1 00:00:04,120 --> 00:00:07,160 Speaker 1: Get in touch with technology with tech Stuff from how 2 00:00:07,200 --> 00:00:13,960 Speaker 1: stuff Works dot com. Hey there, and welcome to tech Stuff. 3 00:00:14,000 --> 00:00:17,520 Speaker 1: I am your host, Jonathan Strickland. I'm an executive producer 4 00:00:17,560 --> 00:00:19,439 Speaker 1: with How Stuff Works and I heart radio and I 5 00:00:19,480 --> 00:00:23,079 Speaker 1: love all things tech, and today I'm going to cover 6 00:00:23,320 --> 00:00:27,040 Speaker 1: the story of Spotify, really the origin of Spotify, and 7 00:00:27,080 --> 00:00:29,480 Speaker 1: then a bit about what it's been up to recently. 8 00:00:29,880 --> 00:00:32,440 Speaker 1: And just for the interests of full disclosure, I feel 9 00:00:32,440 --> 00:00:34,680 Speaker 1: I should point out that the company I work for, 10 00:00:34,840 --> 00:00:38,040 Speaker 1: I Heart Media, is a competitor to Spotify. But don't worry. 11 00:00:38,159 --> 00:00:40,080 Speaker 1: I'm going to cover this topic just like I would 12 00:00:40,200 --> 00:00:43,800 Speaker 1: any other, as objective as possible, and maybe with some 13 00:00:43,880 --> 00:00:46,360 Speaker 1: bad jokes and puns. And I think this will also 14 00:00:46,440 --> 00:00:49,680 Speaker 1: help lead into a discussion about the way consumer media 15 00:00:49,800 --> 00:00:52,680 Speaker 1: has changed significantly over the last couple of decades. That 16 00:00:52,760 --> 00:00:55,720 Speaker 1: might actually be a second episode that I'll focus on 17 00:00:55,720 --> 00:00:59,280 Speaker 1: a little bit later. The story of Spotify is tied 18 00:00:59,440 --> 00:01:03,120 Speaker 1: very close with its founders, uh mainly Daniel Eck but 19 00:01:03,160 --> 00:01:06,760 Speaker 1: also Martin Lawrenson. Those are two Swedish businessmen who set 20 00:01:06,760 --> 00:01:09,600 Speaker 1: out to change how people access music, and while the 21 00:01:09,640 --> 00:01:12,480 Speaker 1: service would launch in two thousand eight, the real story 22 00:01:12,520 --> 00:01:16,800 Speaker 1: begins much earlier with Daniel Eck and initially in two 23 00:01:16,840 --> 00:01:19,360 Speaker 1: thousand two, but we're going to go even earlier than that. See, 24 00:01:19,400 --> 00:01:24,440 Speaker 1: Daniel K was an enterprising kid, like super enterprising, and 25 00:01:24,520 --> 00:01:27,040 Speaker 1: an interview and the event that was called a Pando 26 00:01:27,160 --> 00:01:29,560 Speaker 1: Monthly in New York City back in two thousand twelve, 27 00:01:29,600 --> 00:01:32,080 Speaker 1: he talked about how as a young teen and I'm 28 00:01:32,120 --> 00:01:35,600 Speaker 1: talking about thirteen years old, fourteen years old, he started 29 00:01:35,600 --> 00:01:39,800 Speaker 1: making money by creating websites for local businesses in Sweden. 30 00:01:39,880 --> 00:01:42,720 Speaker 1: He was interested in coding and he was getting into 31 00:01:42,760 --> 00:01:46,479 Speaker 1: it and he started getting hired to make websites for 32 00:01:46,480 --> 00:01:49,600 Speaker 1: for companies. And we're not talking about small amount of money. 33 00:01:49,640 --> 00:01:51,440 Speaker 1: I mean his first job was about a hundred dollars, 34 00:01:51,440 --> 00:01:53,120 Speaker 1: and then he went up to about two hundred dollars 35 00:01:53,120 --> 00:01:55,640 Speaker 1: and it started going up from there. And according to K, 36 00:01:55,680 --> 00:01:58,440 Speaker 1: at one point he was pulling down about fifty grand 37 00:01:58,720 --> 00:02:03,160 Speaker 1: a month doing business. So imagine that being in high 38 00:02:03,160 --> 00:02:06,960 Speaker 1: school and your side gig is pulling you down fifty 39 00:02:07,080 --> 00:02:12,080 Speaker 1: thousand dollars a month. Yikes. That was going pretty well 40 00:02:12,680 --> 00:02:15,959 Speaker 1: until the Swedish tax Authority notified X that he owed 41 00:02:16,040 --> 00:02:18,600 Speaker 1: the government a substantial amount of money to the tune 42 00:02:18,600 --> 00:02:21,800 Speaker 1: of a couple hundred grand. X early fortune was pretty 43 00:02:21,840 --> 00:02:24,400 Speaker 1: much wiped out, and he learned a valuable lesson about 44 00:02:24,480 --> 00:02:26,880 Speaker 1: running a business, which is that you can't do it 45 00:02:26,960 --> 00:02:30,280 Speaker 1: on the q T forever. Around two thousand two, X 46 00:02:30,320 --> 00:02:33,720 Speaker 1: started thinking about the problem with digital music and piracy, 47 00:02:34,040 --> 00:02:38,200 Speaker 1: and it was definitely a big problem. Services like Napster, 48 00:02:38,480 --> 00:02:42,720 Speaker 1: new Tela, and kaza had been home to huge databases 49 00:02:42,840 --> 00:02:47,239 Speaker 1: of pirated music since the late nineteen nineties, or had 50 00:02:47,320 --> 00:02:51,959 Speaker 1: facilitated music piracy since the ninet Since not all of 51 00:02:52,000 --> 00:02:54,000 Speaker 1: them were really databases, they were more like peer to 52 00:02:54,000 --> 00:02:56,360 Speaker 1: peer networks. More on that in a little bit. So 53 00:02:56,440 --> 00:03:00,000 Speaker 1: governments around the world were responding by creating some pretty 54 00:03:00,160 --> 00:03:04,680 Speaker 1: draconian laws in an effort to curb online piracy. The 55 00:03:04,720 --> 00:03:08,320 Speaker 1: governments were largely responding to big media companies that were 56 00:03:08,360 --> 00:03:11,440 Speaker 1: putting a lot of pressure on elected officials to fix 57 00:03:11,520 --> 00:03:14,400 Speaker 1: this problem. Everyone could see that the Internet was going 58 00:03:14,440 --> 00:03:17,520 Speaker 1: to be an important component in all sorts of industries. 59 00:03:17,880 --> 00:03:20,320 Speaker 1: Apple had already staked its own claim with iTunes in 60 00:03:20,360 --> 00:03:23,480 Speaker 1: two thousand one, but there was a real concern that 61 00:03:23,600 --> 00:03:28,040 Speaker 1: piracy essentially translated into lost sales. Now to that point, 62 00:03:28,639 --> 00:03:31,960 Speaker 1: I want to acknowledge that it's not as simple as that. 63 00:03:32,520 --> 00:03:35,520 Speaker 1: If I walk into an old fashioned record store and 64 00:03:35,600 --> 00:03:38,920 Speaker 1: I shoplift an album, we're talking like old vinyl albums, 65 00:03:38,960 --> 00:03:43,480 Speaker 1: and I grab a copy of uh, Phil Collins Greatest 66 00:03:43,520 --> 00:03:46,640 Speaker 1: Hits because I'm real bad, and I slip it under 67 00:03:46,680 --> 00:03:49,480 Speaker 1: my my jacket and I and I step out the door. 68 00:03:49,840 --> 00:03:52,720 Speaker 1: That's a clear loss for the shop owner of that 69 00:03:52,840 --> 00:03:57,160 Speaker 1: music shop, right, because I've taken one physical album. The 70 00:03:57,200 --> 00:03:59,760 Speaker 1: shop owner has a limited number of physical copies that 71 00:03:59,800 --> 00:04:03,360 Speaker 1: they have ordered from the record label, so they've spent 72 00:04:03,400 --> 00:04:05,960 Speaker 1: a certain amount of money to get a certain number 73 00:04:06,080 --> 00:04:08,680 Speaker 1: of copies of each title. I just took one of those. 74 00:04:08,880 --> 00:04:11,600 Speaker 1: They can no longer sell that particular album, so they 75 00:04:11,640 --> 00:04:14,440 Speaker 1: are out the cost they incurred when they ordered it. 76 00:04:14,840 --> 00:04:17,960 Speaker 1: That's pretty clear, right, you can understand that's a direct loss. 77 00:04:18,360 --> 00:04:21,960 Speaker 1: But with digital media it's different. Maybe I never intended 78 00:04:22,000 --> 00:04:24,880 Speaker 1: to buy a certain song. Maybe I kind of want 79 00:04:24,960 --> 00:04:27,960 Speaker 1: that song, but I don't want it badly enough to 80 00:04:28,000 --> 00:04:31,360 Speaker 1: actually spend my money on it. So I decide I'm 81 00:04:31,400 --> 00:04:35,240 Speaker 1: just gonna pirate a copy. The original song, however, still exists. 82 00:04:35,480 --> 00:04:37,839 Speaker 1: The original copy of the song still exists. I didn't 83 00:04:37,880 --> 00:04:41,840 Speaker 1: take anything physical. Nothing is stopping a vendor from selling 84 00:04:41,880 --> 00:04:44,640 Speaker 1: just as many copies as they would have even if 85 00:04:44,640 --> 00:04:48,119 Speaker 1: I hadn't taken anything. So for that reason, you can't 86 00:04:48,240 --> 00:04:52,840 Speaker 1: really argue that stolen's songs directly translate into lost revenue 87 00:04:53,080 --> 00:04:56,240 Speaker 1: in the digital market, because it could be that the 88 00:04:56,279 --> 00:05:00,560 Speaker 1: people who downloaded songs illegally otherwise would have just never 89 00:05:00,720 --> 00:05:03,719 Speaker 1: bought the music at all, so they may have just 90 00:05:03,880 --> 00:05:06,359 Speaker 1: gone without. It's not a loss sale because it was 91 00:05:06,400 --> 00:05:09,160 Speaker 1: never going to be a sale in the first place. Now, 92 00:05:09,240 --> 00:05:11,440 Speaker 1: I don't want this to be one sided. While the 93 00:05:11,520 --> 00:05:15,760 Speaker 1: people downloading music for free, we're circumventing the legal route, 94 00:05:16,040 --> 00:05:19,400 Speaker 1: and they were effectively stealing music, whether you could argue 95 00:05:19,440 --> 00:05:22,719 Speaker 1: that it was causing direct harm or not. The music 96 00:05:22,760 --> 00:05:27,680 Speaker 1: industry wasn't exactly making a good case for purchasing music legally. 97 00:05:28,240 --> 00:05:32,000 Speaker 1: The music landscape was fractured, with some record labels signing 98 00:05:32,040 --> 00:05:35,120 Speaker 1: with certain online stores, other record labels would sign with 99 00:05:35,240 --> 00:05:39,840 Speaker 1: other stores. Sometimes it was very piecemeal, where certain albums 100 00:05:39,880 --> 00:05:43,359 Speaker 1: would be allowed and others wouldn't. And then there was 101 00:05:43,400 --> 00:05:46,840 Speaker 1: the matter of digital rights management or d r m uh. 102 00:05:47,240 --> 00:05:52,640 Speaker 1: This is a way of protecting digital property. Many companies 103 00:05:52,640 --> 00:05:56,400 Speaker 1: have been putting restrictive DRM on music files. It's meant 104 00:05:56,440 --> 00:05:59,520 Speaker 1: to prevent you from being able to make an infinite 105 00:05:59,560 --> 00:06:02,480 Speaker 1: number of copies of a digital file, because obviously that's 106 00:06:03,120 --> 00:06:06,880 Speaker 1: a downside to the digital format, at least if you 107 00:06:06,920 --> 00:06:09,960 Speaker 1: are in the business of selling stuff, Right, if the 108 00:06:10,000 --> 00:06:14,360 Speaker 1: thing you create it can be replicated infinitely by anyone, 109 00:06:14,640 --> 00:06:16,840 Speaker 1: then all you have to do is sell one of those, 110 00:06:16,880 --> 00:06:19,919 Speaker 1: and then immediately you never sell another copy because people 111 00:06:20,080 --> 00:06:23,919 Speaker 1: just start copying them and then distributing them everywhere. So 112 00:06:24,040 --> 00:06:26,800 Speaker 1: DRM was meant to be a counter to that. You're 113 00:06:26,839 --> 00:06:31,480 Speaker 1: to prevent people from being able to copy indiscriminately in 114 00:06:31,520 --> 00:06:33,880 Speaker 1: some way or another. But one of the nasty side 115 00:06:33,880 --> 00:06:37,440 Speaker 1: effects of DRM is that it can impact the experience 116 00:06:37,480 --> 00:06:41,000 Speaker 1: of legitimate customers. Right, So the purpose of DRM is 117 00:06:41,040 --> 00:06:43,800 Speaker 1: to protect digital media so that people can't just steal it. 118 00:06:44,040 --> 00:06:46,719 Speaker 1: But when that same DRM makes it harder to listen 119 00:06:46,800 --> 00:06:50,880 Speaker 1: to legitimately purchased music, the people who are actually buying 120 00:06:51,240 --> 00:06:55,640 Speaker 1: the stuff feel as though they've been punished for buying it. Right. 