Big Data
THE “WINTER” THAT SPOTIFY HAD long been anticipating arrived in the spring of 2015. Competition was now coming at them from all angles. Amazon and Google had expanded their streaming services, and while Tidal’s subscriber base was well below the one million mark, its strong ties to genre-defining artists rendered it a constant threat.
In addition, a forthcoming launch from Apple—some sort of revamp of Beats Music—loomed on the horizon. The iTunes Store already had around eight hundred million customers, most of them with registered credit cards. While Spotify was the market leader in streaming, iTunes dwarfed their roughly twenty million paying subscribers.
Yet with size came scrutiny. Apple’s ties to the major labels now faced more criticism than ever before. Four years after Spotify’s dramatic entry into the United States, the tech giant was still suspected of counteracting streaming services. During the spring, the European Commission, the US Department of Justice, and the Federal Trade Commission were all reportedly looking into whether Apple had joined forces with the music industry to counteract offerings such as Spotify’s free tier.
Meanwhile, Daniel Ek was busy sharpening Spotify’s product. His latest pitch to users and investors was not only to serve up “music for every moment,” but also for every mood.
“If we notice that you’re driving faster than usual to work, we’ll adjust the music to that mood,” he told a group of investors visiting Jarla House in the spring of 2015, according to one person.
To achieve this, Spotify needed to know where their users were and whether they were standing still, running, or traveling by car. One of the latest catchphrases in the tech industry was “big data,” and Spotify was about to start gathering more information from their users’ phones than ever before. Daniel understood the value in knowing more about the listeners. Spotify’s extended data collection would form part of a big product launch, scheduled a few weeks before Apple was due to unveil its new streaming service.
While the vision for the revamp belonged to Daniel Ek, the execution largely rested on Gustav Söderström. Fully aware of the high stakes, the duo’s aim was to offer their user base an entirely new way of using Spotify.
“This is do or die,” Gustav told his team as the launch date approached.
You Don’t Know Me
The pending transformation of Spotify, where the interface would truly let the user lean back, had the working title “Moments.” Whether users were partying, relaxing at home, or hosting a dinner, the new features were designed as a soundtrack to life’s every moment. The idea was to cover as much of the listener’s day as possible, with playlists like “Deep Sleep” and a brand-new catalogue of podcasts intended to secure user engagement outside of regular music hours.
The product team had strived to target their recommendations using location data. A user who appeared to be on vacation in Los Angeles might want to hear “Going Back to Cali” by Notorious B.I.G. For that to work, Spotify needed to ask users to hand over their GPS coordinates. One especially bold idea was to let Spotify play its recommended track instantly, as soon as the user opened the app. The product team was confident their music recommendations would hit precisely the right note.
The athletic Gustav Söderström was particularly excited about a new feature called Spotify Running. To develop it, his staff had turned a nondescript room in Jarla House into a test lab. A visitor peeking in would recall seeing a Spotify coworker running on a treadmill, wearing headphones, while colleagues studied a computer screen nearby. The employees were testing software that matched the music to the pace of the jog within a few seconds. Spotify Running, which was being developed together with Nike, fed off of sensor data showing how fast the user’s smartphone was moving.
The wide-ranging update of the Spotify app, due to be presented at a dimly lit studio in Manhattan, was partly the company’s answer to the music curation Beats Music had brought to the forefront. Beyond that, it was a way of thwarting whatever Apple was about to present after their acquisition of Beats one year prior. The final component in the “Moments” revamp was an integration of video into the app. Shiva Rajaraman—who had shuttered the Spotify TV project only a few months earlier—had licensed video content in both Sweden and the US.
While planning its most ambitious product launch to date, Spotify CFO Peter Sterky had been instructed to secure new funding for the company. Spotify was growing at a healthy pace, and Apple’s acquisition of Beats had confirmed that streaming was the future of the industry. Investors were easier to come by than during Spotify’s early years, but Peter approached them with a big ask: He wanted to double the company’s valuation to a whopping $8 billion.
