmy Iovine met with co-founder Niklas Zennström, the Swede who had recently cashed in spectacularly when Skype was sold, for a second time, now to Microsoft. Iovine is said to have left the meeting thinking Zennström wanted too much money for his streaming company. Instead, he and the Beats team decided on MOG, another San Francisco-based streaming service with forty employees. The company was founded a year prior to Spotify, yet didn’t stand a chance against them. Beats acquired MOG in March of 2012 for around $14 million, which would be pocket change in the ensuing streaming wars. Ola Sars would take credit for landing the deal. But soon, the “Daisy” project would move into a new phase that would result in his departure from the company.

Fredric Vinnå, however, rose through the ranks. He was allotted shares in the company and became Head of Product, filling his team with top talent out of Silicon Valley. It was a perfect setup, but taxing work. In 2013, Vinnå lived in a swank apartment with a view of the San Francisco Bay, but he never had the time to furnish it properly. Most nights he would work until midnight, only to get up early the next morning and do it all over again.

Long before the product was finished, Iovine was in talks to sell his company. He met with Ted Sarandos, the Chief Content Officer at Netflix, who was quickly becoming one of the entertainment industry’s top executives. One source would recall how Iovine also courted representatives from Google and the team at Microsoft’s Xbox division in Seattle, which had inherited digital music distribution from the discontinued Zune project.

Many big technology companies had contemplated entering the music-streaming market at this point. Iovine’s main goal, however, was to sell his company to Apple.

We’re Not Living in America

Despite its code name, Beats’ intention to challenge Spotify was no longer a secret. By 2013, details of the project had begun to leak to the press. Among those who took notice were Spotify’s founding duo, and one of them was especially annoyed.

“Trent? Damn him,” Martin Lorentzon said during a meeting in Stockholm, having just been told about the rock star’s influential role at what would eventually be called Beats Music.

Just a few years prior, the Nine Inch Nails singer was one of many influencers in the music world that helped promote Spotify in the United States. The way Martin saw it, if there was a dark side in the digital music space, Trent Reznor had just enlisted. He now worked for Jimmy Iovine, whose ties to Apple had been clear since he helped Steve Jobs launch the U2 special-edition iPod back in 2004.

The meeting in Stockholm had been requested by Ola Sars, who was about to start a new streaming company with Spotify as a major shareholder. Daniel Ek was also present to discuss the new venture. Soundtrack Your Brand would offer music streaming to shops and restaurants. But the conversation lingered around Sars’s turbulent time with Iovine, Vinnå, Reznor, and the others. It had now been a year since he left Beats with just over a million dollars as thanks.

Martin floated the idea of getting Vinnå to come work for Spotify. Daniel seemed especially interested in how Beats Music was meant to work. Sars, bound by a nondisclosure agreement, painted a general picture of how their music curation—with playlists tailored for each user—would work once the service launched.

Spotify was already heading in the same direction. Besides Spotify Radio, they had launched a “Discover” tab with music recommendations served up by algorithms. But Daniel knew that he needed to program much more of the listening on his service if Spotify was to become a true hit in the United States. He had recently seen market research that showed Spotify lacking a unique advantage over their American competitors. Online radio listeners in the US had responded that their instinct was to turn on Pandora. Those looking for a specific song would tend to search for it on YouTube. Spotify was not the leading contender, not even for the lean-forward user case that it had always centered around.

The results fascinated several of Spotify’s top executives, who had begun to realize the extent of the problem. They were too far-removed from the average music listener in the US. How might they reach thirteen-year-olds who just wanted to hear the latest cover track aired on American Idol? Spotify’s new tagline—“Music for every moment”—was a roadmap of sorts. But exactly how they would deliver on it remained unclear.