121 00:06:55,680 --> 00:06:58,559 Speaker 1: If you if you bought a song and it turns 122 00:06:58,560 --> 00:07:00,760 Speaker 1: out you can't listen to the song the way you 123 00:07:00,800 --> 00:07:03,280 Speaker 1: want to, despite the fact that you've spent money on it. 124 00:07:03,839 --> 00:07:07,320 Speaker 1: You're not, you don't have an incentive to keep doing that, right, 125 00:07:07,360 --> 00:07:11,000 Speaker 1: You're You're You've got a bad experience. Meanwhile, pirates would 126 00:07:11,040 --> 00:07:14,040 Speaker 1: spend some time and effort in order to strip files 127 00:07:14,400 --> 00:07:18,240 Speaker 1: from the DRM, or rather DRM from the files, so 128 00:07:18,320 --> 00:07:22,040 Speaker 1: that the versions that they would upload or allow to 129 00:07:22,200 --> 00:07:26,520 Speaker 1: be downloaded from their machines would be DRM free. So 130 00:07:26,640 --> 00:07:28,800 Speaker 1: you would actually have a better experience listening to the 131 00:07:28,920 --> 00:07:32,679 Speaker 1: pirated music than if you were to purchase the legal stuff. 132 00:07:33,040 --> 00:07:36,840 Speaker 1: So as a consumer, you had two choices. Essentially, you 133 00:07:36,840 --> 00:07:39,760 Speaker 1: could jump through some hoops and deal with a crappy 134 00:07:39,880 --> 00:07:43,600 Speaker 1: listening experience with official music that you pay for and 135 00:07:43,640 --> 00:07:45,480 Speaker 1: it's got DRM and everything, so it's got all this 136 00:07:45,520 --> 00:07:48,600 Speaker 1: baggage attached to it, or you could pop on over 137 00:07:48,800 --> 00:07:52,200 Speaker 1: to a piracy site or service and then download whatever 138 00:07:52,240 --> 00:07:55,040 Speaker 1: you want for free. Now, there always was a risk 139 00:07:55,440 --> 00:07:58,440 Speaker 1: that you could also end up downloading some malware on 140 00:07:58,480 --> 00:08:00,360 Speaker 1: top of the music files or whatever where it was 141 00:08:00,440 --> 00:08:03,080 Speaker 1: you were after, but for many it seemed like it 142 00:08:03,120 --> 00:08:06,760 Speaker 1: was worth the risk. So the whole thing was kind 143 00:08:06,800 --> 00:08:09,400 Speaker 1: of a mess, and X thought there had to be 144 00:08:09,520 --> 00:08:12,480 Speaker 1: a better way. There had to be some method to 145 00:08:12,600 --> 00:08:16,560 Speaker 1: making music available digitally. That would remove the hurdles that 146 00:08:16,600 --> 00:08:18,760 Speaker 1: the public would have to jump over to get to 147 00:08:18,800 --> 00:08:21,800 Speaker 1: what they wanted. And if he could crack that, if 148 00:08:21,800 --> 00:08:24,160 Speaker 1: he could build a real business out of it, then 149 00:08:24,200 --> 00:08:26,680 Speaker 1: he could stand to really make some money. And he 150 00:08:26,760 --> 00:08:29,520 Speaker 1: was thinking, there's gotta be a way to make the 151 00:08:29,520 --> 00:08:36,920 Speaker 1: experience seamless enough where the legal route is preferable to piracy. 152 00:08:36,960 --> 00:08:39,200 Speaker 1: That's the secret. If you can make it just as 153 00:08:39,240 --> 00:08:42,320 Speaker 1: easy or easier to buy music as it would be 154 00:08:42,400 --> 00:08:45,880 Speaker 1: to steal it, then more people are going to buy it. 155 00:08:46,400 --> 00:08:49,199 Speaker 1: And the reasoning was that a lot of people want 156 00:08:49,240 --> 00:08:52,679 Speaker 1: to actually spend money supporting the stuff they love. They 157 00:08:52,720 --> 00:08:56,440 Speaker 1: just if you make it frustrating, they'll go around that, 158 00:08:56,840 --> 00:08:59,600 Speaker 1: because who wants to deal with that kind of nonsense. Now, 159 00:08:59,640 --> 00:09:01,680 Speaker 1: this was back in two thousand two, but would still 160 00:09:01,679 --> 00:09:04,160 Speaker 1: be a few years before he would develop the idea further. 161 00:09:04,720 --> 00:09:07,079 Speaker 1: In the meantime, he worked for a couple of companies, 162 00:09:07,120 --> 00:09:10,400 Speaker 1: and he founded some other companies, including an online advertising 163 00:09:10,400 --> 00:09:13,720 Speaker 1: firm called Advertigo, which he would later sell for a 164 00:09:13,720 --> 00:09:16,600 Speaker 1: big profit. In fact, he ended up founding and selling 165 00:09:16,720 --> 00:09:20,640 Speaker 1: four companies in a relatively short time. This was right 166 00:09:20,679 --> 00:09:25,040 Speaker 1: after the wake of eBay purchasing Skype. It kind of 167 00:09:25,080 --> 00:09:28,720 Speaker 1: opened up the mergers and acquisitions market in Europe at 168 00:09:28,760 --> 00:09:32,720 Speaker 1: that time. And by then he was a millionaire, and 169 00:09:32,960 --> 00:09:36,560 Speaker 1: he was considering retiring at the ripe old age of 170 00:09:36,679 --> 00:09:41,480 Speaker 1: twenty three years old, but instead he thought about that 171 00:09:41,559 --> 00:09:48,480 Speaker 1: music challenge again, also millionaire by twenty three. Way to go, dude, man, 172 00:09:49,000 --> 00:09:51,960 Speaker 1: that that's some hustle right there. So Eck found a 173 00:09:52,040 --> 00:09:54,800 Speaker 1: partner in Martin Lawrence n He was actually the guy 174 00:09:54,800 --> 00:09:58,320 Speaker 1: who had acquired ad Vertigo from Daniel Eck, and that 175 00:09:58,480 --> 00:10:02,080 Speaker 1: was ex advertising plat Form. The two began to brainstorm 176 00:10:02,160 --> 00:10:05,640 Speaker 1: about making a legal music service that removed some of 177 00:10:05,679 --> 00:10:08,440 Speaker 1: the barriers that other official stores had kind of been 178 00:10:08,480 --> 00:10:11,800 Speaker 1: putting up. The reason that those barriers encouraged people to 179 00:10:11,880 --> 00:10:14,640 Speaker 1: resort to piracy, and the music industry as a whole 180 00:10:14,840 --> 00:10:17,720 Speaker 1: was hurting as and so something had to be done. 181 00:10:18,000 --> 00:10:19,880 Speaker 1: But if you just made it easier to get that 182 00:10:19,960 --> 00:10:22,400 Speaker 1: music you wanted legally, they figured people would do it, 183 00:10:22,400 --> 00:10:25,880 Speaker 1: just like I was saying earlier. So they created an 184 00:10:25,920 --> 00:10:28,480 Speaker 1: office out of a three bedroom apartment that was above 185 00:10:28,480 --> 00:10:31,480 Speaker 1: a coffee shop, and they began to work on their design. 186 00:10:31,600 --> 00:10:34,160 Speaker 1: Their plan was to leverage peer to peer networks to 187 00:10:34,280 --> 00:10:38,160 Speaker 1: deliver streaming music. So what exactly is a peer to 188 00:10:38,160 --> 00:10:40,400 Speaker 1: peer network and how does it work. Some of you 189 00:10:40,520 --> 00:10:43,880 Speaker 1: might be familiar with peer to peer. It's something that 190 00:10:43,960 --> 00:10:46,760 Speaker 1: was really big in the nineties. It's still quite big today. 191 00:10:47,120 --> 00:10:49,000 Speaker 1: It's just not talked about as much. A lot of 192 00:10:49,200 --> 00:10:52,400 Speaker 1: the conversation is shifted to cloud computing, but peer to 193 00:10:52,440 --> 00:10:55,200 Speaker 1: peer is still a very important methodology. So here's a 194 00:10:55,240 --> 00:10:58,880 Speaker 1: quick rundown. First, You've got a network of computers all 195 00:10:58,920 --> 00:11:01,760 Speaker 1: right there. They're connected, perhaps over the Internet, but it's 196 00:11:01,800 --> 00:11:04,480 Speaker 1: a it's a network within the Internet, it's not the 197 00:11:04,640 --> 00:11:08,000 Speaker 1: entire Internet. So each of those computers could be owned 198 00:11:08,000 --> 00:11:11,520 Speaker 1: by a regular person like yourself, and each computer in 199 00:11:11,559 --> 00:11:14,360 Speaker 1: that network is what we would call a peer. Each 200 00:11:14,400 --> 00:11:17,360 Speaker 1: computer on the network is running special software, which is 201 00:11:17,400 --> 00:11:21,120 Speaker 1: what makes them peers. It connects them, it creates this 202 00:11:21,200 --> 00:11:24,760 Speaker 1: network among all the peers on that particular connection, and 203 00:11:24,840 --> 00:11:28,160 Speaker 1: peers can share files with one another without having to 204 00:11:28,160 --> 00:11:31,560 Speaker 1: go through an intermediary server. So if I'm on the 205 00:11:31,600 --> 00:11:34,040 Speaker 1: network and you're on the network, we could share files 206 00:11:34,080 --> 00:11:37,800 Speaker 1: directly with one another. And typically the way this would 207 00:11:37,840 --> 00:11:40,160 Speaker 1: work is that you would designate a special folder on 208 00:11:40,240 --> 00:11:43,440 Speaker 1: your computer's hard drive to act as a share folder, 209 00:11:43,760 --> 00:11:46,240 Speaker 1: and anything you would put in that share folder could 210 00:11:46,240 --> 00:11:49,280 Speaker 1: be seen and copied by peers on the network, and 211 00:11:49,320 --> 00:11:51,920 Speaker 1: the more peers who have copies of a file, the 212 00:11:52,000 --> 00:11:54,840 Speaker 1: faster downloads go. As your computer can pull from the 213 00:11:54,880 --> 00:11:57,600 Speaker 1: best connection available across the network, you can get bits 214 00:11:57,600 --> 00:12:01,160 Speaker 1: and pieces from different computers and just download a file 215 00:12:01,280 --> 00:12:04,480 Speaker 1: much faster than if it were dependent upon a single source. 216 00:12:04,840 --> 00:12:08,120 Speaker 1: So the more computers on a peer to peer network 217 00:12:08,120 --> 00:12:11,640 Speaker 1: that are hosting a file, the faster those transfers will go. Now, 218 00:12:11,720 --> 00:12:15,079 Speaker 1: there's nothing illegal about this method of file transfer. It's 219 00:12:15,120 --> 00:12:18,880 Speaker 1: a great way to disseminate large files across a network. 