The Start

Daniel Ek, the co-founder of Spotify, has a background rich in tech and entrepreneurship. Born in Stockholm, Sweden, Ek started his first company at the age of 14.

Before Spotify, he was involved in several tech ventures, including a role as CTO of the advertising company Advertigo, which was later sold to TradeDoubler.

His deep understanding of technology and online business models, coupled with his passion for music, laid the foundation for his next big venture.

In 2006, after experiencing frustration with the limitations of music piracy and the lack of accessible legal alternatives, Ek partnered with Martin Lorentzon to create a platform that would revolutionize the way people consume music.

The Problem

Before the inception of Spotify, the music industry was plagued by piracy, which severely affected artists' revenues and the industry's overall profitability.

Legal digital music services were either too expensive or lacked the convenience users desired.

Daniel Ek identified this critical problem and saw an opportunity to bridge the gap between free, illegal downloads and expensive digital purchases.

The vision was to create a platform where users could stream music legally, with ease and affordability, while ensuring that artists and rights holders received fair compensation.

This idea led to the creation of Spotify, which aimed to transform the music consumption experience by offering a vast library of music through a convenient and legal streaming service, addressing the needs of both consumers and the music industry.

Getting their first customers:

Development of Spotify’s initial product, which was known as Spotify AB, began in Sweden in 2006.

The company built a working prototype in just four months. Less than a year later, in 2007, Spotify AB went into closed beta. They focused on low latency (200 ms) since they discovred that users want instant music and 200ms was the threshold they had to reach.

To find its initial users, Spotify contacted influential music bloggers in Sweden, inviting them to try the new product. This strategy was incredibly effective.

Spotify’s beta testers were struck by just how good the company’s product was, even at such an early stage in its development.

In just one year, Spotify had built a product that music bloggers were already excited about — and they helped spread the word about the exciting new music app.

In 2008, “Big Four” American record labels—EMI, Sony, Universal, and Warner Music—and a couple of smaller labels agreed to make their entire back catalogs available to Ek and his company for use outside the U.S. on a limited basis.

In return, the Big Four record labels became Spotify’s biggest shareholders, receiving almost one-fifth of Spotify’s stock.

Digging this? Get more actionable strategies like these straight in your inbox for free