Speaker 1: Welcome, Welcome, Welcome back to Bob Lofstett's podcast. My guest
Speaker 1: today is Charlie Eleman of Spotify. He's the VP Global
Speaker 1: Head of Music Product. What is that in English?
Speaker 2: Charlick English? Yeah, nice to be here, Bob. Head of
Speaker 2: Music Product means I look after our end to end
Speaker 2: music offering, mostly you know, in terms of our services
Speaker 2: to labels and publishers, artists and songwriters, So all the
Speaker 2: tools that they use to get their music on Spotify,
Speaker 2: promote their music, manage their their profiles, and our overall
Speaker 2: policies of running the music vertical for Spotify.
Speaker 1: Okay, what involving music does not come under your purview?
Speaker 2: Well, so David Kafer and I run the music vertical together.
Speaker 2: He manages things like license and sing and artists relations.
Speaker 2: I manage more of the product side, and together we
Speaker 2: co lead the music vertical at Spotify.
Speaker 1: Okay, who would be overseeing the people who create playlists? Yeah?
Speaker 2: The editorial team, the human editorial team is also part
Speaker 2: of the music vertical. They report in to David Kaefer.
Speaker 2: But like I said, the two of us are joined
Speaker 2: at the hip and working on all of that together
Speaker 2: every day.
Speaker 1: Okay. From thirty thousand feet. Yeah, he deals with licensing
Speaker 1: with the labels. Yeah, what do you deal with the labels?
Speaker 2: So, for instance, like our Spotify for Artist product, which
Speaker 2: is how the labels see how they're doing, manage their
Speaker 2: presence on Spotify, promote their music, et cetera.
Speaker 1: Okay, So in terms of ingesting music, yeah, that is
Speaker 1: not your thing. In terms of relationships with music and
Speaker 1: promoting the music from labels, that is your thing.
Speaker 2: That's right. Yeah. I've been at Spotify now for fourteen years,
Speaker 2: so obviously my role has evolved quite a bit over
Speaker 2: the years. But recently my role expanded to being responsible
Speaker 2: for the music vertical overall, which just means as we've
Speaker 2: gone into podcasts and audiobooks, other leaders look after those
Speaker 2: verticals and I try to look after our music proposition
Speaker 2: end in.
Speaker 1: Okay, you talk about the labels, How do you deal
Speaker 1: with independent labels and independent artists?
Speaker 2: Yeah, great question, and that's been something that's evolved a
Speaker 2: ton over the years. As you know. I mean, we
Speaker 2: released our Loud and Clear Report today which you might
Speaker 2: have seen, and in twenty twenty four, fifty percent of
Speaker 2: all of our payouts went to indies, which is just
Speaker 2: a huge sea change from where it was, you know,
Speaker 2: even a decade ago. And so for indies, that spanned
Speaker 2: everything from a do it yourself artist that might be
Speaker 2: coming through distro kid or tune core and they use
Speaker 2: Spotify for artists and manage their profile, you know, run
Speaker 2: their promotions, et cetera, all the way to you know,
Speaker 2: a pretty big indie label that might have a direct
Speaker 2: custom deal with Spotify and kind of everything in between.
Speaker 2: So the range of what is included in indies is
Speaker 2: pretty broad.
Speaker 1: Okay, let's just stay there. Can you tell us more
Speaker 1: about the trends of consumption.
Speaker 2: Yeah, I mean, I think the biggest one that stands
Speaker 2: out to me is that year over year, in addition
Speaker 2: to just payouts growing and the overall size of the
Speaker 2: pie growing, which is great, it's being cut up in
Speaker 2: a lot more ways. They're just a lot more types
Speaker 2: of success stories happening now than we're happening five years
Speaker 2: or ten years ago. So, you know, I think even
Speaker 2: if you go back twenty years, maybe twenty percent of
Speaker 2: plays and downloads we're coming from the top forty songs.