220 00:12:19,160 --> 00:12:21,840 Speaker 1: It's efficient, and it removes the need for more hefty 221 00:12:21,880 --> 00:12:25,160 Speaker 1: network servers. But it also allowed for people to share 222 00:12:25,200 --> 00:12:29,920 Speaker 1: stuff illegally at a pretty alarming rate, at least alarming 223 00:12:29,960 --> 00:12:33,079 Speaker 1: to media companies, and so selling the idea of a 224 00:12:33,320 --> 00:12:36,080 Speaker 1: legal peer to peer network was a bit of an 225 00:12:36,160 --> 00:12:40,120 Speaker 1: uphill battle. However, the actual implementation of a peer to 226 00:12:40,160 --> 00:12:43,840 Speaker 1: peer network using Spotify service was a lot different from 227 00:12:43,880 --> 00:12:47,360 Speaker 1: the napsters and kazas of the piracy era. The plan 228 00:12:47,640 --> 00:12:50,680 Speaker 1: wasn't to allow users to build up an enormous library 229 00:12:50,720 --> 00:12:54,199 Speaker 1: of songs in their personal computers, which they then could 230 00:12:54,400 --> 00:12:58,079 Speaker 1: help distribute across an ever widening network and thus sap 231 00:12:58,240 --> 00:13:01,200 Speaker 1: the music industry of its revenue. Instead, the plan was 232 00:13:01,240 --> 00:13:04,000 Speaker 1: to use peer to peer relationships to create a good 233 00:13:04,080 --> 00:13:08,080 Speaker 1: listening experience for users to sidestep another problem. That problem 234 00:13:08,160 --> 00:13:11,080 Speaker 1: was if you wanted to create a centralized music on 235 00:13:11,200 --> 00:13:15,120 Speaker 1: demand service, you'd be beholden to the Internet connections between 236 00:13:15,160 --> 00:13:19,920 Speaker 1: your server, your giant music database, and all of your users. 237 00:13:20,480 --> 00:13:24,280 Speaker 1: Now this wasn't as huge a problem in Sweden, which 238 00:13:24,360 --> 00:13:26,800 Speaker 1: was a leading and still is a leading country when 239 00:13:26,800 --> 00:13:29,880 Speaker 1: it comes to rolling out high speed broadband internet, but 240 00:13:30,200 --> 00:13:33,920 Speaker 1: it would make it difficult to scale Spotify globally. So 241 00:13:34,000 --> 00:13:35,839 Speaker 1: let's say that you did go with this method, where 242 00:13:35,840 --> 00:13:38,160 Speaker 1: you went with a centralized approach. You have your big 243 00:13:38,240 --> 00:13:41,720 Speaker 1: music database that's sitting in a data center somewhere on 244 00:13:41,840 --> 00:13:45,200 Speaker 1: your property. If a connection were bad between a user 245 00:13:45,600 --> 00:13:48,640 Speaker 1: and this database, the user might have to wait for 246 00:13:48,679 --> 00:13:50,920 Speaker 1: a long time for a song to buffer far enough 247 00:13:50,920 --> 00:13:54,720 Speaker 1: along to start playing. That's irritating, or worse, the song's 248 00:13:54,800 --> 00:13:57,480 Speaker 1: quality might suffer in the middle of the song, or 249 00:13:57,480 --> 00:14:00,640 Speaker 1: it might stop playing. That you know it might midplay 250 00:14:00,679 --> 00:14:03,400 Speaker 1: through while the service tried to get the data from 251 00:14:03,480 --> 00:14:07,480 Speaker 1: the server side to the user's device and restart the song. 252 00:14:07,880 --> 00:14:10,760 Speaker 1: The peer to peer approach could help that. Now explain 253 00:14:10,800 --> 00:14:13,160 Speaker 1: how it works in just a moment, But let's get 254 00:14:13,160 --> 00:14:15,760 Speaker 1: back to the business side for a second. They met 255 00:14:15,800 --> 00:14:18,920 Speaker 1: with a lot of resistance from record labels because they 256 00:14:18,920 --> 00:14:21,800 Speaker 1: were going to have to get licensing agreements from those 257 00:14:21,800 --> 00:14:24,960 Speaker 1: record labels in order to do this. But their arguments 258 00:14:25,040 --> 00:14:28,640 Speaker 1: were persuasive. It took a long time, but they were 259 00:14:28,680 --> 00:14:32,120 Speaker 1: making some pretty sound arguments. They laid out the challenges 260 00:14:32,160 --> 00:14:34,720 Speaker 1: that I mentioned earlier with the older model of music. 261 00:14:34,960 --> 00:14:37,600 Speaker 1: They stayed in their case in terms of business plans, 262 00:14:38,000 --> 00:14:41,280 Speaker 1: and they said, are the licensing fees and royalties would 263 00:14:41,280 --> 00:14:44,720 Speaker 1: provide steady revenue to the record labels and presumably too 264 00:14:44,800 --> 00:14:47,240 Speaker 1: artists more than that in a second, But it was 265 00:14:47,440 --> 00:14:49,680 Speaker 1: challenging to get the record labels to agree. It was 266 00:14:49,720 --> 00:14:53,720 Speaker 1: also challenging to get investors on board because without the 267 00:14:53,760 --> 00:14:57,640 Speaker 1: backing of the music industry, there was no business for Spotify. 268 00:14:57,440 --> 00:15:01,640 Speaker 1: They had nothing to provide anybody, and many investors saw 269 00:15:01,680 --> 00:15:04,320 Speaker 1: the idea as a bad bet, So Lawrenson would end 270 00:15:04,400 --> 00:15:07,320 Speaker 1: up funding operations for a couple of years, just out 271 00:15:07,320 --> 00:15:10,880 Speaker 1: of out of pocket. Now, gradually record labels began to 272 00:15:10,880 --> 00:15:13,880 Speaker 1: come around, and they sort of had to because the 273 00:15:13,960 --> 00:15:18,000 Speaker 1: music industry revenues had peaked in nineteen ninety nine at 274 00:15:18,000 --> 00:15:21,360 Speaker 1: twenty seven billion dollars. That's a lot of cheddar, as 275 00:15:21,400 --> 00:15:26,320 Speaker 1: Ben Bolan would say, but that was the peak. It 276 00:15:26,400 --> 00:15:30,960 Speaker 1: went to decline after that, sales started flagging. This wasn't 277 00:15:31,120 --> 00:15:33,560 Speaker 1: just due to piracy, although to hear the music industry, 278 00:15:33,640 --> 00:15:36,840 Speaker 1: they would argue vehemently that piracy was what took the 279 00:15:36,920 --> 00:15:40,680 Speaker 1: largest chunk out of their, uh, their revenue. I would 280 00:15:40,720 --> 00:15:43,200 Speaker 1: say that there were a lot of different factors. But 281 00:15:43,560 --> 00:15:47,520 Speaker 1: by a decade later, in two thousand and eight, the 282 00:15:47,520 --> 00:15:52,280 Speaker 1: global industry was down to fourteen billion dollars. That's still 283 00:15:52,320 --> 00:15:54,560 Speaker 1: a lot of money, but that's like half of what 284 00:15:54,640 --> 00:15:58,680 Speaker 1: it was in nine and so it took Spotify about 285 00:15:58,680 --> 00:16:02,520 Speaker 1: two years from conception to launch. It was thought of 286 00:16:02,560 --> 00:16:05,520 Speaker 1: in two thousand two, it was seriously started in two 287 00:16:05,560 --> 00:16:08,560 Speaker 1: thousand six, and it was launched in two thousand eight, 288 00:16:08,600 --> 00:16:11,600 Speaker 1: in October two thousand eight, uh and launched in just 289 00:16:11,680 --> 00:16:14,560 Speaker 1: a few European countries at the time. It did get 290 00:16:14,600 --> 00:16:18,640 Speaker 1: the backing of the four major music labels. That would 291 00:16:18,680 --> 00:16:22,600 Speaker 1: be Warner Music, Sony, E and My Music and Universal. Now, 292 00:16:22,600 --> 00:16:24,640 Speaker 1: when we come back, I'll talk more about how the 293 00:16:24,680 --> 00:16:27,480 Speaker 1: service works and how it's evolved since two thousand and eight. 294 00:16:27,560 --> 00:16:37,720 Speaker 1: But first let's take a quick break. Okay, so let's 295 00:16:37,760 --> 00:16:42,520 Speaker 1: talk about the Spotify service. To access Spotify, you first 296 00:16:42,520 --> 00:16:45,880 Speaker 1: need to download the client software for whatever platforms you 297 00:16:45,960 --> 00:16:49,640 Speaker 1: plan to use. Now, originally this was limited to desktop computers, 298 00:16:49,960 --> 00:16:53,240 Speaker 1: so your first step was downloading some software to your 299 00:16:53,320 --> 00:16:57,119 Speaker 1: machine and installing it. This would act as your interface, 300 00:16:57,200 --> 00:16:59,560 Speaker 1: allowing you to search for songs on the service, but 301 00:16:59,680 --> 00:17:03,000 Speaker 1: it also served as the peer to peer software to 302 00:17:03,080 --> 00:17:06,960 Speaker 1: make your machine part of the overall sharing network. This 303 00:17:07,080 --> 00:17:10,720 Speaker 1: client can pull music stored on your computer into your 304 00:17:10,760 --> 00:17:14,560 Speaker 1: Spotify library, assuming the music you have isn't stored in 305 00:17:14,600 --> 00:17:17,960 Speaker 1: a protected M four P file. That's actually a little 306 00:17:17,960 --> 00:17:20,640 Speaker 1: bit redundant because in four P stands were IMPEG four 307 00:17:20,680 --> 00:17:24,560 Speaker 1: protected audio. Uh. This was a file extension that Apple's 308 00:17:24,680 --> 00:17:28,919 Speaker 1: fair Play digital rights management system used. The format restricted 309 00:17:28,920 --> 00:17:32,159 Speaker 1: the devices that could play the associated audio file and 310 00:17:32,280 --> 00:17:36,359 Speaker 1: limited to authorized devices only, So if an device was 311 00:17:36,400 --> 00:17:38,879 Speaker 1: authorized to play the file, it could otherwise it could not. 312 00:17:39,840 --> 00:17:44,520 Speaker 1: Spotify just to sidestep any problems, said we can't handle 313 00:17:44,600 --> 00:17:47,280 Speaker 1: any of those types of files. However, if you did 314 00:17:47,359 --> 00:17:50,640 Speaker 1: happen to have songs in that format, Spotify would look 315 00:17:50,680 --> 00:17:53,480 Speaker 1: to see if it had a license for those tracks 316 00:17:53,520 --> 00:17:56,960 Speaker 1: on its service. So if you happen to have a 317 00:17:57,200 --> 00:18:00,399 Speaker 1: track of an artist that was on Spotify, and that 318 00:18:00,520 --> 00:18:04,040 Speaker 1: song was on Spotify, it would match the track with 319 00:18:04,119 --> 00:18:06,159 Speaker 1: what was in your library and just go ahead and 320 00:18:06,160 --> 00:18:07,840 Speaker 1: put that in your playlist. It's just you wouldn't be 321 00:18:07,880 --> 00:18:11,000 Speaker 1: listening to the version that was on your computer. You 322 00:18:11,000 --> 00:18:13,480 Speaker 1: would actually be listening to one that was on the 323 00:18:13,520 --> 00:18:16,960 Speaker 1: Spotify service itself, and it would be a a non 324 00:18:17,320 --> 00:18:21,000 Speaker 1: uh M four P DRM version. All other songs, whether 325 00:18:21,000 --> 00:18:24,960 Speaker 1: in Spotify's licensing agreements or not, would appear in your library, 326 00:18:25,040 --> 00:18:29,080 Speaker 1: assuming you have DRM free versions on your computer. So 327 00:18:29,320 --> 00:18:32,399 Speaker 1: even if you had a whole mess of songs in 328 00:18:32,520 --> 00:18:36,400 Speaker 1: your computer's memory, if it was in its hard drive 329 00:18:37,000 --> 00:18:39,560 Speaker 1: that were not on Spotify. Let's say that you had 330 00:18:39,720 --> 00:18:43,000 Speaker 1: all the Beatles albums, and Beatles was one of those 331 00:18:43,160 --> 00:18:46,600 Speaker 1: groups that wasn't being carried by Spotify, it would show 332 00:18:46,680 --> 00:18:48,600 Speaker 1: up in your library because you had them on your 333 00:18:48,600 --> 00:18:51,119 Speaker 1: hard drive, but no one else would be able to 334 00:18:51,840 --> 00:18:55,200 Speaker 1: listen to those using Spotify, you know, pulling it over 335 00:18:55,240 --> 00:18:59,720 Speaker 1: the network. The format Spotify uses when streaming music is 336 00:18:59,800 --> 00:19:04,040 Speaker 1: the Vorbis method of audio compression. Vorbis is an open 337 00:19:04,119 --> 00:19:08,119 Speaker 1: source software project, and it uses the file extension dot 338 00:19:08,160 --> 00:19:12,480 Speaker 1: o g g or og for compressed audio files. So 339 00:19:12,560 --> 00:19:16,080 Speaker 1: you often hear people talk about as Aga Vorbis, which 340 00:19:16,080 --> 00:19:19,680 Speaker 1: sounds like a character from Game of Thrones. Now, actually 341 00:19:20,040 --> 00:19:22,919 Speaker 1: it does trace its name to a fantasy series, but 342 00:19:23,119 --> 00:19:25,639 Speaker 1: one that's a little more lighthearted than George R. R. 343 00:19:25,720 --> 00:19:29,400 Speaker 1: Martin's epic Saga because the name Vorbius comes from Terry 344 00:19:29,400 --> 00:19:34,960 Speaker 1: Pratchett's fantasy comedy series Discworld, a fantastic comedy fantasy series. 