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- Unheard Roots of Spotify (PT.2) 🎶
Welcome back to part 2 of the Spotify story.
Listen, you got to read Part 1 if you want to get some context.
If not, you’ll be totally confused.
Without further ado, this is part 2 of the Spotify story!
Partnering up 🤝
After selling the web design business he had been building since 14, Daniel was left purposeless.
He was still super young and had lots of money from the acquisition.
Around the same time, Martin had gone through an IPO with his own business.
Meaning Daniel wasn’t the only twenty something year old looking for a new adventure.
One day while the duo were chilling in Daniels home in the southern suburbs of Sweden, they decided to start a company together.
Daniel Ek on the left and Martin Lorentzon on the right
Napster & Lawsuits ✨
There were lots of potential ideas the experienced duo could work on.
An idea that excited Daniel & Martin was streaming music through the internet.
Since this was still the early days of the internet everything was mostly text, one of the only companies disrupting that was Napster.
Napster had pioneered the very first versions of streaming & downloading music through the internet.
Despite being a hit among consumers, record labels weren’t happy with Napster and drowned the small startup in lawsuits.
It was obvious consumers wanted a well-built music streaming tool, only problem was it was difficult to make online streaming possible with existing licensing laws.
Disrupting music ❗️📈
Despite having literally no experience in the music industry or knowing anything about licensing laws, the duo decided to build Napster but legally.
The vision was to build a platform where you could instantly access & stream every single song in the world without any kind of lag or buffering.
“It took a couple of minutes for you to download just one song. So we needed to create that feeling about you know immediacy of no buffering, no nothing. It just needed to be lighting-fast so that it felt like you had all the worlds music on your hardware.”
As soon the Daniel & Martin came up with the idea they got to work on building the first version of Spotify.
Here is a lesser known fact about Spotify, they were a bootstrapped startup for most of their early days.
Navigating Laws 💼
At first, Daniel thought it would only take 6 months to get the license needed to upload songs on their new platform.
That deadline was shattered when he met an executive in the music industry and was told it wouldn’t be as easy and quick as the young duo thought.
To help the young entrepreneurs, the executive met with Daniel in New York and introduced him to the executives of all major record labels.
“So I got on a plane to New York. Sat down with all the major labels and some of the bigger indies and everyone was super supportive.”
The first series of meetings went exceptionally well, everyone was complimenting Daniels idea and telling him they would love to work with Spotify.
“I remember walking out calling my co-founder Martin and saying well you know this thing seems totally reasonable we’ll do it in about 6 months.”
Shattered Dreams 💔
Was Spotify able to launch within 6 months? Nope, Daniel learned the hard way not to trust the compliments of the record labels.
Negotiations started falling apart and Daniel lost hope day after day.
The duo had dumped close to $10 million of their own money into building Spotify and it was unclear if they could even reach an agreement with the record labels.
In fact, Spotify had hired close to 50 employees to help with from design to engineering.
No one on the team knew how bad the situation in New York was since had Daniel tried to hide it from everyone else.
Fun fact: Daniel lost all of his hair during the process due to stress.
Turning things around 🙏
Just as Daniel was about to give up and fly back to Stockholm, he made a call to his co-founder Martin.
What Martin would say would go on to change the course of history. Martin told Daniel to hang in their just a little bit more and if things didn’t work out, they would try a new idea in 2 weeks.
“What I ended up doing is I just canceled my trip back to Stockholm. And ended up camping outside of their offices.”
Every single day Daniel would walk into the offices of record labels and change his pitch just a bit to see if they reacted positively.
The final breakthrough came when Daniel decided to pitch running trials in smaller countries to prove the Spotify model could work.
Spotify launches in Europe 🌍🇪🇺
Spotify was finally able to get permission from the record labels to launch in some European countries like France.
In these countries it would prove the model could work and the agreement was it would then expand to other countries.
Since there was clear demand on the consumer side, Spotify immediately took off.
The successful trials proved the model was viable and the record labels agreed to to give Spotify the license needed to scale.
Lessons from Spotify 📚
If you want to disrupt a major industry, don’t hold back because you’re not an expert in it.
“There is something said about that the entrepreneurs that are successful in an industry seldom the people with the best knowledge about it. It’s usually outsiders or people that have somewhat of an insight but aren’t full deep in the weeds of why things are working.”
There is a reason why Elon Musk was able to disrupt space travel or Daniel & Martin were able to disrupt music.
It’s usually the naive outsiders that end up making major progress in industries since the experts know too much to believe change is possible.
When you’re about quit, hang in there just a bit
“The longer you hang in there, the greater the chance that something will happen in your favor.”
If Daniel hadn’t stayed in New York and camped outside the record label offices just as he was about to quit, we might have never had Spotify.
Startups are tough and break throughs take time, you need to be gritty and patient if you want to achieve exceptional results.
And that right there is the Unheard Roots of Spotify :)
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