Dancing Machine
As Spotify rushed to launch Moments, a few of the company’s most gifted coders found themselves without much to do. The tight-knit team, based at the company’s West 18th Street offices in New York City, were specialists in machine learning. Some of them had conducted doctoral-level research before joining Spotify to build music-recommendation tools. Their algorithms powered “Discover,” the section where listeners could find new songs and releases. But their remit had shrunk during the latter part of 2014. Most of the features they had overseen were now being developed outside of Boston, at the offices of Echo Nest, Daniel Ek’s most recent acquisition.
Yet the AI specialists in New York were gifted and ambitious. They began to skunkwork—the tech world’s term for engineers experimenting on pet projects without clearance from above. Toward the end of 2014, two likable, low-key team members—Edward Newett and Chris Johnson—began to delve deeper into one of the ideas. They wanted to package their usual music recommendations as a playlist. Now, they challenged themselves to test which of their methods would render the best selection of music, resulting in a playlist tailored to the taste of each user.
At their disposal were a handful of tested ways to recommend music. One way was to pair the user with a listener that shared a similar listening history. Their system, built on massive troves of listening history, in part resembled how Netflix would recommend films and TV shows, or how Amazon would rank all manner of physical goods on its website. Another way to recommend music was to analyze the waveforms of songs to match them with music of a similar tempo, structure, and intensity. But the third way to recommend music yielded superior results.
Just as when the team had constructed Spotify Radio a few years prior, it relied upon the now approximately 1.5 billion playlists created by Spotify listeners themselves. Most were a collection of music that somehow fit together, whether by sound, theme, or mood. When the recommendation team fed the engine with that data, it came up with a machine-powered selection of songs that somehow felt organic.
To confirm their findings, Edward and Chris placed a request to test the playlist in-house, on other employees. Their new boss, Matthew Ogle, moved the new, personalized playlist to the top of the employee-only playlists in the Spotify client. The decision paid off immediately.
“It’s as if my secret music twin put it together. Everything in it is good,” one of the early testers wrote. The recommendation team and a few product designers decided that the playlist could be released every week, like a personal mixtape. They trimmed it down from about one hundred songs to thirty songs, or around two hours of music, and called it “Discover Weekly.”
Before launch, they would have to perform a live test on real Spotify users and study its performance. Just a few hundred thousand users scattered over the world would be enough. But the product pipeline appeared clogged, and the higher-ups seemed preoccupied with Moments. The skunkwork playlist would have to wait.
Moment 4 Life
Weeks prior to Apple’s unveiling, rumors that Tim Cook was about to lower the price of streaming began to emerge. Several outlets reported that Jimmy Iovine and his team were looking at offering their service at five dollars per month.
Slashing the price of a streaming subscription in half would certainly be a hard sell on his compatriots in the music industry, but Iovine, the newly minted billionaire, was now working for Apple. Cutting the cost of streaming could boost their user growth and put the loss-making Spotify under even more financial strain. The pressure was mounting in what the tech world had dubbed the streaming wars.
Meanwhile, Daniel Ek entered a brick building on West 37th Street, a couple of blocks from the Hudson River. The Spotify founder was about to deliver his most important stage performance to date.
The event, held in a former warehouse that now served as a sleek studio space, occurred right between Tidal’s launch and the forthcoming rebirth of Beats Music in Cupertino. More than six months had passed since Taylor Swift ditched Spotify, and Daniel’s messaging around artist compensation was carefully crafted.
“Spotify is on a mission to bring all the world’s music to all the world’s music fans, in a way that’s great for them and great for all the amazing artists and songwriters who create it,” he said, after welcoming the scores of journalists present and hundreds of others watching around the world.
A string of neon lights lined the ceiling and floors of the otherwise dark studio. Daniel Ek, now thirty-two years old, underscored that Spotify was not a gang of hostile technicians from Stockholm, but rather a tech company striving to protect the interests of artists and musicians.
“We’re a technology company by design, but we’re really a music company at heart,” Daniel said, before bringing a few members of his leadership team out on stage.
Yet it was the non-music elements of the presentation that stood out. Spotify users would soon be able to find podcasts and video clips from ESPN, MTV, and the young channel VICE News. Ilana Glazer and Abbi Jacobson—the star duo from Comedy Central’s acclaimed TV series Broad City—made an on-stage cameo. Several Swedish media companies, among them Kanal5 and the newspaper Aftonbladet, were also on board.