345 00:19:34,960 --> 00:19:36,800 Speaker 1: If you've never read any of the Discworld books, I 346 00:19:36,840 --> 00:19:40,800 Speaker 1: highly recommend checking them out. But this name was specifically 347 00:19:40,880 --> 00:19:43,919 Speaker 1: from the book Small Gods. Aug is also a name 348 00:19:43,960 --> 00:19:46,199 Speaker 1: that shows up in Terry Pratchett's works, but that was 349 00:19:46,240 --> 00:19:50,040 Speaker 1: just a coincidence. The uh the Age extension was not 350 00:19:50,280 --> 00:19:54,840 Speaker 1: named after the Terry Pratchett character uh Nanny Ogg in 351 00:19:54,880 --> 00:19:59,080 Speaker 1: the Discworld books. I've talked about audio compression before, but 352 00:19:59,240 --> 00:20:02,679 Speaker 1: here's a quick reminder. The purpose for compression is that 353 00:20:02,800 --> 00:20:05,639 Speaker 1: audio files tend to be pretty large, and the larger 354 00:20:05,680 --> 00:20:08,160 Speaker 1: the file size, the more time it takes to send 355 00:20:08,160 --> 00:20:11,320 Speaker 1: over a network, and that time is experienced by the 356 00:20:11,440 --> 00:20:15,080 Speaker 1: user as a lag between hitting the play button and 357 00:20:15,119 --> 00:20:17,960 Speaker 1: hearing any sound, or in the form of having a 358 00:20:18,000 --> 00:20:20,679 Speaker 1: song stop part way through while the data transfer continues 359 00:20:20,720 --> 00:20:24,240 Speaker 1: in the background, or having the quality of the sound 360 00:20:24,480 --> 00:20:27,960 Speaker 1: drop in the middle of play through. So compression means 361 00:20:28,040 --> 00:20:30,480 Speaker 1: you take these files and you make the file size 362 00:20:30,520 --> 00:20:33,680 Speaker 1: is smaller and thus easier to transfer across a network. 363 00:20:33,920 --> 00:20:37,760 Speaker 1: And there are two broadways to do this. There's lossless 364 00:20:37,800 --> 00:20:41,879 Speaker 1: and lossy. Now, lossless compression means that you take a file, 365 00:20:42,280 --> 00:20:45,119 Speaker 1: you squish it down, you compress it, and when you 366 00:20:45,400 --> 00:20:48,160 Speaker 1: un squash it when you when you expand it back, 367 00:20:48,560 --> 00:20:52,159 Speaker 1: you have the bit for bit identical file as the 368 00:20:52,240 --> 00:20:56,439 Speaker 1: pre compressed version. So you have song file A, you 369 00:20:56,520 --> 00:21:00,320 Speaker 1: compress it into compressed format B, and when you take 370 00:21:00,359 --> 00:21:04,320 Speaker 1: it back out of compression is back to song file A. Again, 371 00:21:05,240 --> 00:21:08,000 Speaker 1: this is not easy to do, and typically you only 372 00:21:08,040 --> 00:21:11,520 Speaker 1: reduce the file size by a relatively small amount. Some 373 00:21:11,600 --> 00:21:14,560 Speaker 1: files can only be compressed down maybe five cent, which 374 00:21:14,560 --> 00:21:16,480 Speaker 1: does not save you a whole lot of space, and 375 00:21:16,560 --> 00:21:18,399 Speaker 1: you might be able to get down as much as 376 00:21:18,440 --> 00:21:22,600 Speaker 1: fifty with certain types of lossless compression. But if you're 377 00:21:22,640 --> 00:21:27,200 Speaker 1: really looking at a high quality audio file and it's 378 00:21:27,200 --> 00:21:32,520 Speaker 1: a large audio file, even the reduction is still still 379 00:21:32,560 --> 00:21:34,640 Speaker 1: means you're dealing with a big file. It still might 380 00:21:34,680 --> 00:21:38,199 Speaker 1: be too big for you to easily stream. Lossy compression 381 00:21:38,320 --> 00:21:41,960 Speaker 1: can squish files down much smaller than lossless, but they 382 00:21:41,960 --> 00:21:48,040 Speaker 1: do so at drumroll please a loss. Lossy compression ditches 383 00:21:48,400 --> 00:21:51,040 Speaker 1: some of the data in the audio file during the 384 00:21:51,040 --> 00:21:56,600 Speaker 1: compression process. Now, ideally, the information the compression format ditches 385 00:21:56,960 --> 00:22:00,119 Speaker 1: represents stuff that you wouldn't be able to notice anyway, 386 00:22:00,240 --> 00:22:04,200 Speaker 1: because human hearing can only pick up a range of frequencies, 387 00:22:04,240 --> 00:22:07,360 Speaker 1: and typically we describe it as the average human can 388 00:22:07,400 --> 00:22:11,440 Speaker 1: hear between twenty hurts to twenty kill a hurts. Anything 389 00:22:11,480 --> 00:22:15,280 Speaker 1: that is above or below that range is outside what 390 00:22:15,359 --> 00:22:19,120 Speaker 1: we could directly perceive. So if the audio file has 391 00:22:19,200 --> 00:22:23,440 Speaker 1: any information about sounds beyond human hearing, then it might 392 00:22:23,480 --> 00:22:26,639 Speaker 1: just sweep that stuff under the digital rug before compressing 393 00:22:26,680 --> 00:22:29,040 Speaker 1: the rest. It might say, well, no one could hear 394 00:22:29,080 --> 00:22:31,280 Speaker 1: this anyway, so there's no point in keeping it, and 395 00:22:31,320 --> 00:22:34,560 Speaker 1: I'm just gonna not include that information. There are a 396 00:22:34,560 --> 00:22:37,920 Speaker 1: lot of different rules for compression and different codex to 397 00:22:37,960 --> 00:22:41,679 Speaker 1: follow different philosophies, but they're all based on the psychoacoustic 398 00:22:41,760 --> 00:22:45,160 Speaker 1: model of how we perceive sound. So if it determines 399 00:22:45,200 --> 00:22:47,639 Speaker 1: that we would not have perceived that sound, it can 400 00:22:47,680 --> 00:22:50,120 Speaker 1: go out out the door at the end of the day. 401 00:22:50,560 --> 00:22:53,520 Speaker 1: If it's important, it's supposed to go into the compressed file, 402 00:22:53,680 --> 00:22:56,360 Speaker 1: and if it's not, it doesn't. The question is who 403 00:22:56,400 --> 00:22:59,480 Speaker 1: determines what exactly is important. That's what the different codex do. 404 00:23:00,000 --> 00:23:04,320 Speaker 1: Moving on, so, Spotify chose the ag vorbis format because 405 00:23:04,320 --> 00:23:09,000 Speaker 1: it represented a great return on investments. Plus, being open 406 00:23:09,080 --> 00:23:12,160 Speaker 1: source and in the public domain meant that the company 407 00:23:12,160 --> 00:23:15,800 Speaker 1: could use the format without worrying about licensing issues, so 408 00:23:15,840 --> 00:23:17,880 Speaker 1: there was no fear that one day they would turn 409 00:23:17,920 --> 00:23:21,400 Speaker 1: around and encounter resistance from some vendor that had them 410 00:23:21,400 --> 00:23:24,520 Speaker 1: over a barrel by holding onto a compression license in 411 00:23:24,560 --> 00:23:28,360 Speaker 1: return for more money. That no one's gonna say to them, oh, well, 412 00:23:28,400 --> 00:23:30,800 Speaker 1: I see that you're doing really well now, so we 413 00:23:30,880 --> 00:23:34,240 Speaker 1: want a bigger cut of the profits. Also, according to 414 00:23:34,359 --> 00:23:37,119 Speaker 1: Kevin Goldsmith, who was the vice president of engineering at 415 00:23:37,160 --> 00:23:41,080 Speaker 1: Spotify for several years. The ag vorbis format provided good 416 00:23:41,119 --> 00:23:44,479 Speaker 1: audio quality relative to the bandwidth needed to stream the audio, 417 00:23:44,600 --> 00:23:46,040 Speaker 1: so they just felt like they were getting the best 418 00:23:46,080 --> 00:23:49,880 Speaker 1: results with it. The standard audio quality for Spotify's desktop 419 00:23:49,920 --> 00:23:54,359 Speaker 1: app is one sixty kilobits per second. Now, technically that 420 00:23:54,480 --> 00:23:57,560 Speaker 1: refers to the audio files bit rate, or the number 421 00:23:57,600 --> 00:24:01,560 Speaker 1: of bits used per unit of playback time to represent audio. 422 00:24:02,359 --> 00:24:05,720 Speaker 1: Generally speaking, the higher that number, the better quality of 423 00:24:05,760 --> 00:24:09,600 Speaker 1: audio you get. Essentially, you're saying you're using more information 424 00:24:09,720 --> 00:24:14,080 Speaker 1: to to present that sound per unit of time. One 425 00:24:14,480 --> 00:24:16,080 Speaker 1: sixty kill a bits per second is kind of in 426 00:24:16,119 --> 00:24:19,440 Speaker 1: the middle of audio quality for streaming. If you were 427 00:24:19,480 --> 00:24:23,440 Speaker 1: to upgrade to premium Spotify UH and more on that later, 428 00:24:23,800 --> 00:24:27,560 Speaker 1: the bit rate would be increased to three killabits per second, 429 00:24:27,600 --> 00:24:31,600 Speaker 1: so you would have higher quality audio files. The actual 430 00:24:31,680 --> 00:24:35,360 Speaker 1: quality of the audio you would experience would be dependent 431 00:24:35,440 --> 00:24:38,280 Speaker 1: not just on bit rate, but other stuff, sample rate 432 00:24:38,359 --> 00:24:40,600 Speaker 1: and all that good stuff, plus the quality of the 433 00:24:40,640 --> 00:24:43,520 Speaker 1: speakers you're using, So in some cases you might not 434 00:24:43,640 --> 00:24:46,160 Speaker 1: really be able to tell the difference between hundred sixty 435 00:24:46,240 --> 00:24:49,960 Speaker 1: killabits per second and three killabits per second. If you 436 00:24:50,000 --> 00:24:53,120 Speaker 1: had really low quality headphones, for example, you might listen 437 00:24:53,160 --> 00:24:54,840 Speaker 1: to the exact same track and not be able to 438 00:24:54,840 --> 00:24:57,000 Speaker 1: tell the difference between the good version and the bad 439 00:24:57,080 --> 00:24:59,440 Speaker 1: version quote unquote, or the good version and the better 440 00:24:59,560 --> 00:25:03,920 Speaker 1: version if you prefer, uh, if your headphones are are crappy. 