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Piracy to Paying Customers: The story of Spotify

Funny times we live in. Basic questions of business owners have shifted gears…from “what is your business objective” and “where do you wish to be ten years from now”, the questions now are “would this concept survive after a decade” and “what could be an unforeseen shift in consumer behavior over the next decade”.

The omnipresent God who decides the course of our lives and rules them with complete power, foresees the future and deciphers devices and apps to battle the unknown mysteries of tomorrow, is the same God who smart entrepreneurs embrace to do quite the impossible. Technology.

If Tech is God, Integration is the path to divinity. Device and platform integration combined with wellbeing being a priority made seamless connectivity a beautiful journey rather than a destination for brands. And that’s where music streaming came into frightful prominence. Experts feel music subscriptions outweigh subscriptions to video platforms once it’s a matter of choice of one over the other.

“Earshare is the new mindshare.” –Andreessen Horowitz, venture capital firm in Silicon Valley, California, backing bold entrepreneurs building the future through technology.

Problems plaguing the music industry at the start of this century were many, piracy being on the top of the list. And this majorly propelled Daniel Ek and Martin Lorentzon to launch Spotify, a small startup in Stockholm, Sweden, in 2006. Their mission:

Our mission is to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.

Ek saw a great opportunity: “turn the pirates into customers.” I imagine he asked himself, “If people would break the law to get music; would they also be willing to pay a small fee to get it legally, seamlessly, and on demand?”

Before delving into the whys and hows behind Spotify, let us take a quick look at the music industry and its spectacular metamorphosis over the past 25 years.
Audio version of entertainment has changed: recorder of chosen music to live stream and free access to music worldwide
Cost of access: from the privileged to mass, from costly to free
Quality of music:
Speed of delivery: high speed wifi, smart speakers
Custom-made choice just for you: flexibility to choose and tech to suggest music just for you
Grow slow, grow big – Having found its firm base in Sweden, Spotify expanded to the US, not in too many places at one go. As stated by Startup Genome Project, “You want to grow your venture as quickly as possible, but doing so out of balance will not turn your company into the next Spotify.”


The means of music production to our ears is perhaps more interesting than any study in Channel Management. Key milestones to evolution comprised record players to cassettes to CDs. This is where ripping made a stormy entry. Audio files from CDs could easily and inexpensively be converted to WAV and MP3 files. Remember Napster? Sharing became the new normal and friendships were forged through a common love of music. And the turn of the century saw the launch of Rhapsody as the first on-demand music streaming service. Music revolution was certainly underway. And in this, as is almost the norm with Apple, the first iPhone introduced in 2007 cannibalized its single-purpose predecessor, the iPod, a great device to download music.

And then came the great transition from wired to wireless. AI reigned as the new king and had your favourite playlist ready for you even before you asked. And even more, where especially during the pandemic, friends located at different parts of the globe made their own part of the same track and music was created without anyone setting foot in an actual studio.

So what did Spotify do to crown them as a disruptor in the music space?

Paid service – The big milestone in making consumers pay for music again and this was an unbelievable leap of faith. At a fraction of the price of buying a CD, consumers could now stream music legally and share with other, while creators could experiment and upload as they like.

Welcome to “mood” – Gone were typical genres e.g. happy, melancholy, weddings etc. Spotify broke all conventional boundaries and created “mood congruence” basis your feelings based on environment and tone of voice. Tech is enabled to determine your emotions and play tracks which match your mood.

Limitless became the new normal. Artists, genres, streaming, sharing from any corner of the world became seamless across platforms, devices and people. For this alone, Spotify would remain as the great boon to experimentation for music creators and music lovers alike.

Autoplay became a friend who understands your needs even before you state it – Even after your current playlist was over, Spotify would use algorithm to keep playing music in congruence with your playlist. Get more even without asking!

Creating stars -Much like the social media of today, artists became stars and stars became the most wanted stars on Spotify. Further, artists could share stories, hence making an essentially audio platform come alive with videos of music recording through Canvas. Interactive stories made a success story even more successful.

Overcoming competition:

Apple Music, Amazon Music, YouTube Music, Sound Cloud, Deezer are competition. Spotify’s key differentiation lay in providing customers with a wide range of music which are personalised as per the mood as well as providing music recommendations. “Spotify’s user-generated playlists may be its biggest competitive advantage. Playlists created and shared by users accounted for 36% of listening hours.”

As says Ek, Spotify is going after the world’s eardrums. “Everyone underestimates audio. It should be a multi-hundred-billion-dollar industry. Audio is ours to win.”
“I don’t have Steve Jobs’ crisp view of the future,” says Ek, “But I have a direction. If we’re moving fast enough, I know we’ll eventually get there.”

Gargee Ghose

Brand Building & Digital Content Specialist. Passionate about pets and wildlife.