Spotify CEO Daniel Ek | Full interview | Code 2018

normally when we bring up a publicly-traded media company CEO we talk to them on this stage about Roseanne Barr right mix things up let's talk about our Kelly sure you know who are Kelly I do I actually do what's your favorite art Kelly song I don't know recently you guys said you wasn't an are Kelly ban but you said there's a bunch of artists that we don't like because their personal behavior we don't want to promote them are Kelly was one of them there's a rapper whose name I cannot pronounce I'm not going to try to there's a lot of furor about that you recently change those decisions can you explain why you made the first decision and in what why you made the second decision sure well I mean if you just think two steps back and kind of look at what it is we try to accomplish I think we're now at a point where we're obviously a material part of the music industry we have three million artists on the platform we have a hundred and seventy million consumers using this and as a platform one of the key things that we believe in is just being transparent and I think it's something that more and more platforms are waking up about and thinking a lot more I'm talking about that yeah and and so what we really just wanted to do was just be transparent about it and there's two pieces specifically that we rolled out one was about hate speech and I think that's sort of less controversial and then there's the other one about conduct and I think just being very honest we we were very big and we were just and just to be clear you said you're not banning people from being on Spotify right right Ian's Nazi or someone who abuses women and be on Spotify well you know again we're both oh yeah probably not so much well I mean again the whole goal with with this was just to make sure that we didn't have hate speech on the service it was never about punishing one individual artists or even naming one individual artist as well so I think you know and and coming back to it is really kind of my responsibility as a leader and I think we rolled this out wrong and we could have done a much better job in that well I just think we could have handled the communication i there's too much integrity and in terms of how people interpreted this and as you said people thought that they couldn't be on the service which was of course never the intent I kind of liked it when I first heard about I mean I know the labels were all complaining and how do you figure out if this abusive person can be on ER this one but I I liked it it's in contrast to YouTube and Facebook and Twitter and all right spent a lot of time talking to and they sort of shrug their shoulders and say what are you gonna do and you guys said yeah we actually want to make a decision but it seems like you backtracked a bit well again I think the key point here is what we were trying to go after it was just really around hate speech it wasn't to go after being moral police about it who did right who did wrong and you know you get into really tricky things such as has this person actually been charged with something have they actually been convicted of something at cetera et cetera that was never the goal I mean we're a platform where we want art we want to express a lot of diverse opinions we don't want to be the judge and the moral police of that I'll talk about that just a little bit and then we'll get into your business what's wrong with values I don't quite I have a lot of arguments with so many people I'm like the reason you don't like values does it make you have to make decisions about things and you have to make choices and you have to piss people off sure and make statements of values what is why wouldn't that injected values are such a problem like that they don't want to state them which they have by the way well I don't think that there's anything wrong with having values but I also think you know being a platform from being in an editorial driven service is something totally different and I think in our case the reality is as I said we had three million artists and what we wanted to be was just transparent we didn't want to get into a position about talking about it who gets to do exactly what or what what the situation is on Spotify there's certain things which I think the rules should be pretty clear about it there should be you know if if you are talking about being KKK and doing that kind of stuff I think it's pretty obvious that we don't want you on the service was this something you were pushing forward to come up from your organization uh it was a debate that we had internally at the company it's something that we keep on discussing and I think again one of the core values of the company is just being transparent and driving that agenda another core value that we have is to iterate as we get feedback and this has been one of those things where we got a lot of feedback from a lot of different advocacy groups about us being big and you know so we're clearly listening to people and taking that input do you think you're different than Silicon Valley companies you're you're you started the company in Sweden moved to London in the u.s. your big office is New York not California do you do you think that you operate the company differently than an American tech company I think so but I think that's just natural based on the environment we're in I mean you know being Swedish myself and and starting the company in Sweden that's just a very different society then you have here in the US and obviously that's been impacting us a great deal so how so well I mean just take something like parental leave you know one of the things that we realized as we started hiring more and more people here in the US was you know that's that I think it was like two or three weeks yeah if you were parents that you could take off and we saw our our employees in Sweden could take six to 12 months off that just didn't make any sense why that should be different so we rolled out a global parental leave policy throughout the company where now everyone has you know six months of paid leave so those parts of values for us is really important and and that's something that you know obviously comes from from being from Sweden yeah well Sweden's better so it's obviously better let's talk about the business about what you doing since you went public a lot of people as Peter said didn't think this was gonna happen that your business was impossible