Speaker 2: That's now down to two percent something like that, And
Speaker 2: so things have gotten cut up into a lot smaller
Speaker 2: niches in music, so less top heavy and more kind
Speaker 2: of middle tier artists having sustainable fan bases but might
Speaker 2: not be superstars. I think that's been the biggest shift
Speaker 2: in consumption patterns over the last ten years or so.
Speaker 1: Okay, let's just assume I'm somebody through distro kid yeah
Speaker 1: or CD baby, one of these independent aggregators. Yeah, can
Speaker 1: I touch you?
Speaker 2: What do you mean?
Speaker 1: I would assume if I'm universal, there's a direct pipeline
Speaker 1: between them and you. They have the largest market share.
Speaker 2: Whatever, I see what you mean.
Speaker 1: Let's say that I'm an independent artist. Is there any
Speaker 1: way to interact with someone at Spotify?
Speaker 2: Yeah, we try to have avenues at all different levels
Speaker 2: of scale. So I'll give you an example. Our human
Speaker 2: editorial team. If you go back, you know, say, five
Speaker 2: eight years, a lot of that was through human interaction.
Speaker 2: Like they were getting sent pre release music that was
Speaker 2: going to come out, they were listening to stuff that
Speaker 2: they were getting sent, and you know, they have limited
Speaker 2: hours in the day, right, so they're trying to be
Speaker 2: on top of everything, but they're only exposed to so much.
Speaker 2: So one of the things that we did was through
Speaker 2: Spotify for artists. We launched what we call New Music Submission,
Speaker 2: this playlist pitching tool where everyone, even if you're a
Speaker 2: do it yourself artist, you upload your music and then
Speaker 2: you can tag it with a bunch of stuff, tell
Speaker 2: the story, what instruments are used, you know who's in
Speaker 2: the band, all this kind of stuff, tag it with genres,
Speaker 2: and then that all goes into one workflow for the editors.
Speaker 2: So it doesn't matter if you're from Republic or if
Speaker 2: you're from District Kid. It all comes into one funnel
Speaker 2: and it goes into you know, if you're an indie
Speaker 2: rock editor, you get all the stuff tagged for indie rock,
Speaker 2: and then you you listen to the pre release music
Speaker 2: and try to tag up you know, what's showing promise,
Speaker 2: what we're we're gonna believe in, what we're gonna give
Speaker 2: some editorial love to. And so through things like that,
Speaker 2: we've tried to streamline it. So the levels of access
Speaker 2: are pretty uniform, you know, regardless of the kind of
Speaker 2: label set up the.
Speaker 1: F Let's say I'm an independent artist, I'm through one
Speaker 1: of those aggregators. Yeah, but I have money to spend,
Speaker 1: h Can I immediately get access? Say, well, you know,
Speaker 1: I want certain stuff that you offer the big labels
Speaker 1: because I'm willing to pay for it.
Speaker 2: Yeah, that's another area where we've really streamlined and made
Speaker 2: the same tools accessible for everyone. So there's two types
Speaker 2: of promotional offerings that we offered a labels big and small.
Speaker 2: One is what we call native ads. So these are
Speaker 2: things where if you come into Spotify you might see
Speaker 2: you know, sponsored recommendation or new release and it's featured
Speaker 2: and artists, you know, whether they're on the biggest label
Speaker 2: or they're do it yourself. They can come into Spotify
Speaker 2: for artists and they can book a campaign. They can
Speaker 2: target dormant fans or existing fans or potential listeners, and
Speaker 2: they can use a cash budget for that. You know,
Speaker 2: works very similarly the way a lot of digital advertising works.
Speaker 2: And again because we've launched that in a self serve way,
Speaker 2: everybody has equal access to that. The other program that
Speaker 2: I would argue is even more accessible is Discovery Mode,
Speaker 2: and it's more accessible because it actually requires zero upfront budget.