Daniel had already tried to partner with third-party app developers, once again borrowing a page from Mark Zuckerberg’s playbook. For around eighteen months, leading music magazines like Rolling Stone and Pitchfork had been building apps within Spotify that contained music charts and user reviews of new releases. Def Jam, an influential hip-hop imprint under Universal Music, served Spotify users their music in playlisted form. Other developers offered anything from touring schedules to dating services based on a person’s music taste.

But the app that truly caught Daniel’s attention was Tunigo. It had been built by a company with offices in a basement on a tucked-away stretch of Kammakargatan, a back street in central Stockholm. In workstations starved of daylight, coders and music editors had built playlists that fit into categories like “romance,” “working out,” “travel,” and “partying.” They had been heavily inspired by Songza, a startup based in Queens, New York, that would later be purchased by Google.

In May 2013, Spotify paid more than $6 million for Tunigo, the company’s first acquisition since μTorrent in 2006. The new subsidiary was tasked with helping Spotify sift through the roughly twenty million tracks in its catalogue. Several members of the Tunigo team joined Spotify, among them the company’s CEO, Nick Holmstén. He would become director of the section within the Spotify player called “Browse,” where listeners could find new music.

“Tunigo helps users find great music for every moment,” Nick said when the deal was announced.

The concept of “moments” would, over time, become central to Spotify’s product strategy. The following year, in an interview with the New Yorker, Daniel would sound like he had found his edge.

“We’re not in the music space—we’re in the moment space,” he told the magazine.

Thinkin Bout You

As the battle for streamed music heated up, Jimmy Iovine was not alone in talking to potential buyers.

During 2013, Daniel Ek once again held several meetings with representatives from Google. This time, the stakes were higher—as were the dollar sums.

The Swede had had a complicated relationship with the search giant ever since he, as a teenager, was rejected for a job there. YouTube was now one of Spotify’s core competitors. Many Spotify staffers were bothered by the fact that Google’s sprawling video platform earned advertising dollars on music videos while paying the music industry considerably less than Spotify did.

Four sources would recall that Daniel spoke to Google about selling his company two years after the US launch. According to one account, Daniel flew to San Francisco to meet Larry Page, the revered co-founder whose crowning achievement—coming up with the “Page Rank” algorithm, the backbone of Google’s search infrastructure—had since spawned an internet empire. By many accounts a problem-oriented, introverted person, Page was now serving as Google’s chief executive, having taken over from Eric Schmidt two years prior.

Both Daniel Ek and Martin Lorentzon have remained tight-lipped about the discussions. One source, however, would describe how Daniel had seemed interested in a deal only if he could serve as head of both Spotify and YouTube, as a new online media division. A deal with Larry Page would need to include a grander vision about music and video.

“Daniel was interested in the deal,” as one source would say, “but he didn’t want Spotify to become yet another business unit within Google.”

The Swede did not appear interested in cashing in on his company and joining Google only to leave once his entire payment package had matured, the way many acquisitions in the tech space tended to pan out. One forthcoming example was Facebook’s $16 billion acquisition of the messaging service WhatsApp.

Daniel and Page didn’t click, and Daniel left the encounter feeling slightly rejected. The numbers didn’t meet his expectations either, according to two sources.

During the talks, Daniel was said to have asked for $10 billion and then lowered his ask to $8 billion, one source recalled. Google’s representatives offered $3 billion, or maybe $4 to $5 billion, depending on the source. Regardless, the parties remained billions of dollars apart. The negotiations never amounted to a formal bid.

“Google knows all about advertising and weren’t very impressed with that side of Spotify’s business,” one source in the record industry would recall.

In a regulatory filing from December 2013, Google wrote that it had “recently pursued but discontinued a potential buyout of a foreign company, with a valuation estimated in the range of $4 to $5 billion.”

According to one source, Daniel would have had a hard time pitching Page on the idea that he would also run YouTube.

“That was the part of Google that everyone wanted to work at,” the source said.

Daniel Ek once again had walked away from acquisition talks, meaning venture capital was the way forward. His finance team had been drumming up interest for a new round of funding that would bolster Spotify’s valuation and allow its CEO to keep investing in growth.