I've talked to so many so that like they can't people that consider buying you people that consider lots of people consider buying you but they're like we can't make money at this talk a little bit about the problem going public and how you thought about that well I mean going public in and on itself was never a milestone for us honestly I know that that might be a milestone for some companies but I've always just thought about you know our mission and our mission has been you know from from the beginning to try to build a service the consumer love where we can get them to experience and enjoy more music than they've ever had before and at the same time compensating artists for that and you know honestly it's just been what we've been doing now for more than ten years and what's we're keep on building every day still losing money right you lost money your entire time and running it now it's all in since been out there for a while and and you have this difficult model where most the money you come brain has to go back out to the rights holders that's good for them makes it very hard to sort of see how you are going to eventually make a profit I've talked to you the past he said well if we stopped growing with you profitable that's still the case if you should have stopped marketing stop trying to grow the business yeah very very much so but I also think like I look at the business maybe from a slightly different perspective in the sense that you know I think about our cash flow as one of the primary metrics and we've been cashflow positive for a bunch of quarters and as long as that's the case we don't have to go back to the markets and ask them to keep funding the company so that's been a very important metric of mine and as long as we've been having that you know breakeven on a cash flow basis or a positive cash flow we obviously since we believe that this is the early inning still of the music streaming market I want to keep on growing and investing in growth so talk about your relationship with the labels when you started off they had all the power you couldn't run the service without getting them to licence you you had to give them all your money basically you're still giving them most of your money but now they really need you because you're running them really big checks every year but it strikes me there's a fundamental tension between where you guys want to go ultimately which is having more and more control of the music business more power maybe maybe working with musicians directly and what happens to them it seems the more you grow the more more difficult it's going to be for them they're fully aware of that so how are you guys how are you guys working out that dynamic well I mean I think that's driven almost any supplier retail or dynamic right you're only three of them so it's tense right sure I mean that's one way of looking at it but we have over 20,000 partners in total on their record label side of just mentioning even the top record labels so there's way more than three even though that there's three beige three that you like extreme 87% a year whatever your number is enough violence most of most of your business comes from us most of it yeah for sure so obviously it's important but you know Procter & Gamble and Unilever are very important for Walmart and other retail businesses as well so so I don't think that's in an in an all itself as a unique phenomenon I think the most important thing though is I don't view you know us winning being equivalent to them losing I actually think that when I look at the music industry and one of the things that I talked about during our Investor days how exciting it is for us now to focus on the other side of the marketplace as well and I still think that there's huge amount of inefficiencies as you think about how hard it is today for an artist to break through and we sit there and we have this audience of 170 million people and then one thing that they asked us for is help us find more great content and the number one thing artists are asking us for is obviously I help me find an audience so we view it that we can play in a really important role in connecting the two and in doing so and creating more and more tools for labels and artists and managers to work with these tools I think we can create even more interesting business opportunities which makes their marketing budgets more efficient and that is a do you feel that more as a Netflix model it's almost like do you see yourself becoming you becoming that like creating shows or creating artists or no well I mean it's it's a lot lower compared ascend to people like to make because we were both subscription media companies so CFO is the old Netflix yes sure and I mean there there are a lot of similarities but I think fundamentally when you've just view the fact that we have 30 million pieces of content and we have thirty thousand you pieces of content that's being uploaded every single day and about 3 million craters it's a very different platform than Netflix but you're saying to the artists hey we can help you find this audience and by the way we own this audience now anybody have 70 million paid subscribers we're gonna bring you to those people were essentially becoming radio a really big part of the traditional music labels job is we're gonna bring your music we're gonna write you a check but then really we're gonna do is find you people we're gonna we're gonna get you on radio we're gonna put you in stores and it seems like what you're doing long term is taking a lot of those jobs that a record label used to do taking on yourself and if you're an artist you're gonna have to think more and more about why your work signing up with a label is I'm just working with you guys directly well I mean III think that's the bird's eye view of what a label is I think the reality is in with many businesses like the best labels that I see our service businesses they partner very very deeply with artists they're around they help with nr they put them together with great producers it's more than just the actual marketing piece of it it's about booking shows it's about the right collaboration there's so many aspects of making it in an artist today I don't think any of that goes away I think that there are certain elements that we can bring efficiency and use the things that's honestly been around in the internet for decade-plus in terms of tools and data I knowledge and bring that to the music industry