Speaker 2: So with Discovery Mode, you say, here are my promotional priorities,
Speaker 2: these are the tracks I'm really trying to work. I
Speaker 2: want you to try to find spotify any opportunity for
Speaker 2: this to show up in more relevant place. And I
Speaker 2: don't put in budget on the front end. I accept
Speaker 2: a commission of my royalty rate on the back end
Speaker 2: when you pay me next month. And because it doesn't
Speaker 2: require upfront budget, it really levels the playing field so
Speaker 2: that it doesn't advantage people that have the most you know,
Speaker 2: cash on hand for marketing. But just you know, whatever
Speaker 2: is the most relevant in the system, which you know,
Speaker 2: we're really proud of.
Speaker 1: That, Okay, you know, staying with the independent artists because
Speaker 1: there's not a lot of light on this particular sphere. Yeah,
Speaker 1: I am an independent artist. Let's go with the latter.
Speaker 1: And I say, okay, I am checking in these discovery modes.
Speaker 1: If people listen, I will accept a reduce royalty. Yeah,
Speaker 1: but what are the odds that people are gonna actually
Speaker 1: hear my stuff?
Speaker 2: It performs pretty well. It's it's I think it's been,
Speaker 2: you know, certainly our most successful promotional product today. So
Speaker 2: I can explain a little bit more and detail how
Speaker 2: it works. But generally people say, you know, if you
Speaker 2: look at how many streams you got before putting in
Speaker 2: discovery mode and streams you got after putting in discovery mode,
Speaker 2: typically you're seeing you know, fifty one hundred hundred and
Speaker 2: fifty percent higher royalties because of the lift and streams,
Speaker 2: you get.
Speaker 1: A little bit more granular. Yeah, how does it actually work? Sure?
Speaker 2: Okay, So discovery mode operates in algorithmic playlists. So these
Speaker 2: are things like you know, radio stations or AutoPlay, right,
Speaker 2: and when a radio station is formed, there's two steps
Speaker 2: to this. So first, you know you're making it a
Speaker 2: Dell radio station. There might be three four, five hundred
Speaker 2: songs that are relevant for a Dell radio station. You know,
Speaker 2: Slean Beyond to Beyonce. You could go a lot of
Speaker 2: different ways. So you create a pool of all the
Speaker 2: most hyper relevant stuff. But then you got to sequence
Speaker 2: that playlist, right, like does this user typically like Selean
Speaker 2: theon or do they like Beyonce? What are they famili
Speaker 2: you're with? Or what's going to be more of a
Speaker 2: new discovery for them? You have to have some variations,
Speaker 2: so it's not you know, all Adele in the beginning
Speaker 2: and then all the other stuff, right, So a lot
Speaker 2: of the goodness comes in the sequencing. So the only
Speaker 2: thing that discovery mode does is after the track pool
Speaker 2: has already been set up. It only affects the sequencing,
Speaker 2: So there's maybe fifty or one hundred things that go
Speaker 2: into the sequencing, and discovery mode adds that one more ingredient.
Speaker 2: To say, factor in the fact that you know, this
Speaker 2: is the promotional priority for this artist, and because of that,
Speaker 2: it's going to get sequenced often higher in the list
Speaker 2: than it would have if it were not in discovery mode.
Speaker 2: Does that make sense?
Speaker 1: Yeah, but let's just go even deeper. User creates a
Speaker 1: radio station, Yeah, we'll use your example at Dell. Are
Speaker 1: we saying conventionally there's five hundred tracks or is that
Speaker 1: a number you just used.
Speaker 2: Yeah, it's usually a track pool for radio stations, a
Speaker 2: few hundred tracks. That's about right.
Speaker 1: Okay, there's five hundred tracks. The tracks in that pool
Speaker 1: are based on daddy you got from the listener, uh huh.
Speaker 1: And the rotation because as you said, you don't want
Speaker 1: all adele first in all unknown at the end. How
Speaker 1: is the rotation established?
Speaker 2: So the sequencer it has all these different dimensions to it.
Speaker 2: But it's like we have to have a good mix
Speaker 2: of familiarity and discovery. So some tracks that you're going
Speaker 2: to recognize in some that you don't. We want a
Speaker 2: good diversity of mix of artists. We want to have,
Speaker 2: you know, diversity of old versus new. So a lot
Speaker 2: of different factors go into it, and then discovery mode
Speaker 2: becomes one of those factors that goes into the ordering
Speaker 2: that we give the user.