It turned out to be a hard sell. The Spotify team met with a wide range of investors but did not have the metrics to show that their business would eventually yield major profits. To convince the skeptics, the Spotify team started making aggressive projections for its future mobile growth, one person would recall. They wanted to issue new shares amounting to 6 percent of the company in exchange for $250 million. That would indicate a total value of more than $4 billion for the company.

Ordinarily, a deal of that size would mostly be swallowed by one or two lead investors, with smaller shareholders sharing the scraps. But in this case, there was only one interested party: Technology Crossover Ventures, a fund based in Silicon Valley. To ensure its influence over proceedings at Spotify, TCV secured a board seat at the company.

The seat was taken by Barry McCarthy, a seasoned American media executive who, two years prior, had left his position as Chief Financial Officer of Netflix. The outspoken sixty-year-old would come to play an influential role at Spotify over the coming years.

Once again, Spotify had convinced an investor to take a leap of faith. Apart from their Facebook partnership in 2011, Spotify hadn’t been able to dazzle venture capitalists with its growth figures. Success always seemed just a few quarters away. Daniel was running out of time to convince the market that Spotify would win the battle over digital music.

Call Me Maybe

During 2013, Beats Music’s CTO, Fredric Vinnå, found himself in a meeting with Jimmy Iovine and Eddy Cue, who had been one of Steve Jobs’s most trusted executives. Among countless other projects, Cue had helped create the iTunes Music Store in 2003 and the App Store in 2008. Given Apple’s size, both innovations had helped spawn entirely new sectors in the digital economy.

Fredric Vinnå was still hard at work creating Beats Music with Trent Reznor and their team. But it had become clear to him that Iovine wanted to sell the company as soon as he could. The Swede found the negotiations stressful. His job was to build a strong product, and he still wasn’t sure he would succeed. Once ready and launched, the app needed to find traction among digital consumers in the United States, who were spoiled for choice. The launch date, which had been set to January 2014, loomed ever closer.

Daniel Ek kept in touch with Vinnå throughout 2013, hoping to recruit him to a top position in Spotify’s product division. Vinnå politely declined, preferring to stay at Beats Music at least until the launch, and braced himself for an intense push to finish the project. The final three months became a whirlwind of meetings, video conferences, and technological meltdowns.

That Don’t Impress Me Much

On a cloudy Tuesday morning in San Francisco, Fredric Vinnå and Ian Rogers, the CEO of Beats Music, woke up in a conference room. They had been sleeping on the floor of what had served as the company’s war room. A couple of hours must have gone by. The pair looked at each other, smiling wearily. It was January 21, 2014. Beats Music was live, but they both knew it wasn’t really ready. The thought of how much work remained made Vinnå feel nauseous. An endless series of minor catastrophes had preceded the launch, but Jimmy Iovine had finally gotten what he wanted. Beats Music was out on time, and the app was more or less functioning.

Music journals such as Rolling Stone reported that Beats Music had succeeded in differentiating itself from Spotify, Pandora, and YouTube with its playlists by tastemakers and artists. At the core of the product was “the sentence,” a feature designed to serve up the right music at the right time.

“I’m in a den and I feel like dancing to pop music,” talk show host Ellen DeGeneres said in a commercial that aired during the Super Bowl halftime show.

New users began to trickle in, tempted by the free trial period. After that, the app cost ten dollars a month. Like all other streaming services, Beats Music lacked the unlimited free tier that was the key to Spotify’s growth.

“Image is everything: Beats Music bets on style and celebrity to take on iTunes,” the headline on the tech site The Verge read after the launch.

The staff at Spotify’s offices in New York downloaded the Beats Music app immediately, but few were impressed by its features. The verdict from the engineers—the very technicians Jimmy Iovine had taken aim at—was that Beats Music was a disaster. They couldn’t understand why Beats had acquired MOG instead of Rdio, a service they thought had far superior technology. As his colleagues roasted their new competitor, the designer Christian Wilsson was impressed by the Beats playlists. He joked that Dr. Dre’s hip-hop picks felt considerably cooler than whatever was coming out of the Tunigo team back home.