The scattered collection of video clips had been costly. Two people familiar with Spotify’s financials would recall that Daniel had to clear a licensing cost of around $50 million with the Spotify board. In addition, Daniel had licensed podcasts from the likes of BBC and NPR in order to capture listeners throughout their day.
“We want Spotify to help soundtrack your life,” he said on stage.
As far as the music went, Daniel stressed that data was only a complement to what he might have dubbed Spotify’s “heart and soul”: the company’s curators.
“Of course, we look at data to help figure out what our listeners like. But another key reason for our success is really that we have some of the most talented music experts working to curate the playlists that matter most to our users,” he said, in what appeared to be a retort at the thinly veiled shots being fired from Jimmy Iovine’s camp.
Spotify’s curators had assembled playlists such as “Workout,” “Party,” and “Gaming” in order for the app to stay relevant in every context. After the presentation, Gustav Söderström told Wired that his team had targeted every slot in the average user’s day.
“I’d like for users to start Spotify in the morning and not really pause it until they go to sleep,” he said.
The market leader in streaming was now a music company offering video clips, podcasts, music curation, and a running feature. Afterward, industry journalists surmised that Spotify had tried hard to differentiate itself from Tidal and whatever was coming at Apple.
“Here are all the new features packed inside Spotify,” the Wired headline read.
To fully launch all the new features, Spotify would soon request access to more user data than ever. Before that happened, Daniel Ek would watch as Apple unveiled its billion-dollar foray into music streaming.
Release Me
Two weeks after Daniel Ek pitched the future of Spotify to journalists and investors worldwide, Tim Cook took to the stage in San Francisco—and he saved his best news for last.
“We do have one more thing,” the Apple CEO said, quoting his predecessor’s signature line to the audience’s cheers.
Cook then cued a lavishly produced video chronicling the history of recorded music, from gramophone recordings to radios, and later to LPs, 8-tracks, cassettes, iPods, and iPhones. The viewer was then transported to the current year, 2015, and the Apple Music logo, prompting Cook to invite another speaker onto the stage.
“He has worked with fantastic artists, from Bruce Springsteen to John Lennon and countless others. We are happy to have him as a part of Apple’s team. Please join me in welcoming Jimmy Iovine!”
The sixty-two-year-old Beats founder—sporting his signature blue-tinted glasses, a dark suit jacket, jeans, and dark sneakers—stepped onto the stage to cheers.
“Thanks, Tim,” he said.
Iovine pointed out that he was a part of the iTunes Media Store launch in 2003, and that he now hoped to transform the industry one more time. Another artistic film promoting Apple Music, with shots from concerts and young people listening to music on their phones, was beamed from the projectors.
“There is a need for a place where music can be treated, not like digital bits, but more like the art it is,” the narrator’s voice said. “With feeling and respect and the desire to explore.”
The voice belonged to Trent Reznor, who suddenly appeared on screen.
“This is what we will do with Apple Music,” he said.
The new streaming service offered a complete catalogue, specially composed playlists and recommendations, and a new radio channel, Beats One. It would broadcast twenty-four hours a day and be hosted by DJs in Los Angeles, New York, and London. The heart of Apple Music was declared to be something called “Connect,” where artists would be able to share remixes, photos, song texts, and other content with their fans. Apple’s new service appeared to include a social network. The price was ten dollars per month, but there was also a free trial period of three months. Apple had not lowered the price point for streaming.
“At Apple Music we will give you the right tune, on the right playlist, at the right moment,” Iovine said, outlining what every streaming service was aiming to do in 2015.
The price of Apple Music was on par with Spotify’s paid service, although Spotify users who upgraded through the iPhone’s App Store would have to pay three dollars more to make up for Apple’s surcharge. A standing joke at the office was that Apple had made more off of Spotify’s streaming than the company itself.