Speaker 1: Okay, so let's just use your number of five hundred. Yeah,
Speaker 1: how do we decide if my discovery mode track goes
Speaker 1: with the Dell as a post to Deftones, and what
Speaker 1: if everybody wants to be with it? Don't.
Speaker 2: Well, since discovery mode only affects the sequencer, it can
Speaker 2: only move within a trackpool it's already in. You cannot
Speaker 2: use discovery mode to inject a track into a radio
Speaker 2: station that it wouldn't have already been in. The only
Speaker 2: thing it influences is the rank within the track pool.
Speaker 1: Okay, once again, very deep. I upload my stuff, I
Speaker 1: say I want discovery mode. Yeah, how do I know
Speaker 1: what acts and how many acts would I be in
Speaker 1: that pool of tracks?
Speaker 2: So we have these pre campaign analytics for you that
Speaker 2: show you this is where you're at. These are some
Speaker 2: suggestions of what might perform well, and then you can
Speaker 2: take those suggestions or ignore those suggestions. You try something,
Speaker 2: and then you get a report that's like, this is
Speaker 2: the amount of uplift each of these tracks got. These
Speaker 2: ones are ROI positive because they're getting more royalties than
Speaker 2: they did before. These ones. It's not resonating, like we
Speaker 2: tried to give it more spins, but it's not performing
Speaker 2: well and so it's staying flat and so you're accepting
Speaker 2: a discount, but it's not really worth it for you.
Speaker 2: So you get all this reporting and then you make
Speaker 2: adjustments for next month about what you want to try.
Speaker 2: That's different.
Speaker 1: Okay, is it month by month?
Speaker 2: It is month by month, Yeah, because that's the royalty
Speaker 2: reporting cycle, and so it's a good, you know cycle.
Speaker 1: So everybody's on the same month exactly counter month. Okay,
Speaker 1: let's say I'm a complete unknown quote Bob Dylan, do
Speaker 1: I get discovery options.
Speaker 2: For discovery mode? We need the system needs to know
Speaker 2: a bit about you in the algorithm, right, because since
Speaker 2: you have to already be in the track pulls to
Speaker 2: get you know, moving up and moving down, if the
Speaker 2: algorithm has no idea where you're relevant, it can't process
Speaker 2: the track for discovery mode. So you have to have
Speaker 2: some minimum presence in radio stations or algorithm mixes. All right,
Speaker 2: it still means that there's like hundreds of thousands of
Speaker 2: uploaders who have access to the tool. But you can't
Speaker 2: start from absolute zero.
Speaker 1: Okay, so let's just doue them. I'm starting from nothing. Yeah,
Speaker 1: in order to be eligible, is it as simple as
Speaker 1: someone's got to listen to my track or people have
Speaker 1: to listen to my track a thousand times on Spotify?
Speaker 1: How do we create the data that gives us the
Speaker 1: ability to go to discovery mode?
Speaker 2: Yeah, you need some thousands of streams and then you'll
Speaker 2: see in Spotify for artists when the algorithm on the
Speaker 2: radio and mix aside has picked it up enough where
Speaker 2: you're now eligible for it.
Speaker 1: And to be clear, this is all algorithmic radio playlist
Speaker 1: has got nothing to do with curated.
Speaker 2: Playlists, That's right.
Speaker 1: We have.
Speaker 2: Two separate worlds, the man in the machine and for
Speaker 2: editorial playlists like Today's Top Hits, rap CA stuff like that,
Speaker 2: discovery mode has no impact on it whatsoever. It's only
Speaker 2: for kind of the lean back sessions where people are
Speaker 2: open to discovery and like a wide variety of tracks
Speaker 2: where the discovery mode promotion system operates.
Speaker 1: Okay, what percentage of Spotify listening is in lean back mode?