A few days later, the Beats Music team celebrated their launch with a star-studded show at the Belasco Theatre, a historic building with a Gothic façade in downtown Los Angeles. On stage, Dr. Dre, Eminem, Diddy, Ma$e, Busta Rhymes, and Nas performed classic hip-hop tunes in a formation that was intended to resemble a human playlist. Drake, Selena Gomez, Macklemore, and Paris Hilton all made cameo appearances.

Beat It

A few weeks after the launch of Beats Music, Fredric Vinnå had had enough of the near-constant glitches, the many meetings, his duties as manager, and all the endless hours. His relationship with his girlfriend was in dire straits, one of his two brothers had recently passed away, and all he wanted was to spend time with his family in Sweden. Daniel Ek got in touch again, tempting him with a top job at Spotify, in a professional environment, with reasonable working hours. Martin Lorentzon jumped in to seal the deal.

“Listen, it’ll be summer soon. We’ll go out in the archipelago, eat pickled herring, and drink shots of schnapps,” the Spotify Chairman said.

Something snapped inside of Vinnå. He wrote an email describing how he needed to resign “for personal reasons,” and sent it to Jimmy Iovine, Luke Wood, and Trent Reznor. His deal with Spotify wasn’t finalized, and he didn’t mention his new job in the email. Regardless, his decision rocked the Beats leadership team.

“No one has ever done this to me before,” Iovine shouted over the phone.

Vinnå’s departure hit Trent Reznor the hardest. He took it as a personal betrayal. Vinnå eased his own guilty conscience by giving up his shares in the company, saying he wanted to move on with a “clean slate.” It would become the worst financial decision of his life. But when the airplane rose over San Francisco, he felt relieved. His cell phone was off, his laptop tucked away. All he could hear were the engines roaring. For the first time in over a year, he felt free.

Come As You Are

As the Beats Music team was busy converting its trial subscribers to paid customers, it was crunch time over at Spotify. In April 2014, the product team presented a comprehensive redesign that had gone by the codename “Cat,” after Catwoman. A uniform, black background served to highlight album covers and song titles, and the overhaul received praise in the tech journals.

“We have this metaphor of stepping into a theatre—when you dim the lights, the content comes forward,” Michelle Kadir told Wired after the unveiling.

The product developer with the unparalleled sneaker collection conducted a dozen interviews with foreign journalists. She had led the redesign with Rochelle King, who had arrived at Spotify from the product division at Netflix.

Underneath the hood, Spotify had shed additional weight. For several years, the company had spent millions of dollars upgrading the back end infrastructure. Now, Spotify featured nimble, web-based code, an area where its technology had lagged behind European competitors such as WiMP and Deezer. The new back end allowed Spotify’s engineers to work in an iterative process of constant updates. The time from idea to deployable code had been shortened from six months to just a few weeks. Finally, Spotify’s back end was snappy again.

Fredric Vinnå had joined the company, with an office right next to Daniel Ek’s. News of his arrival did not reach the product division until Beats Music’s former product head suddenly stood in front of them, ready to start working.

The new recruit, whose title was VP of Product, struck his coworkers as calm and empathetic. But, as two people would recall, his expectations did not sit right with the head of product, Gustav Söderström.

Some tech CEOs are hands on with the product themselves; others allow their deputies a high degree of autonomy. For the most part, Spotify fell into the latter category. Gustav had carved out a powerful position for himself that spanned from strategist to evangelist. His long, prophetic emails about where Spotify was headed could arrive at any time of day. Of the handful of members of Spotify’s executive team, he appeared to be closest to Daniel. Spotify was a product-driven company.