441 00:25:04,000 --> 00:25:06,880 Speaker 1: So it's dependent on lots of different things. Plus it's 442 00:25:06,880 --> 00:25:12,160 Speaker 1: dependent upon our perception, which is not reliable all the time. 443 00:25:12,480 --> 00:25:15,879 Speaker 1: All right. While Spotify relied on DRM free Music to 444 00:25:15,920 --> 00:25:19,159 Speaker 1: pull into the music library, the format Spotify uses to 445 00:25:19,320 --> 00:25:23,439 Speaker 1: stream includes DRM, so that's also something to remember. In 446 00:25:23,480 --> 00:25:26,040 Speaker 1: addition to the songs that you've already got stored on 447 00:25:26,080 --> 00:25:29,800 Speaker 1: your device, you can search the Spotify service for specific tracks. 448 00:25:30,080 --> 00:25:32,040 Speaker 1: So these would be things that you don't own that 449 00:25:32,160 --> 00:25:34,840 Speaker 1: are on your hard drive, and Spotify has an agreement 450 00:25:34,880 --> 00:25:38,919 Speaker 1: with whatever entity holds the right for that music, the 451 00:25:38,960 --> 00:25:42,200 Speaker 1: track should pop right up. So let's say you play 452 00:25:42,240 --> 00:25:44,680 Speaker 1: on a track that you want to hear. You you 453 00:25:45,160 --> 00:25:47,520 Speaker 1: have decided you want to hear S O B by 454 00:25:47,600 --> 00:25:50,800 Speaker 1: Nathaniel Rateliff in the Night Sweats, which is a phenomenal song. 455 00:25:51,560 --> 00:25:53,480 Speaker 1: You don't have that song in your hard drive, though, 456 00:25:53,640 --> 00:25:56,720 Speaker 1: so you open up Spotify and you type it in 457 00:25:56,960 --> 00:26:00,639 Speaker 1: and you see that it's available there, Spotify serves up 458 00:26:00,640 --> 00:26:03,520 Speaker 1: a streaming version of the song to you, and rather 459 00:26:03,600 --> 00:26:06,879 Speaker 1: than serve it to you from a central server, it 460 00:26:06,960 --> 00:26:10,760 Speaker 1: consults the network of Spotify users and it finds copies 461 00:26:10,840 --> 00:26:15,320 Speaker 1: of the song on those peers, those users whose devices 462 00:26:15,359 --> 00:26:18,320 Speaker 1: are currently connected to the network, and it sends the 463 00:26:18,359 --> 00:26:22,240 Speaker 1: file to you streaming. By relying on this network, this 464 00:26:22,320 --> 00:26:25,280 Speaker 1: helps ensure that you get an uninterrupted experience played at 465 00:26:25,280 --> 00:26:28,119 Speaker 1: a decent sound quality. And while you're listening to the music, 466 00:26:28,240 --> 00:26:31,359 Speaker 1: Spotify is actually storing the song in a memory cash 467 00:26:31,520 --> 00:26:35,240 Speaker 1: on your computer, and that serves two purposes. First, because 468 00:26:35,240 --> 00:26:37,520 Speaker 1: Spotify is staying a little ahead of you in your 469 00:26:37,560 --> 00:26:40,679 Speaker 1: listening experience, you're listening to music that's stored on your 470 00:26:40,720 --> 00:26:45,600 Speaker 1: device's memory, not pouring directly in from the Spotify feed. 471 00:26:45,880 --> 00:26:48,320 Speaker 1: So as long as the data going into your memory 472 00:26:48,480 --> 00:26:53,040 Speaker 1: is outpacing the playback speed, you won't have any interruptions. So, 473 00:26:53,040 --> 00:26:55,199 Speaker 1: in other words, they're filling up the bucket faster than 474 00:26:55,240 --> 00:26:59,520 Speaker 1: you can empty the bucket. But more importantly for Spotify operations, 475 00:27:00,080 --> 00:27:02,679 Speaker 1: those songs that are stored in the cash memory of 476 00:27:02,720 --> 00:27:06,119 Speaker 1: your device stay there so they can be used in 477 00:27:06,200 --> 00:27:09,239 Speaker 1: the peer to peer sharing. I was talking about So 478 00:27:09,280 --> 00:27:11,560 Speaker 1: the next time someone else in the network wants to 479 00:27:11,600 --> 00:27:14,280 Speaker 1: listen to S O B, Spotify might be in part 480 00:27:14,400 --> 00:27:17,720 Speaker 1: relying on your computer because you happen to have listened 481 00:27:17,760 --> 00:27:20,240 Speaker 1: to that song earlier, and it happens to be stored 482 00:27:20,320 --> 00:27:25,159 Speaker 1: in your cash, so your device helps keep Spotify's service going. 483 00:27:25,920 --> 00:27:29,520 Speaker 1: Sometimes the cash material might cause some other issues on 484 00:27:29,560 --> 00:27:31,800 Speaker 1: your device. If you've got an awful lot of stuff 485 00:27:31,800 --> 00:27:33,280 Speaker 1: on there, maybe you don't have a lot of space 486 00:27:33,320 --> 00:27:35,440 Speaker 1: on your device, and you might notice that things aren't 487 00:27:35,480 --> 00:27:38,359 Speaker 1: running as smoothly as they normally do. So Spotify allows 488 00:27:38,440 --> 00:27:41,480 Speaker 1: users to go into their settings and see where offline 489 00:27:41,520 --> 00:27:44,080 Speaker 1: songs are stored. This would be the cash that they 490 00:27:44,160 --> 00:27:46,760 Speaker 1: rely upon. You can then go to that folder and 491 00:27:46,800 --> 00:27:50,000 Speaker 1: delete the files in that folder to clear out the cash. 492 00:27:50,040 --> 00:27:53,040 Speaker 1: That's just for the desktop version. For iPhones, it's a 493 00:27:53,040 --> 00:27:56,280 Speaker 1: little bit more of a pain. Spotify advises iPhone users 494 00:27:56,320 --> 00:28:02,399 Speaker 1: to reinstall the Spotify app. You know, essentially you're taking 495 00:28:02,400 --> 00:28:04,159 Speaker 1: it off your phone and putting it back on again, 496 00:28:04,400 --> 00:28:06,760 Speaker 1: which will clear out the apps cash, but it will 497 00:28:06,800 --> 00:28:08,919 Speaker 1: also log you out of your account, so you have 498 00:28:08,960 --> 00:28:11,200 Speaker 1: to log back in. You have to re sink any 499 00:28:11,280 --> 00:28:13,760 Speaker 1: offline music you have stored on your phone with your account, 500 00:28:13,840 --> 00:28:16,880 Speaker 1: you have to reactivate any preferred settings you might want 501 00:28:16,960 --> 00:28:20,040 Speaker 1: on there, So that's kind of a hassle. On Android devices, 502 00:28:20,080 --> 00:28:22,440 Speaker 1: it's a little bit better. You can go into your library, 503 00:28:22,520 --> 00:28:26,359 Speaker 1: mean you choose settings, select other in the options, and 504 00:28:26,400 --> 00:28:30,200 Speaker 1: then delete cash and save data. It's not exactly straightforward, 505 00:28:30,560 --> 00:28:32,439 Speaker 1: but it's perhaps a little bit better than having to 506 00:28:32,480 --> 00:28:35,520 Speaker 1: reinstall the whole app. Now, I'm not surprised that it's 507 00:28:35,520 --> 00:28:37,440 Speaker 1: a bit of a headache to clear out the cash 508 00:28:37,520 --> 00:28:41,960 Speaker 1: because Spotify's operation depends upon this peer to peer infrastructure, 509 00:28:42,200 --> 00:28:44,800 Speaker 1: and the songs in your cash are what help ensure 510 00:28:44,840 --> 00:28:47,520 Speaker 1: a smooth experience for people in the network. So your 511 00:28:47,560 --> 00:28:50,880 Speaker 1: device is effectively working for Spotify, which is why they 512 00:28:50,920 --> 00:28:54,520 Speaker 1: probably don't make it super easy for you to clear 513 00:28:54,560 --> 00:28:58,440 Speaker 1: that cash. Your device is effectively working for Spotify. Now, 514 00:28:58,520 --> 00:29:01,040 Speaker 1: I've got a lot more to say about Spotify, but 515 00:29:01,120 --> 00:29:03,920 Speaker 1: before I get into that, let's take another quick break 516 00:29:04,000 --> 00:29:15,040 Speaker 1: to thank our sponsor. Okay, So Spotify launches in two 517 00:29:15,040 --> 00:29:17,920 Speaker 1: thousand eight in Europe and uses this peer to peer 518 00:29:17,960 --> 00:29:21,920 Speaker 1: technology to help deliver high speed streaming to users. The 519 00:29:21,960 --> 00:29:24,480 Speaker 1: company had managed to make some deals with enough record 520 00:29:24,520 --> 00:29:27,920 Speaker 1: labels to create a compelling but by no means universal 521 00:29:28,080 --> 00:29:32,360 Speaker 1: music service, and it rolled out operations gradually, originally relying 522 00:29:32,400 --> 00:29:36,440 Speaker 1: on an invitation only approach to adding listeners so as 523 00:29:36,480 --> 00:29:39,080 Speaker 1: to guarantee a good experience and not get overwhelmed. Riyal 524 00:29:39,200 --> 00:29:43,719 Speaker 1: the gate Plus they had two tiers of users. They 525 00:29:43,720 --> 00:29:47,040 Speaker 1: had free users and premium users. The free users were 526 00:29:47,080 --> 00:29:49,320 Speaker 1: the only ones that had to be invitation only if 527 00:29:49,360 --> 00:29:52,400 Speaker 1: you wanted to pay for the service. They as many 528 00:29:52,400 --> 00:29:55,479 Speaker 1: people could join as possible for that. They didn't want 529 00:29:55,480 --> 00:29:59,200 Speaker 1: to limit that at all. Understandably, that's not snark, that's 530 00:29:59,200 --> 00:30:02,000 Speaker 1: just I mean, that's just makes sense. Uh. The invitation 531 00:30:02,400 --> 00:30:05,800 Speaker 1: served another purpose because it also gave the service and 532 00:30:05,880 --> 00:30:10,520 Speaker 1: air of exclusivity. Nothing makes people want to try something 533 00:30:10,560 --> 00:30:13,320 Speaker 1: out more than being told there's a limit to the 534 00:30:13,400 --> 00:30:16,600 Speaker 1: number of users who will be accepted. And we saw 535 00:30:16,640 --> 00:30:20,320 Speaker 1: the same thing when Google Plus launched. Each user would 536 00:30:20,320 --> 00:30:23,560 Speaker 1: have five invites they could extend to other people, So 537 00:30:23,920 --> 00:30:27,600 Speaker 1: finding someone on the service who hadn't already dedicated all 538 00:30:27,720 --> 00:30:32,040 Speaker 1: five invites became a bit of a common pastime. You 539 00:30:32,040 --> 00:30:34,440 Speaker 1: would look for your friends and say, hey, do any 540 00:30:34,480 --> 00:30:37,360 Speaker 1: of you have an invite to Spotify? And like I said, 541 00:30:37,360 --> 00:30:40,720 Speaker 1: the service did have two tiers. The free tier was 542 00:30:40,760 --> 00:30:44,520 Speaker 1: supported by advertising still is supported by advertising. Um it 543 00:30:44,600 --> 00:30:47,080 Speaker 1: has had a limitation on the number of hours that 544 00:30:47,160 --> 00:30:50,440 Speaker 1: users could stream music per month, and the service also 545 00:30:50,480 --> 00:30:52,440 Speaker 1: placed limits on the number of times you could listen 546 00:30:52,480 --> 00:30:55,240 