At Jarla House, it was long past dinner time on a Monday night. The sun was setting on Stockholm, yet many employees had stayed at work to follow the presentation. This was a moment they had been anticipating for years. Apple Music was only free for trial users, meaning Spotify had maintained its unique advantage of retaining users indefinitely without asking them to pay. During the presentation, Daniel Ek could not help but share how underwhelmed he felt on Twitter.
“Oh ok,” he wrote, garnering thousands of retweets before he deleted the swipe at Apple’s new service.
One thing that gave the Spotify team confidence was that Apple’s software rarely made it big outside of the company’s own devices. Spotify, on the other hand, was built to be ubiquitous.
“Still, we were nervous. The US market was important for the IPO,” as one source would recall.
The Spotify staffer with the strongest ties to Apple’s project, Fredric Vinnå, had recently left the company. A year later, he would be recruited to Apple by his former boss, Jimmy Iovine. That made “the Swede,” as Iovine called him, the only person to move from Beats to Spotify and then back to his old gang, now at Spotify’s arch rival, Apple.
In Cupertino, Vinnå would become Tim Cook’s head of design for music, TV, and podcasts.
Look What You Made Me Do
The launch of Apple Music also drew the attention of regulators in Europe and the United States. Apple—which controlled the App Store, the sole distribution platform for apps designed for iPhones and iPads—now offered a competing service in the music space. And the company’s ties to the music industry were still under scrutiny.
Soon after the launch event in San Francisco, the New York Times reported that the Attorneys General in New York and Connecticut were investigating whether Apple had broken antitrust laws in the US. Some of the investigating legal teams had previously brought the case against Apple that led to fines for colluding with book publishers to drive up the price of e-books, undercutting Amazon.
The suspicion was now that Apple may have put pressure on, or conspired with, the major record companies to counter “freemium” services such as Spotify. The new antitrust investigation bore similarities to those already underway in the EU and with US federal authorities. In a response to the reports, Universal Music’s representatives commented that they had no deals in place with Apple, or any other record company, which would limit the availability of ad-funded music services.
Around the same time, Taylor Swift published an open letter with the headline “To Apple, Love Taylor” on her Tumblr page. In it, she explained why she had chosen to withhold her album 1989 from Apple Music, too. She wrote that Apple was set to skip royalty payments during their free trial period of three months. The letter implied that Apple had struck a much more favorable deal with the labels than Spotify, which had to pay every time a free user streamed a song.
“I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company,” Taylor Swift wrote.
What followed was an amicable dispute, in full public view, so formulaic in structure and tone that it appeared choreographed. Apple backed down the very same day. A few days later, just as Apple Music was about to go live, the parties had sealed the deal. Artists and songwriters would get paid, and Taylor Swift agreed to license the rights to 1989, which neither Daniel Ek nor Jay-Z was allowed to stream.
“This is simply the first time it’s felt right in my gut to stream my album. Thank you, Apple, for your change of heart,” Taylor Swift wrote, this time on Twitter.
Later, Jimmy Iovine would tell the press about his efforts to get Apple executives to side with music creators.
New Rules
A couple of days after Jimmy Iovine had presented Apple Music, Daniel Ek took a short morning walk to Stureplan in central Stockholm. It was the beginning of summer and the Spotify founder wore a green polo shirt, jeans, and white Air Force One sneakers.
Earlier that year, on Valentine’s Day, Daniel and Sofia had gotten engaged. A few weeks later, their second daughter, Colinne, was born.
As he stepped into the lobby of the Swedish telco Telia, Daniel appeared calm and reflective. He was there to meet three journalists from the Swedish financial newspaper Dagens industri. The Spotify CEO seemed happy to chat off the record, but appeared more guarded when the recording began. To one of the journalists present, he seemed to weigh his words carefully, eager to tone down the fact that Apple had just raised the stakes in music streaming.
“I don’t think you have to be number one to succeed. For me, it would be enough to be one of the top three,” Daniel said, showing a humility that many of his close coworkers and friends would not take at face value.
That morning, the financial press was awash with details of Spotify’s latest round of funding. The company had raised more than $500 million. A significant part of the money came from Telia, which led to the interview alongside Telia’s CEO. However, Daniel wasn’t very interested in talking about the money he had just raised.