On stage, Gustav was a natural communicator, often outshining Daniel with his enthusiastic delivery, articulate storytelling, and a few jokes. At thirty-eight, his once-blond hair had started to gray, but he’d started working out more frequently and his diet was healthier than before. Privately, he’d just moved with his family from central Stockholm to the suburban island of Ekerö. From there, he rode his Ducati motorcycle to work whenever he could. Outside of Spotify, he continued to invest in startup companies. He owned shares in the Swedish e-commerce platform Tictail, a competitor of Etsy, and in the visual technology company 13th Lab, which would soon be bought by the Facebook subsidiary Oculus VR.

At the Spotify head office, Gustav Söderström now began to work closely with Fredric Vinnå, developing new song charts, artist pages, and a new home screen for Spotify’s mobile app. The Beats Music veteran had a high degree of respect for his new boss, but the process at Spotify failed to inspire him. He missed hanging out with Trent Reznor and talking about a music service with “heart and soul.”

By 2014, Spotify had turned the entire product division into “squads” consisting of up to twelve people. The idea was that every unit would work independently of each other, like a small startup within a big company. Squad members could mix with others to form chapters, tribes, or even guilds, with the latter consisting of individual members from any number of squads. It was a radical reorganization, outlined later in an ambitious white paper that praised the agile method of software development. The document would quickly spread among management professionals online.

Yet in practice, Spotify was not the agile utopia it wanted to be. Many employees found the model chaotic, hard to follow, and overly focused on team autonomy. Cross-team collaboration may have been the intention, but it rarely succeeded. Some felt that the blog posts and white papers explaining the “Spotify model” of management were misleading.

“Ironically, the posts were thought to be great for recruiting,” one employee who joined Spotify in 2017 would recall after leaving the company. With time, the former employee noted, the Spotify leadership began to revert to more traditional and hierarchical modes of decision making.

Fredric may have been a casualty of this management experiment. He struggled to form a team that was loyal to him and his ideas. Some departed Spotify staffers would claim that Gustav could have done more to empower his second-in-command. A few months after joining Spotify, Fredric Vinnå felt like he needed a longer break from work. He had, after all, only taken a few weeks off after abruptly quitting his job at Beats in California.

The Masterplan

Beats Music was now gaining considerable traction among influencers and tastemakers in the music business. Spotify’s playlists did not have the same air of exclusivity, except for Sean Parker’s popular list, Hipster International.

The contrast between Beats’ celebrity-laden approach and Spotify’s curation style was partly by design. Daniel Ek believed he could find a more scalable way, centered around technology, to bring users the right songs at the right time. The Swede wanted to use machine learning to automate music recommendation at scale, and he had his eyes on a small company outside of Boston that was on the same quest.

Starting in 2005, engineers at Echo Nest had analyzed several decades of recorded music and sorted it into microgenres such as “Basque rock” and “more contemporary country.” The company, which had its roots at the Massachusetts Institute of Technology (MIT), had also developed a tool that would come to be known as “Truffle Pig” for its ability to sniff out gems in a vast music catalogue. Users looking for “angry” music from the 1980s with a low level of “acousticness” might be served a selection of aggressive synth tracks.

In March 2014, Spotify made its largest acquisition to date, buying Echo Nest for around $70 million in cash and stock options in Spotify. As part of the deal, the roughly sixty Echo Nest employees, including the three founders, would now start working for Spotify.

“You’ll start noticing improvements pretty much instantly,” Daniel told a reporter after the deal was announced.

But the integration would turn out to be challenging. Echo Nest’s technology relied on comprehensive data scrapes of blogs, song charts, and a wide range of other online sources. Spotify’s recommendations team, meanwhile, had built their work largely on data from actual listeners: whether they skipped songs, saved them to a playlist, or started perusing releases from similar artists. The methodologies clashed, and it took a year or two for the recommendations teams to get up to full speed again.