Speaker 1: to any particular track over a given amount of time, 547 00:30:55,720 --> 00:30:59,360 Speaker 1: and those were really Spotify is way of of bowing 548 00:30:59,360 --> 00:31:02,520 Speaker 1: to the music and the street to get these negotiations 549 00:31:02,520 --> 00:31:05,040 Speaker 1: to work out. So if you listen to Spotify on 550 00:31:05,160 --> 00:31:09,320 Speaker 1: the service, uh, you'd get a commercial between every few songs, 551 00:31:09,720 --> 00:31:12,240 Speaker 1: and if you try to mute the audio on commercials, 552 00:31:12,280 --> 00:31:14,480 Speaker 1: it would just pause the ad, so really you're just 553 00:31:14,480 --> 00:31:18,360 Speaker 1: putting off the inevitable. The desktop application would likewise display 554 00:31:18,400 --> 00:31:21,320 Speaker 1: ads over the user interface, so you could get both 555 00:31:21,360 --> 00:31:24,800 Speaker 1: audio and visual ads to generate revenue for Spotify, and 556 00:31:24,800 --> 00:31:28,760 Speaker 1: occasionally video ads playing as well. In addition, Spotify introduced 557 00:31:28,800 --> 00:31:31,560 Speaker 1: a premium tier, so for a monthly fee which has 558 00:31:31,800 --> 00:31:35,160 Speaker 1: changed a few times over the years, but for a 559 00:31:35,240 --> 00:31:38,160 Speaker 1: certain amount per month, you could get unlimited access to 560 00:31:38,240 --> 00:31:41,560 Speaker 1: the music that was available over Spotify. There were no 561 00:31:41,680 --> 00:31:44,880 Speaker 1: monthly restrictions on use. You weren't capped at a certain 562 00:31:44,960 --> 00:31:48,400 Speaker 1: number of hours and you also had no ads with premium. 563 00:31:49,040 --> 00:31:52,880 Speaker 1: Premium users could also listen to Spotify offline. Obviously, that 564 00:31:52,920 --> 00:31:55,440 Speaker 1: service would rely on the music stored on the device 565 00:31:55,480 --> 00:31:58,640 Speaker 1: you're using, and you would get an unlimited number of 566 00:31:58,720 --> 00:32:02,480 Speaker 1: skips of songs. If something was playing and you didn't 567 00:32:02,520 --> 00:32:04,840 Speaker 1: care to listen to it, you could skip it, and 568 00:32:04,840 --> 00:32:06,600 Speaker 1: then if you didn't like the next six songs, you 569 00:32:06,600 --> 00:32:08,760 Speaker 1: could skip those as well, and you'd never run out 570 00:32:08,760 --> 00:32:11,400 Speaker 1: of the skips. Oh and you would also get that 571 00:32:11,520 --> 00:32:15,400 Speaker 1: higher bit rate for your audio files that kill abits 572 00:32:15,400 --> 00:32:18,400 Speaker 1: per second. That was another benefit for the premium use. 573 00:32:18,520 --> 00:32:20,880 Speaker 1: Still is another benefit I keep saying was, but this 574 00:32:20,960 --> 00:32:24,040 Speaker 1: is still a thing. The company posted a four point 575 00:32:24,120 --> 00:32:28,600 Speaker 1: four million dollar loss in two thousand and eight, But 576 00:32:28,640 --> 00:32:30,880 Speaker 1: then it's kind of hard to imagine a scenario where 577 00:32:30,920 --> 00:32:33,800 Speaker 1: that wouldn't have happened. The company had to deal with 578 00:32:33,880 --> 00:32:38,120 Speaker 1: startup costs, all those music licensing fees, had to pay 579 00:32:38,160 --> 00:32:41,440 Speaker 1: for operations, and had to pay out royalties. Spotify says 580 00:32:41,480 --> 00:32:45,400 Speaker 1: they pay out seventy of their revenue and royalties to 581 00:32:45,560 --> 00:32:48,920 Speaker 1: different music companies music labels, and it had only just 582 00:32:49,000 --> 00:32:51,640 Speaker 1: gotten started. And it's also the sort of business that 583 00:32:51,720 --> 00:32:56,440 Speaker 1: really generates serious revenue after its scales up. It actually 584 00:32:56,520 --> 00:33:00,320 Speaker 1: is kind of a money losing venture on till it 585 00:33:00,360 --> 00:33:03,959 Speaker 1: gets to a certain size, but turns out that the 586 00:33:04,040 --> 00:33:06,240 Speaker 1: loss was just the first in a long series of 587 00:33:06,280 --> 00:33:10,040 Speaker 1: annual losses. Spotify was starting to get investors, but it 588 00:33:10,080 --> 00:33:14,160 Speaker 1: wasn't turning a profit. In fact, it wouldn't officially turn 589 00:33:14,320 --> 00:33:19,400 Speaker 1: a profitable quarter until February two thousand nineteen, so for 590 00:33:19,520 --> 00:33:23,760 Speaker 1: more than a decade Spotify lost money, though in one 591 00:33:23,840 --> 00:33:26,920 Speaker 1: quarter in two thousand eighteen, it appeared profitable, but that 592 00:33:27,000 --> 00:33:30,320 Speaker 1: was because of a one time tax benefit that Spotify 593 00:33:30,400 --> 00:33:34,360 Speaker 1: received due to its stake in another music streaming service 594 00:33:34,400 --> 00:33:38,160 Speaker 1: called ten Cent Music Entertainment Group out of China. Now 595 00:33:38,240 --> 00:33:40,520 Speaker 1: that story gets a bit weird and complex, but it 596 00:33:40,520 --> 00:33:43,720 Speaker 1: boils down to this. Ten Cent was going to hold 597 00:33:43,760 --> 00:33:45,520 Speaker 1: an I p O in the United States. It was 598 00:33:45,520 --> 00:33:48,360 Speaker 1: going to go public in the US, which meant as 599 00:33:48,440 --> 00:33:51,959 Speaker 1: part of that process, it had to declare the company's 600 00:33:52,080 --> 00:33:55,880 Speaker 1: value in an effort of going public. That also meant 601 00:33:55,920 --> 00:33:59,640 Speaker 1: that Spotify had to re evaluate the value of its 602 00:33:59,640 --> 00:34:04,480 Speaker 1: in sment Intencent. Because Spotify owned a percentage of stocks 603 00:34:04,560 --> 00:34:07,360 Speaker 1: in the company, they had to reevaluate how much those 604 00:34:07,400 --> 00:34:11,200 Speaker 1: stocks were actually worth instead of what was believed to 605 00:34:11,320 --> 00:34:15,400 Speaker 1: be worth. That then led to Spotify being eligible for 606 00:34:15,480 --> 00:34:18,520 Speaker 1: a big tax benefit, and that technically put them in 607 00:34:18,560 --> 00:34:21,360 Speaker 1: the black in two thousand and eighteen for one quarter. 608 00:34:21,760 --> 00:34:25,560 Speaker 1: But that sort of thing is obviously not replicable. It's 609 00:34:25,600 --> 00:34:28,239 Speaker 1: not sustainable. It's no way to run a business. You know, 610 00:34:28,480 --> 00:34:30,520 Speaker 1: you can't count on that happening every quarter or so. 611 00:34:31,080 --> 00:34:34,680 Speaker 1: The transition to profitability in early two thousand nineteen is 612 00:34:34,719 --> 00:34:38,000 Speaker 1: more of a good sign for the company, and it's 613 00:34:38,000 --> 00:34:41,400 Speaker 1: also interesting because it's a company that's valued at billions 614 00:34:41,440 --> 00:34:46,040 Speaker 1: of dollars despite having operated at a financial loss for 615 00:34:46,160 --> 00:34:49,560 Speaker 1: nearly all of its existence. It's another way of reminding 616 00:34:49,560 --> 00:34:53,279 Speaker 1: me that business is crazy. That you can run a 617 00:34:53,360 --> 00:34:57,000 Speaker 1: business that is losing money year after year after year, 618 00:34:57,400 --> 00:34:59,880 Speaker 1: and yet the value of your company that is not 619 00:35:00,120 --> 00:35:03,840 Speaker 1: making money is going up and up and up to 620 00:35:03,920 --> 00:35:06,480 Speaker 1: a point where you know, eventually one of two things 621 00:35:06,560 --> 00:35:09,200 Speaker 1: needs to happen. Either your company needs to start making 622 00:35:09,200 --> 00:35:13,680 Speaker 1: money so that all of that investment in that company 623 00:35:13,760 --> 00:35:18,600 Speaker 1: is justified, or everything falls apart and everybody loses their 624 00:35:18,600 --> 00:35:21,200 Speaker 1: shirt and a lot of people are out of jobs. 625 00:35:21,640 --> 00:35:25,279 Speaker 1: I obviously prefer option A to option B. But it 626 00:35:25,360 --> 00:35:28,880 Speaker 1: still blows my mind that companies like Spotify. Spotify is 627 00:35:28,920 --> 00:35:31,360 Speaker 1: not alone in this Twitter is another great example. But 628 00:35:31,480 --> 00:35:35,560 Speaker 1: companies like Spotify could operate for so long without making 629 00:35:35,600 --> 00:35:39,160 Speaker 1: money and uh and yet still see the value of 630 00:35:39,200 --> 00:35:43,480 Speaker 1: the company on the rise. It's crazy anyway. Jumping back 631 00:35:43,520 --> 00:35:46,680 Speaker 1: to two thousand nine for a second. In February two nine, 632 00:35:46,800 --> 00:35:51,480 Speaker 1: Spotify drop the requirement for invitations and launched registrations in 633 00:35:51,520 --> 00:35:54,080 Speaker 1: the UK, so if you wanted a free Spotify account, 634 00:35:54,120 --> 00:35:56,840 Speaker 1: you could sign up. If you were in Europe and 635 00:35:57,080 --> 00:35:59,680 Speaker 1: no specifically in the UK, you could sign up for 636 00:35:59,719 --> 00:36:02,320 Speaker 1: a free account right off the bat. It also launched 637 00:36:02,360 --> 00:36:05,839 Speaker 1: the Spotify Mobile service. It was pretty primitive in the 638 00:36:05,880 --> 00:36:10,080 Speaker 1: early incarnation, but it did expand its offerings to mobile 639 00:36:10,080 --> 00:36:12,080 Speaker 1: phone users. I think this is a good time to 640 00:36:12,120 --> 00:36:14,680 Speaker 1: mention it was sort of a serendipitous issue of timing 641 00:36:14,719 --> 00:36:17,320 Speaker 1: for Spotify to launch in two thousand and eight because 642 00:36:17,360 --> 00:36:20,600 Speaker 1: Apple had introduced the iPhone in two thousand seven, and 643 00:36:20,640 --> 00:36:23,319 Speaker 1: Apple had effectively opened up the gates for an era 644 00:36:23,440 --> 00:36:27,319 Speaker 1: of consumer smartphones, because up to that point, smartphones had 645 00:36:27,360 --> 00:36:30,920 Speaker 1: largely been reserved for executives and for bleeding edge early 646 00:36:30,960 --> 00:36:35,040 Speaker 1: adopters and no one else. The smartphone revolution really created 647 00:36:35,120 --> 00:36:39,120 Speaker 1: a market for services like Spotify. People like having a 648 00:36:39,160 --> 00:36:43,960 Speaker 1: portable music source. But Spotify executives would even admit later on. 649 00:36:44,040 --> 00:36:47,920 Speaker 1: Daniel Eck admitted later on that the company was a 650 00:36:47,960 --> 00:36:53,560 Speaker 1: little late to create a truly robust mobile app, that 651 00:36:53,600 --> 00:36:56,000 Speaker 1: they were a little late to the game on that one. 652 00:36:56,080 --> 00:36:59,840 Speaker 1: They still managed to capitalize on it, but they probably 653 00:37:00,239 --> 00:37:03,359 Speaker 1: should have moved earlier than they did. However, even that 654 00:37:03,480 --> 00:37:07,279 Speaker 1: early limited mobile service was a big hit, so much 655 00:37:07,320 --> 00:37:10,600 Speaker 1: so that Spotify would actually close down those open registrations 656 00:37:10,600 --> 00:37:13,280 Speaker 1: in the UK went back to the invitation only model 657 00:37:13,640 --> 00:37:16,919 Speaker 1: back in September of two thousand nine, so users could 658 00:37:17,000 --> 00:37:20,360 Speaker 1: opt for the premium service without the need for an invitation. 