Daniel Ek – The Future of Audio [Invest Like the Best, EP.147]

  1. It is so hard for people to comprehend what exponential growth looks like. It is hard to see around corners. To know what issues you will run into when your business is 3 times the size it is today. It was one of the most important management lessons I’ve learned. I realized I had to think differently on how I build my company based on how fast we were growing [3:23]

  2. If we are going to keep trying to grow by billions of dollars a year we need a culture of experimentation. A culture where taking risks - with a lot of failures - is ok. You have to do that if you want to experience that kind of growth. [4:13] 

  3. The combination of globalization, digitalization, and automation creates an extreme polarization in business. The big get a lot bigger and niches are now large enough to be viable. The middle gets evaporated. You need to go for a profitable niche or go for scale. [Daniel is echoing this Jeff Bezos quote: On the Internet, companies are scale businesses, characterized by high fixed costs and relatively low variable costs. You can be two sizes: You can be big, or you can be small. It's very hard to be medium.]  [5:45]

  4. At Spotify, we don’t think the job-to-be-done is different at all between podcasts and music. It is all audio. Everyone else in the space thinks podcasting is something different. [9:12] 

  5. We believe the market we are going after is audio. There are going to be 2 or 3 billion people that want to consume audio content on a daily or weekly basis. [15:12] 

  6. If we are going to win that market we would need at least a third of that market. So we probably have to grow 10 to 15x from where we are today. We are still in the very early days of our journey. [15:22] 

  7. Star vs Constellation: Should you break up your app into multiple apps or keep everything in one main app? There was excitement about breaking things up into multiple apps. The reality is we have seen very few examples where that has worked. We debated it a lot at Spotify. You want to break it up when the job-to-be-done is materially different. [29:47]

  8. In music, we do not believe being our own label is a viable strategy. It is not for the reason most people think which is we would be competing with our suppliers. The primary reason we are not doing it is that it doesn’t make sense for the artists. The vast majority of a music artist’s income is from touring. If that is your business then what you want to do is spread your music as wide as possible. [Being exclusive to Spotify wouldn’t make sense] [37:00]

  9. In podcasting, it does make sense. The value of having it exclusive to our platform may attract new customers to the platform and we are able to put more marketing behind the show to make it bigger. For the creators of audio content, this is their business. This is what they are doing. They are happy to give up some reach to maximize the monetization so they can live off of their art. [38:17]

  10. The key thing I am trying to convey is to think very clearly about who it is you are addressing. Don’t go too big too early. Be completely focused on who your customer is. It served us incredibly well. [47:34] 

  11. I feel the journey of your company needs to be on the verge of uncomfortable because otherwise you are probably not pushing yourself hard enough. [51:06]

    Full podcast here. Invest Like The Best #147 Daniel Ek on The Future of Audio