In the past, anyone who wanted to listen to their favorite songs and any new music had to own a huge CD collection or risk being punished as a music pirate. But everything changed when two founders from Sweden developed an innovative idea that changed the music industry forever.
Today, you can play over 80 million songs and more than two million podcasts via their Spotify streaming service. With an impressive 433 million annual users and 188 million paid subscribers in 178 countries, Spotify has become the world's most popular audio streaming service. The following article reveals the founders of Spotify, how the business idea came about, and more!
When and Where Was Spotify Created?
Long before Spotify founders Daniel Ek and Martin Lorentzon developed their business idea for Spotify, both had a keen interest in innovation and information technology. Daniel Ek discovered his passion for IT and programming languages in his youth long before Spotify was founded. That is why he applied to Google at 16 but was turned down. If only Google had known!
Despite this, he stuck to his passion, studied at the Royal Institute of Technology in Stockholm, and then took on various jobs in the IT field. Daniel Ek later founded the advertising service, Advertigo.
On the other hand, Martin Lorentzon knew he wanted to pursue a career in technology and studied industrial economics right after school. Before founding Spotify, he completed various internships (for example, at the car manufacturer Volvo).
In addition, he worked for the search engine AltaVista in Silicon Valley and finally founded the online marketing company, Netstrategy in 1995. The Spotify founder later changed the company’s name to TradeDoubler.
After Martin Lorentzon built his company TradeDoubler into an internationally successful company with over 100 million USD turnover within a few years, the advertising provider, Advertigo, aroused his interest. Daniel Ek founded this company, and it was an ideal fit for TradeDoubler's business model.
Martin Lorentzon, therefore, made the founder an offer and quickly took over the company from Daniel Ek. This takeover also created a deep friendship between the two business partners long before Spotify was founded. This is where the two Spotify Ltd founders, Daniel Ek and Martin Lorentzon, quickly realized that they wanted to continue working together professionally.
In the early 2000s, music piracy and illegal song downloads caused record companies and artists to lose billions. That's why Martin Lorentzon and Daniel Ek pondered alternatives that would finally put an end to music piracy. This supposedly simple consideration gave rise to the idea of a streaming service.
Martin Lorentzon and Daniel Ek were so enthusiastic about this innovative concept that they officially founded Spotify on April 23rd, 2006, in Stockholm. But then, the Spotify founders first had to program the software and sign contracts with the major music labels. As a result, the platform did not officially go online until October 7th, 2008, two years after Spotify Ltd release date.
So, for those who have been asking “How long has Spotify been around?” The streaming company has been running for 14 years now. Of course, Rome wasn’t built in a day!
Management: Who runs Spotify?
Spotify Ltd parent organization is Spotify Technology S. A. And the Chief Executive Officer (CEO) of Spotify Ltd is Daniel Ek. He has been actively shaping the company's vision since 2006. Prior to Spotify, Ek founded the online advertising company Advertigo, which Tradedoubler later acquired.
The Spotify CEO has also held various senior positions in the online fashion and entertainment business. The top owner of Spotify is also a founding member of the European investment company Prima Materia.
Spotify's Chief Financial Officer (CFO) is Paul Vogel. With Vogel, Spotify has gained a very experienced financial expert who has had a successful career in the investment industry as a portfolio manager and equity analyst, including at Barclays and Morgan Stanley.
From 2016 to 2020, Paul worked at Spotify as Head of Financial Planning and Analysis and was also responsible for Treasury & Investor Relations.
Spotify's nine-strong management team consists of four women and five men. Also, the Supervisory Board is currently made up of four women and seven men.
Shareholder Structure: Who Holds the Most Spotify Shares
Aside from the Spotify Ltd founders, Baillie Gifford is Spotify's largest shareholder. The Scottish investment company joined Spotify before the IPO in 2015 and still holds the most shares at around 11.3%.
Other Spotify institutional investors include T. Rowe Price (7.1%), Morgan Stanley (9.5%), and ARK Investment (2.1%). Another major Spotify shareholder is Tencent Holdings. In December 2017, Spotify and Tencent Music Entertainment agreed to a cooperative share swap. The Chinese tech giant now owns nearly 9% of all Spotify shares.
In return, Spotify holds a 17% stake in its subsidiary Tencent Music Entertainment. Also, a positive signal for investors is the high insider participation of the two founders of Spotify. Lorentzon (12.1%) and the Spotify Ltd CEO, Ek (18.2%), continue to hold large stakes in their company.