659 00:37:20,880 --> 00:37:23,759 Speaker 1: Yet again and again, it makes sense Spotify wasn't going 660 00:37:23,800 --> 00:37:25,520 Speaker 1: to say no, we're gonna limit the number of people 661 00:37:25,520 --> 00:37:28,880 Speaker 1: who want to give us money. Meanwhile, Spotify was dealing 662 00:37:28,880 --> 00:37:31,279 Speaker 1: with some of the other issues that tech companies have 663 00:37:31,360 --> 00:37:35,520 Speaker 1: had to face throughout their own histories, like data security 664 00:37:35,520 --> 00:37:38,080 Speaker 1: being a big one. In March two thousand nine, Spotify 665 00:37:38,160 --> 00:37:41,399 Speaker 1: representatives announced that the security team at the company had 666 00:37:41,440 --> 00:37:45,520 Speaker 1: detected a security flaw in the Spotify service, which could 667 00:37:45,560 --> 00:37:49,280 Speaker 1: have meant that someone had gained unauthorized access to private 668 00:37:49,320 --> 00:37:52,840 Speaker 1: account information for people who had registered before December nineteen, 669 00:37:53,040 --> 00:37:57,520 Speaker 1: two thousand eight. Whether anyone had actually done that was unknown, 670 00:37:57,880 --> 00:38:02,760 Speaker 1: but it was technically possible. Spotify patched that vulnerability. Also 671 00:38:02,760 --> 00:38:06,400 Speaker 1: in two thousand nine, a guy named Mark Zuckerberg you've 672 00:38:06,440 --> 00:38:09,120 Speaker 1: heard of it um, posted on a little platform that 673 00:38:09,160 --> 00:38:12,120 Speaker 1: he had co founded called Facebook that he thought Spotify 674 00:38:12,520 --> 00:38:18,160 Speaker 1: was quote so good end quote kind of like sweet Caroline, 675 00:38:18,560 --> 00:38:21,120 Speaker 1: and that was an early hint of things to come 676 00:38:21,160 --> 00:38:24,480 Speaker 1: in the United States. Would take a couple of years 677 00:38:24,520 --> 00:38:27,239 Speaker 1: to come to fruition, but Facebook and Spotify would be 678 00:38:27,440 --> 00:38:32,040 Speaker 1: BFFs at that point. Spotify also introduced a music purchase 679 00:38:32,080 --> 00:38:35,239 Speaker 1: option in some markets in two thousand nine, which meant 680 00:38:35,320 --> 00:38:38,319 Speaker 1: users in those markets could buy music tracks right off 681 00:38:38,320 --> 00:38:41,800 Speaker 1: Spotify and use Spotify like an online music store similar 682 00:38:41,840 --> 00:38:45,040 Speaker 1: to iTunes. That feature would stick around until early two 683 00:38:45,040 --> 00:38:48,000 Speaker 1: thousand thirteen, and Spotify then discontinued it, but for a 684 00:38:48,000 --> 00:38:51,120 Speaker 1: while that was another revenue source was acting as a 685 00:38:51,200 --> 00:38:57,200 Speaker 1: servant online retailer. In January, Spotify had another headache to 686 00:38:57,280 --> 00:39:02,879 Speaker 1: deal with the anti virus software Semantic identified Spotify as 687 00:39:02,920 --> 00:39:07,200 Speaker 1: a trojan horse form of malware, which seems pretty harsh 688 00:39:07,280 --> 00:39:10,200 Speaker 1: to me, but you can kind of understand it because 689 00:39:10,560 --> 00:39:14,040 Speaker 1: since it used this peer to peer relationship, it meant 690 00:39:14,040 --> 00:39:15,400 Speaker 1: that there was a lot of stuff going on in 691 00:39:15,400 --> 00:39:18,360 Speaker 1: the background and that could look suspicious to an anti 692 00:39:18,480 --> 00:39:21,799 Speaker 1: virus software if they thought, oh, it looks like some 693 00:39:22,560 --> 00:39:26,719 Speaker 1: program is trying to gain administrative access or some sort 694 00:39:26,719 --> 00:39:30,640 Speaker 1: of backdoor access to a computer. So it was proactively 695 00:39:30,760 --> 00:39:35,240 Speaker 1: blocking Spotify from working. So users with semantic antivirus software 696 00:39:35,239 --> 00:39:38,000 Speaker 1: found their Spotify programs were being nullified. So that was 697 00:39:38,040 --> 00:39:40,920 Speaker 1: a big pain for a lot of people for at 698 00:39:41,000 --> 00:39:43,040 Speaker 1: least a short while until it was all patched out. 699 00:39:43,280 --> 00:39:47,719 Speaker 1: Two thousand eleven was when Spotify was finally able to 700 00:39:47,840 --> 00:39:50,240 Speaker 1: enter the US market, So it launched in two thousand 701 00:39:50,200 --> 00:39:52,440 Speaker 1: and eight. People over here in the U S had 702 00:39:52,440 --> 00:39:55,160 Speaker 1: heard about it, but no one was able to actually 703 00:39:55,200 --> 00:39:58,040 Speaker 1: access it without using you know, VPNs or some other 704 00:39:58,239 --> 00:40:01,200 Speaker 1: method to get around the that their computers were. In 705 00:40:01,239 --> 00:40:04,279 Speaker 1: the US. It taken more time for the company to 706 00:40:04,320 --> 00:40:07,799 Speaker 1: negotiate with music labels. Um they had to you know, 707 00:40:09,200 --> 00:40:10,840 Speaker 1: every time they want to move into a new market, 708 00:40:10,880 --> 00:40:14,840 Speaker 1: they have to renegotiate with music labels because the music 709 00:40:15,000 --> 00:40:19,480 Speaker 1: labels want to be able to dictate how their music 710 00:40:19,600 --> 00:40:22,719 Speaker 1: is sold in any given market, and the US is 711 00:40:22,719 --> 00:40:26,520 Speaker 1: a particularly big market, so it took a lot of negotiations. 712 00:40:27,040 --> 00:40:30,520 Speaker 1: Spotify said it has paid billions of dollars in royalty 713 00:40:30,600 --> 00:40:33,040 Speaker 1: fees over the years that there have been some other 714 00:40:33,080 --> 00:40:35,840 Speaker 1: stories that kind of raise questions about this. So, for example, 715 00:40:36,400 --> 00:40:39,279 Speaker 1: one famous story that tends to get quoted all over 716 00:40:39,280 --> 00:40:41,000 Speaker 1: the place, and I think it dates all the way 717 00:40:41,040 --> 00:40:44,879 Speaker 1: back to two thousand nine, is that Lady Gaga's track 718 00:40:45,000 --> 00:40:49,279 Speaker 1: poker Face had hit a few million streams early in 719 00:40:49,360 --> 00:40:54,360 Speaker 1: Spotify's history, and yet generated only one hundred sixty seven 720 00:40:54,400 --> 00:40:59,760 Speaker 1: dollars in revenues, hundred sixty seven thousand, just one sixty 721 00:40:59,800 --> 00:41:02,839 Speaker 1: seven and a hundred bucks plus sixty seven more bucks, 722 00:41:02,840 --> 00:41:06,480 Speaker 1: and that's it. Spotify doesn't have a stock per play 723 00:41:06,600 --> 00:41:11,160 Speaker 1: royalty rate, but I've seen estimates of per play a 724 00:41:11,360 --> 00:41:16,360 Speaker 1: track earning point zero zero six dollars, so point six 725 00:41:16,560 --> 00:41:20,080 Speaker 1: cents to point zero zero eight four dollars or point 726 00:41:20,200 --> 00:41:23,080 Speaker 1: zero eight four or point eight four cents, I should say, 727 00:41:23,160 --> 00:41:25,480 Speaker 1: so not even a full penny per play, So you 728 00:41:25,560 --> 00:41:28,479 Speaker 1: got to rack up a lot of plays to earn 729 00:41:28,520 --> 00:41:31,640 Speaker 1: a dollar, let alone a hundred sixty seven. Now, that 730 00:41:31,680 --> 00:41:36,239 Speaker 1: has led some artists to complain about Spotify, saying that 731 00:41:36,280 --> 00:41:39,960 Speaker 1: this company is benefiting unfairly from the artist's work. And 732 00:41:39,960 --> 00:41:42,040 Speaker 1: you can see where they're coming from. If they're saying, 733 00:41:42,680 --> 00:41:44,799 Speaker 1: millions of people are listening to my music and I 734 00:41:44,840 --> 00:41:47,319 Speaker 1: got a hundred bucks for it, that does seem to 735 00:41:47,320 --> 00:41:52,880 Speaker 1: be pretty unfair. But then Spotify kept operating at a loss. 736 00:41:53,120 --> 00:41:56,279 Speaker 1: The company itself wasn't making an enormous amount of money, 737 00:41:56,280 --> 00:41:59,280 Speaker 1: and according to Spotify again, they were giving the vast 738 00:41:59,360 --> 00:42:03,400 Speaker 1: majority of their revenues back as royalty payments to record labels. 739 00:42:04,440 --> 00:42:08,040 Speaker 1: So maybe you could argue the record labels had some 740 00:42:08,160 --> 00:42:11,000 Speaker 1: responsibility for this, since they were so vehement in their 741 00:42:11,040 --> 00:42:15,879 Speaker 1: negotiations with Spotify, But I think overall, it really just 742 00:42:16,000 --> 00:42:20,000 Speaker 1: points out what a complicated industry, the entertainment industry is 743 00:42:20,040 --> 00:42:25,040 Speaker 1: in general. So Spotify partnered with Facebook for the United 744 00:42:25,040 --> 00:42:29,600 Speaker 1: States rollout, and US users could download Spotify on their 745 00:42:29,719 --> 00:42:32,920 Speaker 1: computers and uh they could create an account using their 746 00:42:32,960 --> 00:42:37,880 Speaker 1: Facebook login information and automatically connect Spotify to Facebook. That 747 00:42:37,960 --> 00:42:41,120 Speaker 1: helped drive adoption in the US. It also lead to 748 00:42:41,160 --> 00:42:44,840 Speaker 1: some controversy. There was a two thousand eighteen piece in 749 00:42:44,960 --> 00:42:48,200 Speaker 1: The New York Times, a report that found Facebook had 750 00:42:48,239 --> 00:42:53,680 Speaker 1: some pretty liberal data sharing agreements with various partners, including Spotify, 751 00:42:53,760 --> 00:42:57,880 Speaker 1: and that those agreements gave companies extensive access to user 752 00:42:58,000 --> 00:43:02,080 Speaker 1: data and that included thing Spotify, Netflix, and the Royal 753 00:43:02,160 --> 00:43:08,560 Speaker 1: Bank of Canada the ability to read private messages between users. Yikes, 754 00:43:09,080 --> 00:43:10,879 Speaker 1: So why would they do that? Why would they give 755 00:43:10,960 --> 00:43:14,480 Speaker 1: these companies the ability? Well, the thought was, at least 756 00:43:14,480 --> 00:43:17,799 Speaker 1: for Spotify, that users could send updates on what they 757 00:43:17,840 --> 00:43:20,680 Speaker 1: were listening to to their friends on Facebook. Through this 758 00:43:20,760 --> 00:43:24,400 Speaker 1: messaging service, you could essentially say, Oh, I'm listening to 759 00:43:24,520 --> 00:43:27,960 Speaker 1: Lady Gaga and my buddy Shay really loves Lady Gaga, 760 00:43:28,000 --> 00:43:31,040 Speaker 1: so I'm going to remind Shay. Hey, hey, listen, I'm 761 00:43:31,080 --> 00:43:32,960 Speaker 1: listening to Lady Gaga right now. Check it out and 762 00:43:33,000 --> 00:43:36,680 Speaker 1: send her a message. Uh. This, by the way, was 