A few years after the acquisition, most of Echo Nest’s sixty-odd staff had stopped working at Spotify. Daniel’s biggest acquisition to date appeared to have been his worst.

Tears Dry On Their Own

A few weeks after the Echo Nest acquisition, Tim Cook looked poised to steal the limelight with a music deal of his own. In early May, the Financial Times reported that Apple was in talks to buy Beats for $3.2 billion. The news—and the price tag—sent ripples through the music world.

As soon as he saw the headline, Fredric Vinnå sent a text to his former Beats partner, Ola Sars. Three months had passed since Vinnå had given up his shares in the company. He couldn’t bear to calculate the millions he might have earned on Jimmy Iovine’s dream deal. At one point, Vinnå had owned 0.5 percent of the company.

The former Beats product developer started to think about Trent Reznor, who wasn’t returning his calls, and had unfriended him on Facebook.

Two days after the Financial Times broke the still unconfirmed news, Nine Inch Nails held a concert at Hovet, an arena just south of central Stockholm. Vinnå stood alone, in a sea of fans watching his friend perform. During the last song—the ballad “Hurt”—tears rolled down his cheeks.

Big Ego’s

Around the time of Trent Reznor’s performance in Stockholm, explosive details surrounding the Beats deal appeared online.

One evening in May, with the Financial Times story still unconfirmed, actor and R&B star Tyrese Gibson began filming himself while hanging out at a music studio in Los Angeles. Sporting a large pair of Beats headphones, he spoke directly into the camera.

“Oh shit, that mix is crazy!” he yelled into it, shaking the phone to simulate a heavy bassline.

By his side was Dr. Dre in a long-sleeved black t-shirt, laughing along. It could have been yet another product placement for the Beats by Dre headphones. But about a minute into the video, Gibson blurted out a few words that would make Jimmy Iovine very nervous.

“Billionaire boys club for real, homie. Fix your face, fix your face. The Forbes list just changed,” Gibson hollered into the camera.

“You know that, you know that,” Dr. Dre filled in.

Then he said it himself.

“The first billionaire in hip-hop, right here from the motherfuckin’ West Coast.”

After a few celebratory dance steps, Gibson shut the camera off. Neither he nor Dr. Dre had mentioned Apple. But once the video appeared on Gibson’s Facebook page, the rest of the world began to see it as confirmation that the deal was done.

Later, Iovine would reveal how the short clip could have ended the whole arrangement. A landmark acquisition was something that neither Tim Cook nor Eddy Cue wanted to—or could—announce in an impromptu online video.

Three weeks later, Apple finally confirmed that they had purchased Beats for $3 billion. Iovine and Dr. Dre would now join Apple to work on their music offering. They posed for the cameras alongside Cook and Cue.

Jimmy Iovine would rake in around $800 million on the deal, according to Bloomberg’s initial calculations. That figure would push him narrowly past the billion-dollar mark, in terms of personal wealth.

Dr. Dre didn’t quite make it. The following year, Forbes estimated his net worth to be around $700 million. Trent Reznor and Luke Wood also cashed in. A few months later, Luke would buy the most expensive home in the Los Angeles neighborhood of Silver Lake.

Back in Stockholm, Fredric Vinnå continued to text his former colleagues, congratulating them on their achievement. But most of them didn’t bother replying.

For a time, Apple’s foray into streaming felt like the only conversation topic at Spotify headquarters. According to the trade journals, Beats Music had only acquired just over one hundred thousand users. Yet the price tag had made the company Apple’s largest acquisition ever. The question was: had they paid for the headphones or the streaming service?

Ola Sars developed his own theory. He believed Apple had primarily bought Beats because of Iovine’s unique position in the music industry.

Tim Cook appeared to offer a similar explanation, stressing that the company now had several new recruits with a deep understanding of music. He also said that Beats Music was the first subscription service that had really gotten it right.

“They had the insight early on to know how important human curation is,” Apple’s CEO said, having just raised the stakes in the war over digital music.