“I don’t put too much weight on valuations,” Daniel said when asked about Spotify’s new price tag of $8.5 billion, which would be nearly four times as much as his loss-making company’s revenue that year.
The sheer magnitude of Spotify’s operation belied its CEO’s humble talk during interviews. It was now a darling of the venture capital world, where being on top was the only game in town. Later in the interview, Daniel began to sound a little more confrontational. He expressed surprise at the fact that Apple’s shift to streaming had taken so long and stressed that Apple Music was a sign that music streaming had finally become a household phenomenon in the US.
“It is a big validation of what we really have been saying for seven years, that the future is in streaming. Now the biggest company in the world is saying that they agree,” Daniel said.
For many, Apple Music would initially prove a disappointment. About a week after the launch, The Verge reviewed the app, noting that the interface was messy and the loading times long. Jimmy Iovine would remain dissatisfied with the product for months, one person would recall. He would consider the first six months in the market a waste of precious time.
Meanwhile, Spotify launched two new batches of features over the summer of 2015. One of them—containing the more advanced parts of the Moments update—would turn out to be a flop. The other would become Spotify’s most successful product launch to date.
Dressed for Success
After a few frustrating months, Spotify’s recommendations team in New York was finally able to test their AI-powered playlist on a larger group of listeners. In April 2015, they released Discover Weekly to nearly one million listeners around the world, and a few of them tweeted about the accuracy of the curation.
“Best 3 weeks of music I’ve ever had. Feel free to come back any time,” one user tweeted after their three-week test run ended.
Daniel Ek, however, remained skeptical. He initially questioned the format of a curated playlist, and he was reluctant to allot more resources to the project team. But his doubts weren’t enough to stop the wider launch. A few weeks into the summer, Spotify presented Discover Weekly to the world. It soon became a user favorite in Sweden and the US.
“It’s scary how well Spotify Discover Weekly playlists know me,” as one listener wrote on Twitter.
Within ten weeks, the new playlist had generated a billion individual streams. In the fall of 2015, Spotify surpassed Pandora in active users. After several years of experimentation, technology-powered music curation had paved the way for a new era in Spotify’s history. Daniel Ek would soon celebrate the playlist on his quarterly call to investors.
Data from playlists created by users had once again proven their worth to Spotify. Discover Weekly ushered in a new era in which Spotify began to program an increasing share of the music listening on the platform. The following year, Spotify unveiled Release Radar, a playlist that sampled new releases tailored to the user’s taste every Friday.
Several others would follow. Rap Caviar and Today’s Top Hits would soon become Spotify brands in the music world, with the power to breathe new life into the careers of established artists and catapult newcomers to stardom. These were not the themed playlists intended specifically for “the gym” or “dinner parties,” for which Spotify had previously been known. They were curated playlists, put together in part by algorithms and in part by Spotify’s music editors around the globe. An outside observer would have to credit Beats for inspiring this development but—crucially, and true to Spotify’s DNA—much of the work was done through automation.
By 2016, Spotify had become the preeminent tastemaker in digital music. Millions of listeners grew closer to the brand, feeling like Spotify understood their taste. In many cases, they no longer had to scavenge for the best songs. The best songs would now find them.
Spotify’s product division drew valuable insights from the data that Discover Weekly generated. The machine-made selections carried a bias: The playlist tended to contain music from independent labels, rendering the major labels underrepresented compared to Spotify’s catalogue as a whole. That meant that the product arm of the company had the power to greatly, and over the long term, influence outcomes within the industry. Not least, Discover Weekly could kickstart careers for unproven artists. Spotify could even use this power to replace the talent scouting that had traditionally been done by record labels.
The insights garnered from the new playlist machine would form a central part of Spotify’s business strategy. But the coders in New York who had initiated the project in late 2014 felt they never received recognition, as one person would recall.
In the months that followed the launch, neither Daniel Ek nor Gustav Söderström reached out to the coders who had created the playlist. Over the next couple of years, the architects behind Discover Weekly would move on to other companies like Amazon and Google’s artificial intelligence unit DeepMind. They left Spotify feeling like they hadn’t been given credit for their work.