763 00:43:36,840 --> 00:43:41,320 Speaker 1: a messaging service that predated Facebook Messenger, the current version 764 00:43:41,480 --> 00:43:45,200 Speaker 1: of Messenger that Facebook uses. But in order to do this, 765 00:43:45,280 --> 00:43:48,680 Speaker 1: in order to activate this ability, Facebook had to grant 766 00:43:48,800 --> 00:43:52,839 Speaker 1: some access to the messaging service to Spotify, so it 767 00:43:52,920 --> 00:43:57,279 Speaker 1: wasn't necessarily intentionally awful, but it doesn't take a lot 768 00:43:57,280 --> 00:44:00,560 Speaker 1: of imagination to conjure up how a system could be 769 00:44:00,840 --> 00:44:04,080 Speaker 1: really badly abused in this way. But the idea was 770 00:44:04,560 --> 00:44:07,480 Speaker 1: sort of similar to giving up the rights to a 771 00:44:07,600 --> 00:44:11,360 Speaker 1: work so that it can be displayed on a on 772 00:44:11,440 --> 00:44:14,160 Speaker 1: a cloud service. Right if you if you create a 773 00:44:14,200 --> 00:44:17,680 Speaker 1: document on Google Docs, you give up some of the 774 00:44:17,760 --> 00:44:22,160 Speaker 1: rights of that document. But it's not meant to transfer 775 00:44:22,239 --> 00:44:25,480 Speaker 1: the intellectual property over to Google. Rather, it's to give 776 00:44:25,520 --> 00:44:29,640 Speaker 1: Google their permission to show you that document no matter 777 00:44:29,719 --> 00:44:33,799 Speaker 1: what computer you're using, because otherwise Google would effectively be 778 00:44:34,640 --> 00:44:38,960 Speaker 1: circumventing those rules for intellectual property. That was the same 779 00:44:39,000 --> 00:44:40,920 Speaker 1: idea with this, but you can see how it was 780 00:44:41,080 --> 00:44:46,080 Speaker 1: not particularly well thought out. In two thousand eighteen, Spotify 781 00:44:46,200 --> 00:44:49,920 Speaker 1: became the world's most valuable music company after its public 782 00:44:50,000 --> 00:44:52,759 Speaker 1: listing on the New York Stock Exchange, which pushed the 783 00:44:52,800 --> 00:44:57,319 Speaker 1: company to a valuation of twenty five billion dollars. And 784 00:44:57,400 --> 00:45:00,200 Speaker 1: keep in mind that at that point the company had 785 00:45:00,280 --> 00:45:04,600 Speaker 1: still yet to turn a profit. Unbelievable. Now these days, 786 00:45:04,880 --> 00:45:10,000 Speaker 1: Spotify has around nineties six million paid subscribers, many more 787 00:45:10,320 --> 00:45:13,440 Speaker 1: use the free option, and in early two thousand nineteen, 788 00:45:13,520 --> 00:45:17,600 Speaker 1: Spotify made another big move by acquiring Gimlet Media and 789 00:45:17,640 --> 00:45:20,320 Speaker 1: a company called Anchor, both of which are big players 790 00:45:20,320 --> 00:45:23,160 Speaker 1: in the podcast world. Anchor is a company that creates 791 00:45:23,239 --> 00:45:27,440 Speaker 1: tools for podcasters to build, monetize, and publish podcasts, and 792 00:45:27,480 --> 00:45:31,880 Speaker 1: gimblet Media is a startup podcast network. Spotify plans to 793 00:45:32,000 --> 00:45:36,640 Speaker 1: use those acquisitions to build out original programming on their platform, 794 00:45:36,680 --> 00:45:39,840 Speaker 1: and the company estimates that in the future, non music 795 00:45:39,880 --> 00:45:43,719 Speaker 1: media will account for twenty of all streaming on Spotify, 796 00:45:43,960 --> 00:45:46,960 Speaker 1: and the company wouldn't have to dole out royalties to 797 00:45:47,040 --> 00:45:51,040 Speaker 1: the music industry for podcast streams, so that reduces costs 798 00:45:51,120 --> 00:45:55,960 Speaker 1: for that particular part of its business. As of this recording, 799 00:45:56,000 --> 00:46:00,600 Speaker 1: Spotify plans to spend another half billion dollars on podcasting 800 00:46:00,600 --> 00:46:04,279 Speaker 1: in twenty nineteen. Serious business. It remains to be seen 801 00:46:04,400 --> 00:46:07,360 Speaker 1: how this will impact the podcasting industry as a whole, 802 00:46:07,560 --> 00:46:10,719 Speaker 1: which obviously I am very interested in since I'm in 803 00:46:10,760 --> 00:46:14,439 Speaker 1: that industry, But there's potential for some pretty big shake 804 00:46:14,520 --> 00:46:16,560 Speaker 1: ups coming down the line. There are a lot of 805 00:46:16,680 --> 00:46:20,480 Speaker 1: questions about how Spotify will handle its in house podcasts 806 00:46:20,640 --> 00:46:23,760 Speaker 1: versus those from outside the company, as well as how 807 00:46:23,840 --> 00:46:28,200 Speaker 1: it will handle ads that will play within podcasts. Any 808 00:46:28,800 --> 00:46:33,440 Speaker 1: show that Spotify produces, they can probably monetize it any 809 00:46:33,480 --> 00:46:37,719 Speaker 1: which way. For shows that they carry that are produced 810 00:46:37,719 --> 00:46:41,600 Speaker 1: from outside Spotify, that's a little more tricky. Right, Like 811 00:46:41,640 --> 00:46:44,279 Speaker 1: the shows I produce, we have ad breaks. I'm sure 812 00:46:44,360 --> 00:46:48,000 Speaker 1: you've noticed them. Obviously, we would want those ad breaks 813 00:46:48,040 --> 00:46:52,000 Speaker 1: preserved if we were to have our shows on other 814 00:46:52,040 --> 00:46:56,239 Speaker 1: platforms like Spotify, which we do, and that's important because 815 00:46:56,280 --> 00:46:59,120 Speaker 1: if they were stripped out, then we wouldn't be able 816 00:46:59,120 --> 00:47:01,960 Speaker 1: to monetize those episodes, and somebody else will be making 817 00:47:02,000 --> 00:47:04,640 Speaker 1: money off of our content, and it wouldn't be It 818 00:47:04,640 --> 00:47:07,320 Speaker 1: wouldn't make our advertisers happy, it wouldn't make us happy. 819 00:47:07,400 --> 00:47:10,920 Speaker 1: So it's it's a delicate thing. Presumably Spotify will preserve 820 00:47:11,000 --> 00:47:14,920 Speaker 1: that they are currently preserving the ads from out of 821 00:47:14,960 --> 00:47:19,880 Speaker 1: network podcasts, and then there are the Spotify exclusives that 822 00:47:19,960 --> 00:47:22,399 Speaker 1: listeners will only be able to listen to if they 823 00:47:22,480 --> 00:47:25,640 Speaker 1: happen to use Spotify service, and all of this, I'm 824 00:47:25,640 --> 00:47:28,080 Speaker 1: sure is going to get hashed out over time. On 825 00:47:28,280 --> 00:47:32,040 Speaker 1: one last thing, just before I finished the notes for 826 00:47:32,080 --> 00:47:35,600 Speaker 1: this particular episode, some more news broke that Spotify is 827 00:47:35,640 --> 00:47:40,440 Speaker 1: bringing an antitrust lawsuit against Apple in the European Union. 828 00:47:41,080 --> 00:47:44,080 Speaker 1: The main charge that they are bringing is that Apple's 829 00:47:44,120 --> 00:47:47,759 Speaker 1: policy is to take a thirty cut of app revenue 830 00:47:48,080 --> 00:47:51,600 Speaker 1: and that this is specifically harmful to streaming services that 831 00:47:51,680 --> 00:47:56,120 Speaker 1: compete against Apple, saying, well, if you take that cut 832 00:47:56,520 --> 00:48:01,560 Speaker 1: for us to operate on your platform, then and considering 833 00:48:01,560 --> 00:48:04,200 Speaker 1: how much revenue we have to spend for our our 834 00:48:04,280 --> 00:48:07,880 Speaker 1: royalties and everything, Uh, it actually costs us money to 835 00:48:08,040 --> 00:48:10,080 Speaker 1: work on your on your system. So what you're doing 836 00:48:10,160 --> 00:48:12,920 Speaker 1: is you are discouraging other companies to compete with you 837 00:48:13,000 --> 00:48:16,920 Speaker 1: on that space. So this is anti competitive and thus 838 00:48:17,400 --> 00:48:22,360 Speaker 1: uh indicative of a monopoly. So that's where the charge is. Obviously, 839 00:48:22,360 --> 00:48:25,080 Speaker 1: that's going to take some time to to suss out 840 00:48:25,560 --> 00:48:27,360 Speaker 1: over in the EU, So I'm sure I'm gonna have 841 00:48:27,400 --> 00:48:29,320 Speaker 1: to do a follow up at some point. There's a 842 00:48:29,320 --> 00:48:30,759 Speaker 1: lot more to talk about, but I'm going to save 843 00:48:30,760 --> 00:48:33,839 Speaker 1: that for another show. I also plan on doing an 844 00:48:33,840 --> 00:48:37,000 Speaker 1: episode that's sort of more philosophical, touching on some of 845 00:48:37,000 --> 00:48:41,760 Speaker 1: the ideas I've talked about here about how our consumption 846 00:48:41,960 --> 00:48:46,120 Speaker 1: of media has changed in my lifetime, how that has 847 00:48:46,200 --> 00:48:50,880 Speaker 1: changed significantly, and what that has meant over the different 848 00:48:50,960 --> 00:48:56,279 Speaker 1: eras of of media consumption. That I have seen, because 849 00:48:56,520 --> 00:49:00,160 Speaker 1: it is a really interesting journey and it had as 850 00:49:00,760 --> 00:49:03,640 Speaker 1: shape not just the technology we use, but the way 851 00:49:03,680 --> 00:49:06,799 Speaker 1: we use it. So look for that episode in the 852 00:49:06,920 --> 00:49:10,759 Speaker 1: near future. It'll probably be me being a contankerous old 853 00:49:10,760 --> 00:49:13,320 Speaker 1: man saying in my day when we listen to podcasts, 854 00:49:13,360 --> 00:49:15,960 Speaker 1: we had to do it uphill both ways, four ft 855 00:49:16,000 --> 00:49:19,840 Speaker 1: deep in snow, or something along those lines. In the meantime, 856 00:49:19,880 --> 00:49:22,680 Speaker 1: if you have any suggestions for future episodes of tech Stuff, 857 00:49:22,719 --> 00:49:25,279 Speaker 1: why not write me. The address is tech Stuff at 858 00:49:25,440 --> 00:49:28,520 Speaker 1: how stuff works dot com, or you can pop on 859 00:49:28,560 --> 00:49:31,680 Speaker 1: over to our website that's tech Stuff podcast dot com. 860 00:49:31,840 --> 00:49:35,080 Speaker 1: You will find links to our social media presence where 861 00:49:35,080 --> 00:49:37,399 Speaker 1: you can go and bug me there or not bug 862 00:49:37,440 --> 00:49:40,160 Speaker 1: maybe just say hi and maybe say hey, could you 863 00:49:40,200 --> 00:49:42,399 Speaker 1: do an episode about blah blah blah, And I might 864 00:49:42,400 --> 00:49:44,080 Speaker 1: say I would love to do an episode about blah 865 00:49:44,120 --> 00:49:47,840 Speaker 1: blah blah and that big fantastic or you know, pop 866 00:49:47,880 --> 00:49:49,640 Speaker 1: on over to our merchandise store that's over at t 867 00:49:49,840 --> 00:49:53,120 Speaker 1: public dot com slash tech stuff. Every item you purchase 868 00:49:53,200 --> 00:49:55,160 Speaker 1: over there goes to help the show, and we greatly 869 00:49:55,200 --> 00:49:59,200 Speaker 1: appreciate it. And I will talk to you again really 870 00:49:59,239 --> 00:50:07,320 Speaker 1: soon for more on this, and thousands of other topics. 871 00:50:07,600 --> 00:50:18,320 Speaker 1: Is it how stuff works? Dot com, m