and make make being a label more efficient to make being an artist more efficient and I like to think that's the way that's gonna be played out is that there's a bigger opportunity for us to grow arpaio Beasley and I think labels in and all itself can operate more efficiently which means that they should be able to also Indian increase what we pay out I wanna talk about adjacent businesses that you're looking into but but first your competitors right now you can see it's got to be Apple correct well I mean there's a bunch of people in music that's not feeding we got YouTube we got Apple we got Amazon we got all of the big ones in this space and for me that's that's not strange I mean there's there's very very few opportunities that a billion plus people around the world care deeply about music is one of those things so naturally all the big platform companies are going to be interested in this space so yeah we compete with a lot of them who do you think about the most of those that you look at honestly it I don't focus as much I think this is like one of those things well surely you must think about it I get the question a lot from people externally but you'd be surprised if you sat in on our management meetings or setting on the company how do we actually talk about competition most of the time what we talk about is what we're seeing in the market what we're seeing in terms of our customers are telling us what we're seeing in terms of what artists are telling us and frankly they don't talk that much about calm there's there's competition and then there's also competition that owns the hardware that you need to be on for it to work and you fought with Apple in the past back and forth it seems like you guys have reached a date odd but I think it's really amazing that either you were able to sort of fight your way in the position you're in or they let you do it willingly or unwillingly I mean did how did you think about that when you were again we're at zero when you were trying to get on the iPhone and Apple wasn't really excited about that you had to sort of force your way into that platform well I I don't know whether we had to force our way into the platform but I think at the end of it you know we've always tried to do what's right for customers and we'll always try to be at the forefront of that so we've been trying to innovate and luckily enough we were in a position where the App Store came along and we took advantage of that and and was one of the earliest apps on the app platform there's a big boom in the home speaker market right Amazon primarily Google Apple trying to catch up what kind of usage are you seeing from from connected and tell the speakers it's it's growing it's it's still not as big as us we and attack the circles seem to make it mobile is your dominant thing right well mobile is certainly a super platform compared to everything else but it's it's super exciting and I mean this is a space where honestly if you looked at the home besides sona's there wasn't really a lot of innovation in the space and now there's kind of a renewed interest in the home in speakers in getting people and people are going out in droves and buying these devices which is really phenomenal and I think once it starts permeating for real it just adds another moment in which people will listen to even more music than they're already on this on the Spotify platforms let's talk about adjacent businesses video what a lot of people what are you doing in that area right now how do you look at it because you've added podcasts you've added other things well the primary video offering that we have today is we have our our flagship brands like rap caviar vivo Latino as an example there and one of the things that our label partners and creators asked us to do was simply just say hey can we do more storytelling on your platform and can we do what we do on some of the other platform put up our music videos so what we started doing was developing videos that we thought would fit our platform and now we started opening that up more wider so that more and more creators can actually post videos onto the platform as well and that's been growing pretty nicely for us this is that's a later version of it cuz at one point you guys were talking to people about actually doing sort of your own OTT service a few years ago you said we're gonna do short form videos and stuff from Comedy Central okay you're really good at audio why do you keep playing with video what's the advantage for you well so here's how I think about it I mean Internet is an audio-visual interactive medium so do not use all of the properties of the medium just doesn't make sense to me now what we have to do is we have to try to get it right for our platform and for what consumers one I do think over time video will be a more important part of our platform then maybe what it is today but you know we are a company that try a lot of things so we try to tend to unlike many others try to do quite ambitious thing even at the beginning and then maybe scale back and then kind of rule out an iteration of that and we went in video way through FAFSA way too early what we instead kind of went back to was to go to our roots which is music do that really well going from that base but I don't think you should think about us it's like in primary video platform or that's where our interest is we're primarily an audio platform and what excites me about being that is just if you think about the world right now like it seems like everyone is competing over the attention video and obviously it is for the obvious reason that it's a trillion-dollar market it's four hours of people's time per day so it's a pretty massive opportunity but what I think people get wrong about what the space were and is that at a very very basic sense if people are competing for your eyes or you're competing about is your eaters it's a different sense it's three hours of people's day right now depending on how you view that space if you would factor in the music industry and you factor in the radio industry it's a hundred billion dollar industry and the question then you can ask yourself is like is your eyes worth ten times more than your ears I don't think so so I actually think you know that's the space double if your weight is your eyes worth ten times more yeah well that that's what the market right now right it's a trillion dollar versus the years that's worth maybe a hundred podcaster undervalued