Creep
Moments’ collection of features was not fully launched until mid-August 2015. Spotify now went public with its new privacy policy, requesting access to photos, GPS coordinates, and contacts on the users’ phones. In addition, sensor data would tell Spotify how fast the device was moving, and thus if the user was walking, running, or traveling on the subway.
Spotify’s expanded data collection quickly garnered criticism in the media, with many users and experts viewing the new terms as intrusive. It was one thing, they would argue, to share one’s location with Google Maps to navigate while driving. The necessity of sharing the same information with a music-streaming app was not nearly as apparent. Wired called the new policy “eerie,” while Forbes’ judgement was “real creepy.”
The Swedish billionaire Markus “Notch” Persson, creator of the wildly successful Minecraft computer game, addressed his compatriot Daniel Ek directly on Twitter.
“As a consumer, I’ve always loved your service. You’re the reason I stopped pirating music. Please consider not being evil,” Notch wrote, referencing the infamous “Don’t be evil” phrase found in Google’s code of conduct.
Daniel had failed to gauge how sensitive the privacy issue was becoming. Concerns over aggressive data collection would not peak until after the 2016 US presidential election. Even so, the Spotify founder felt compelled to correct the misstep by publishing a post on the company’s blog. He emphasized that the online furor over Spotify’s new policy largely failed to understand that the company merely was asking for access, not demanding it. Spotify would only collect photos, contacts, and location data, he wrote, if the users expressly asked them to. The purpose, Daniel wrote, was for users to be able to customize the cover art for their playlists or find music that people nearby were listening to. The sensor data was intended to power Spotify Running.
During the fall, the product team began to roll out the Moments features that had been lavishly unveiled a few months prior. They started, as usual, by trying them out on about one percent of Spotify’s now seventy million users. This test group could now view videos and use the app as their running companion. Members of the product team noticed two alarming signals in the incoming data: the users exposed to Moments were spending less time in the Spotify app, and tended not to return to it to the same extent as ordinary users. According to one person, users appeared to balk at Spotify instantly playing a song as soon as they opened the app.
“It’s like the app starts playing something people didn’t even want to hear,” that person would recall.
In the end, only a small part of the Moments package reached Spotify’s entire user base. The features that survived were Spotify Running and the themed playlists. The video clips, a $50 million outlay, appeared briefly for some users but soon disappeared completely. In Sweden, content from the popular TV duo Filip & Fredrik was only streamed a few thousand times, according to a person familiar with the figures. Many years later, the product department would scrap Spotify Running once and for all.
The botched revamp of the app did, however, mark the beginning of a new content strategy. Spotify’s content team had, since late 2014, been talking about how to develop original material. Several early productions from Netflix—including House of Cards and Orange is the New Black—were showing significant promise. Netflix’s stock had soared on Wall Street since they first began to air.
The head of Spotify’s content team was now Swede Stefan Blom, who had taken over when Ken Parks left the company. Blom’s team was mulling what kind of content Spotify might start to develop on their own. Betting big on exclusive music seemed like a dead end, and long-form video had its own limitations, as the failed Spotify TV project had proven. By late 2015, they also noted how the short-form videos included in the Moments update largely failed to gain traction.
There was, however, a growing media space that seemed appealing. Podcasts had been around for over ten years, but the medium had only recently begun to gain mainstream appeal. Serial—a pioneering title in the true-crime genre, which launched in 2014 by producers at This American Life—was the prime example. Another producer who had worked for This American Life, Alex Blumberg, was building the Brooklyn-based production company Gimlet Media. Suddenly, startups were popping up in the podcast space.
It would be years before Spotify began to pursue this opportunity with any urgency. Daniel Ek’s ambitious but failed bets on video had forced him to focus on getting his core business in shape for the IPO. But once that was out of the way, Spotify would begin to add more podcast titles and start experimenting with exclusive launches. The idea was partly to distinguish the service from competitors, but also to start building a catalogue that could become more lucrative than music licensed from major record labels.
Soon, Daniel would enlist the help of one of the sharpest content strategists around. In the fall of 2016, Ted Sarandos—Netflix’s long-serving chief content officer and one of the most powerful people in Hollywood—joined the Spotify board.