Speaker 2: Well, it's increase over the years, is the algorithms have
Speaker 2: gotten better and better. I think it's grown from ten
Speaker 2: to fifteen towards twenty percent. Is you know, all the
Speaker 2: personalized mixes, algorithmic mixes, auto play radio things like that.
Speaker 1: Okay, let's say I create a radio station with Dell.
Speaker 1: We understand that, Yeah, but also Spotify serves me a
Speaker 1: lot of algorithmic playlist to me. Yeah. If an act
Speaker 1: signs up for discovery mode, will it potentially be placed there?
Speaker 2: The types of mixes that it's in are kind of
Speaker 2: the lean back mixes. So these could be things like
Speaker 2: daily mix We usually make a user five or six
Speaker 2: daily mixes that are each of the users what we
Speaker 2: call taste clusters or artists mix Like, here's a mix
Speaker 2: of you know, adele like music for you, genre mixes,
Speaker 2: you know, hip hop for you, those kind of mixes.
Speaker 1: Let's just say I'm using Discovery Mode and I get traction. Yeah,
Speaker 1: let's just say, for the sake of discussion, my royalty
Speaker 1: pool is increased. What are my options after I get traction?
Speaker 2: Well, I mean usually what we see is obviously artists
Speaker 2: are doing a bunch of different things across a bunch
Speaker 2: of different platforms at the same time to try to
Speaker 2: build buzz. So usually it's combining maybe native ads and
Speaker 2: discovery mode on Spotify, but then also you know, organic
Speaker 2: interest that they're trying to drum up on social media,
Speaker 2: maybe paid advertising on social media as well. It's even
Speaker 2: as you get bigger and bigger sponsorship out of home,
Speaker 2: et cetera. So it's usually part of a broader picture.
Speaker 2: But typically, you know, like what we see is if
Speaker 2: you get traction and you see something's really resonating. One
Speaker 2: of the things that's really cool about discovery mode is
Speaker 2: it's kind of like a heat seeker where it will
Speaker 2: route someone to say, oh, if that thing's resonating really well,
Speaker 2: I wasn't thinking about that one being the next single
Speaker 2: that I'm really promoting. But maybe I'm gonna change the
Speaker 2: plan a little bit, put a bit more emphasis on
Speaker 2: that because it seems to be having, you know, some
Speaker 2: kind of grounds well.
Speaker 1: Wait, wait, a lot of stuff going on there. If
Speaker 1: I'm in discovery mode and I have enough traction such
Speaker 1: that you're doing it, yeah, do I pick a specific
Speaker 1: track or do you take it from a pool of tracks?
Speaker 1: How does that work?
Speaker 2: So an artist could come in or their label, you know,
Speaker 2: if you're if you're doing it at that scale, and
Speaker 2: they could put one track into discovery mode, or they
Speaker 2: could put eight tracks. You know, it's up to them
Speaker 2: how pointed they want to be with it and tactical
Speaker 2: versus more broad and using the tool.
Speaker 1: So let's just assume that I'm gaining traction. What is
Speaker 1: the next level I'm eligible for?
Speaker 2: Its Spotify Well, I mean hopefully the way that we
Speaker 2: see it working organically is signals kind of pick up
Speaker 2: and ladder on each other. So if you're doing well
Speaker 2: in radio, then the algorithm's going to notice that and
Speaker 2: start putting you more and more in other contexts. On
Speaker 2: the editor's dashboards, they're going to see, oh, you know,
Speaker 2: the save rate on this thing is super high. Everyone
Speaker 2: that listens to it wants to save it, so they're
Speaker 2: going to consider it more for things when we're thinking
Speaker 2: about artists to partner with, you know, a radar artist
Speaker 2: or some of the programs that we do to build
Speaker 2: artist brands. It all kind of feeds into the better
Speaker 2: a track is performing. All those opportunities start, you know,
Speaker 2: opening up for ours.
Speaker 1: Let's be very clear, this is a business of hype
Speaker 1: and bullshit. Okay, let's assume I have some traction. They're
Speaker 1: gonna be people who try to make contact with you,
Speaker 1: who are gonna spin a story. I'm gonna be on television,
Speaker 1: I'm selling tickets, et cetera, et cetera. How do you
Speaker 1: separate the week from the chat?