I see that okay good yeah I like that I like what you're going yeah all right so talk about that that getting into podcasts and other audio yeah well this is the amazing thing about being a platform you know we honestly put out this platform and with the intent of music and what ends up happening is most of it of course is music but people tend to upload other things so what started happening is we started getting more and more podcast on the platform and then we started getting customers complaining by our podcast app didn't work that well as other podcast apps worked so we kind of looked at that and we started fixing some very basic things like you know getting the ingestion up in time making sure that you can actually get notified when there's the new episode some pretty basic stuff and people got very excited and started spending a lot more time and so then more people started uploading podcast and you know full circle now probably six seven months later as we were doing that and it's growing like crazy and we're we're finding ourselves and more and more of these conversation and realizing that actually you know what a lot of the problems that we solved for the music industry like monetization like data like all of these things it's essentially the same building blocks that we've already been building and that's super exciting to us and how big a business do you imagine it to be I don't know I think it's like really early on but as I said before I like the whole space in and on itself it's at least a hundred billion dollar opportunity probably a lot more than that a billion of that I that would be fine with me but it is interesting how people are caught it cuz Apple really does dominate that completely almost completely from our perspective at least it's it's big but it's also the platform I mean that's been around since the inception of the word think event yeah so I mean they innovated they have they created the category but not much have happen for the medium in the last 15 years and that's the exciting thing for us here is asking about adjacent businesses periodically there's reports that you guys are looking at hardware do you want to build your own devices and what kind of devices are you looking at right well I mean we are a platform company what we want to do is simple as connecting our artists with fans now every now and then we do innovate and we do experiment on it what you're probably referring to is in the car space but even in in hole minutes in a now itself we actually do already create hardware this is a little known fact that most people don't know about it because the way we did most of our early partnerships and how we got into most of these devices and turn out that the easiest way start getting our software and there ended up being actually producing these ships up itself so we've actually been doing that for probably well over your chips and people's devices mm-hmm and then the car product you're talking about as what well I mean again the way we work with cars as an example is it's a three-pronged strategy the first one is the sole support Bluetooth which pretty straightforward we have tens of millions of people listening to Spotify in the cars the other one is through your phone tethering that's Android auto and apple carplay we're part of both of those platforms and then the third one is direct integration with Carmen car manufacturers and that's you know the third part of where we also do very integrated stuff those are all chip and software do you what he said would you make a device because you know Amazon's a platform company Google's a platform because they all have apples well apples a device company books making faces making their services well I don't rule it out but I think most important part it's not our business our businesses in creating a service in which we get consumers upon and we make money either through advertising or subscription if we do thinks it is to enable that service it isn't to being the hardware or selling business last question I have and then we'll get to questions the audience how is it being a public company see you well well you have you been surprised by well you know I think the biggest surprise was probably when we did our first quarter announcements you know we we went out with guidance and I feel pretty good about it you know having set the guidance 10 days before the quarter closed that we would hit the numbers and we did but we got penalized for it and I think the the guess from people was obviously that hey there they should beat the expectation I thought you were low balling it yeah but you've got a guy who used to weekend be the CFO for Netflix didn't he tell you hey they're gonna expect this or did he think the same thing no I think we both kind of thought that you know sure analysts will make up their own assumptions but at the end of the day one of the things that was really important to us coming back to this value about transparency was you know you can ask a public company either do what a lot of especially tech companies do and don't issue any guidance and let the analysts figure it out themselves but we wanted to be transparent about what we thought about the business and we also said very early on that our goal was to do exactly what we said we were gonna do now I'm more not less yeah that's your mistake but before we before we go to guys on the IPO thing you you did this novel IPO it's not really an IPO it's direct listing you didn't exactly cut the banks out but you really didn't use him the traditional way you did a thing that most really no one's done before it worked but there's a lot of risk in it and it would have been just easier just to do the traditional banking thing why why go through that effort go through that uncertainty to do this direct listing well there is really three parts that that made me go in that direction and obviously I had a tremendous amount of help from Barry as well in doing that which is my CFO but but one was about transparency just like you know one of the one thing about the traditional process which was done in the 1970s is obviously the world has changed a lot but I just it just didn't sit well with me to put out this document in this day and era where when information is like this and you can't comment on and you can't say anything about it until the moment where you kind of ring the bell and go public so I wanted to see if there was a way to push more transparency so that