Spotify Business Partners: Record Labels and Podcast Creators
Spotify's key business partners include music rights holders and record labels. To offer music via the platform, Spotify must acquire the rights.
Some labels were offered exclusive releases via Spotify Premium to reduce the license fees. The agreements with Universal Music Group and other record labels allow artists to release new music exclusively on Spotify Premium for up to two weeks.
Spotify was also able to enter into important partnerships in the podcast sector. Since 2020, podcasts, films, and TV shows have been co-produced with ESPN, Netflix, and other companies.
In the past, Spotify has repeatedly come under criticism because the remuneration for artists and performers is not appropriately high. With the payment system based on royalties, artists receive their remuneration in proportion to the total demand for streams on the Spotify platform.
Spotify Collaborations and Advertising Partners: Peloton, Discord, Visa, and Xiaomi
The management focuses on many integrative partnerships to further network the Spotify platform. Spotify was integrated into PlayStation Music as an exclusive partner in 2015. Also, since 2017, the Waze partnership has enabled directions in the Spotify app and playback of Spotify playlists in the Waze app.
In 2018, the voice chat service, Discord, was integrated into Spotify. This enables users to display songs currently being played on their Discord profile and to invite other users to collaborative "listening parties" via Spotify Premium.
Spotify has also secured important promotional partnerships with international companies such as Xiaomi, Peloton, VISA, and other tech companies to attract more customers. The content of these agreements is mainly free trial subscriptions for selected customers.
Spotify Acquisitions
In February 2009, Spotify began offering its free service in the UK. Shortly after being placed on the market. However, Spotify had to switch back to an invitation-only model because it could not meet the high demand.
Spotify was launched in the US in 2011. This was followed by more and more countries around the world. Since then, the number of customers and subscriptions has grown massively every year, and the company Spotify is getting bigger and bigger.
To further accelerate growth, Spotify made various acquisitions, large and small. Spotify has made 27 acquisitions so far. In May 2013, the music discovery app Tunigo was acquired. Music intelligence company, The Echo Nest, followed shortly after that, as well as Seed Scientific, a data science consulting and analytics firm.
In 2016, social and messaging startups, Cord Project, Soundwave, CrowdAlbum, and Preact were acquired. This was followed in 2017 by Sonalytic, an audio recognition startup (used to improve the company's personalized playlists), and MightyTV, an app for connecting to television streaming services.
With Mediachain, Spotify also strengthened itself in the blockchain area. Mediachain developed a decentralized database system to manage attribution and other metadata. Other takeovers included the startups Niland, Soundtrap, and Loudr.
In 2019, Spotify began targeting the podcasting market by acquiring podcast networks Gimlet Media, Anchor FM, and Parcast, becoming one of the largest podcast platforms.
The acquisitions were followed by important licensing rights for The Ringer by Bill Simmons and The Joe Rogan Experience podcasts. Most recently, Spotify bought additional IT expertise with SoundBetter and Betty Labs. In November 2021, Spotify announced it would acquire audiobook leader, Findaway.
Some other recent acqusitions include Whooshkaa (a podcast tech company), two advertising companies (Chartable and Podsights) and Sonantic, a synthetic voice and video developer. On top of that, Spotify has also acquired the Wordle-inspired music guessing game called Heardle.
Is Spotify Owned by Google?
In 2013, the search engine group, Google, wanted to use the market leader, Spotify, as a basis for its efforts to enter the music streaming business itself. However, the attempt at a takeover was canceled for various reasons.
As the Wall Street Journal reports, citing informed circles, the group was reluctant, among other things, because the Spotify owners called a very high price. In addition, Larry Page (who was Google's boss then) was not a big fan of subscription-based entertainment services and, therefore, probably did not put much emphasis on the talks.
The idea for the takeover is said to have originally come from Susan Wojcicki. She has been a member of Google management for some time and took over the top post at Google subsidiary, YouTube, in February 2014. In a corresponding step, they had seen good opportunities for Google to secure another important market.
Did Elon Musk Buy Spotify?
No, Elon Musk did not buy the giant music streaming platform. However, the Billionaire entrepreneur has criticized Spotify's low payouts to artists sometimes in the past. Who knows, he may consider buying the music streaming platform someday. He’s probably more interested in Mars and other alien matters for now!
Where Is Spotify Based?
The giant streaming service is incorporated as Spotify Technology S.A. in Luxembourg. However, the H.Q. is in Stockholm, Sweden. Also, the company has offices in about 43 cities worldwide, with a majority in the United States.