we could actually be open and could tell this to worry much differently the second thing was when you really think about it the whole process obviously openly is supposed to be so that everyone has the same amount of information yeah what actually happens in practice is you do this quiet Roadshow and give some people a little bit more information and then you kind of open the doors and you hope that those people will then hold your stock and I didn't want to do that I wanted everyone to have exactly the same information and thirdly more importantly as part of this hi I didn't want to put anyone in a different boats so most often what happens is that the investors gets to sell early on the employees do not I did not want that at all I wanted everyone to have the same opportunity to sell or buy by the way day one and those were the three sort of key reasons why we picked the path we did and you know it's sure it was a risk in the sense that it was different but we had a lot of data and we had a pretty strong indication where he was going and over overall I would say even if it would have been more volatility in the beginning I don't think that would have changed our decision we're trying to build something where we care about where the value long term not what the stock will trade they want very Swedish of you yes very stubborn and Swedish yeah alright questions from the audience miss Rosen hi Daniel Hillary Rosen I I couldn't let this go when you said that you originally created your policy after the arc Hillary issue as a as an anti hate speech policy in fact didn't Spotify say that you were going to not promote our Kelly on the on the platform after several well researched reporting most recently in the Washington Post around him being a sexual predator Harvey Weinstein was never convicted Brett Ratner was never convicted the head of Sophie who's been fired multiple people fired from uber a lot of people have been have faced consequences for for their sexual assault behavior but our Kelly isn't because the music industry has been a cloak of darkness here so I'm wondering I love Spotify and when you did that you continued Spotify being ahead of the industry being a little bit of an outsider so that people would think you'd act differently and I'm wondering if now that you backtracked on that whether you're worried you've lost that moral authority oh yeah she used to work for the record is right right well I mean that's obviously for other people to judge at the end of the day I do think as I said the spirit with our original policy wasn't about penalizing one individual artist and in fact in our blog post we didn't mention any one single individual artist either we we spoke about this more from the standpoint but what kind of content will we have on our platform not you know set out to make an example of one named vigil artists in this case okay my question will be a lot easier than that Daniel my name is Greg Lawrence I'm co-founder and CEO of podium publishing digital audio book publisher it seems like audiobooks on your platform is a little bit like has been a bit of an unofficial thing I'm wondering if you see much of a future for it well again and this is the amazing thing about having this platform it's getting used in all of these unintended consequences our primary focus of course is music we're now finding more and more podcast craters on the platform once the audiobook category starts growing I'm sure we'll start investing in making that an even better experience as well yeah Apple Apple's in space now and so they're making big news in it but yeah don't think audible hi Dylan Byers to CNN Pacific I want to talk about the long-term future of your company it seems to me like your biggest competitors are three out of the four biggest market cap companies in the world and you offer a product which is not necessarily offering different content than what they're offering aside from perhaps the aesthetics or the the user interface but fundamentally the content you're offering is the same which is a way in which are very much not like Netflix you don't have a mobile phone you don't have home devices so in the long term what is to stop Apple Amazon Google from basically pushing you out of the market by virtue of the fact that they can bring this music to scale to more people because they invite people to live in a universe whether that's an Amazon Prime universe or an Apple universe well I think when you look at that about the competitive set that we have I think you could almost universally say that's true about all Internet companies that those are exactly the same companies that they're competing against so I don't think that's a particularly the way we think about it though is like one of the real important things is that it remains that these platforms remains open and so we talk a lot about how we extend the debate from net neutrality to being about platform neutrality well what we find is that when we compete on equal terms with all of these companies we tend to do pretty well so that's our focus is keeping these platform open because we think it's in the interest of customers and obviously we know that we do well when that's the case and real quick real quick last question system hi Andy volunteer with variety Daniel just to go back to the content policy quickly is it in place right now can you clarify the status is it amended in any way I just want to understand no not at all I mean again what I want to be clear about it is I think we we screwed up how we roll this out we're now taking feedback we've got a lot of comments from a lot of different groups we're taking feedback we're iterating on that just like we would anything else and you know that comes back to the kind of company we are as well we do things we take the feedback from the market and what is the policies still in place there's policies out there that's out there on our website you can read it ok right what are Kelly's talk--i we might not get him off the platform I'm sorry like if I ran your company I take them right off but that's different but I don't run your company's forgets laws word Daniel thank you so much for coming thank you much [Music] you

Channel: Recode

Views: 59,077

Rating: 4.6871881 out of 5

Keywords: Spotify, music, tech, streaming, R. Kelly, Recode, Code, Kara Swisher, Daniel Ek, IPO, Code Conference, Code Conference 2018

Id: cdQ7mippAiU

Length: 34min 3sec (2043 seconds)

Published: Wed May 30 2018