Speaker 2: Yeah, I mean we see it a lot. I think
Speaker 2: there are things that spike, and then there are things
Speaker 2: that have staying power, and I think we've gotten pretty
Speaker 2: good at especially when things are in our programming or
Speaker 2: editorial programming or algorithmic programming. You kind of see it
Speaker 2: in the data, right, Like when someone listens to the song,
Speaker 2: how often do they go back to it next week?
Speaker 2: How often do they save it and make it one
Speaker 2: of the things in their playlist, how often they sharing
Speaker 2: it with friends? You can't really fake that stuff in
Speaker 2: terms of the response you're getting from real human beings.
Speaker 2: And so you might get some noise in the data
Speaker 2: from something having like a meme moment on TikTok or
Speaker 2: you know, getting featured somewhere, but it's pretty easy for
Speaker 2: us to see what's gonna kind of stick with it
Speaker 2: and have staying power.
Speaker 1: Okay, I'm clicking boxes for discovery mode. Yeah, let's just
Speaker 1: assume I continue to have more and more success. At
Speaker 1: what point do I talk to a human being?
Speaker 2: Well, I mean I don't. I don't say this to
Speaker 2: say we don't want to talk to artists and levels
Speaker 2: we talk to artisans.
Speaker 1: Listen, I don't want to talk to people. I'd rather
Speaker 1: deal with email, whatever, So continue.
Speaker 2: You know, It's just the point I'm trying to make is,
Speaker 2: you know, the music ecosystem is pretty small, right, like
Speaker 2: this industry. It's a small industry and relationships matter. I
Speaker 2: don't want to like deny that, but at the same time,
Speaker 2: I think it's been good for the industry that more
Speaker 2: and more is done on the basis of, you know,
Speaker 2: how is something actually performing and how's it resonating with
Speaker 2: fans more so than who you know and who you're
Speaker 2: connected to. So we try to make it so the
Speaker 2: top of the mountain isn't about getting to talk to
Speaker 2: someone you know. It shouldn't require you having a friend
Speaker 2: in the company, so that's not really all roads don't
Speaker 2: lead to And then you have a meeting with Spotify
Speaker 2: or hopefully our systems are working so that you can
Speaker 2: get a lot done and it doesn't have to be
Speaker 2: about a human relationship.
Speaker 1: But after I'm in discovery mode and it's working, I
Speaker 1: just have to have faith that editorial and it's going
Speaker 1: to work me. You know.
Speaker 2: I think it's about having faith, but it's also about
Speaker 2: look For most artists that are really trying to do
Speaker 2: this and they're trying to get out on tour and
Speaker 2: they're trying to have fans that maybe support them with
Speaker 2: merch or become someone that's going to be a genuine supporter.
Speaker 2: It's about taking people from being light listeners maybe I
Speaker 2: hear you in radio, to being high intent listeners like
Speaker 2: I'm searching for you and I'm playing you to a
Speaker 2: real follower and supporter where I'm you know, buying things,
Speaker 2: and so we try to kind of flow those tools together.
Speaker 2: So let's say you have good success on discovery mode,
Speaker 2: then you can go in and buy a native ads
Speaker 2: campaign that says, I want to target people that have
Speaker 2: only ever heard me on programming but have never put
Speaker 2: me in their library. Can you put me in front
Speaker 2: of them? And then we want to say all right
Speaker 2: now you've got some high intent listeners, Let's put your
Speaker 2: show and your concert listing in front of them. And
Speaker 2: that's kind of the beautiful flow when it works really well,
Speaker 2: is going from discovery mode low intent, native ads high intent,
Speaker 2: and now you start having your concert listings or your
Speaker 2: merch and you start, you know, not only getting very
Speaker 2: material royalties, and I'm sure we'll talk about you know,
Speaker 2: sizeable royalties that are getting paid out, but also other
Speaker 2: revenue streams that you can drive by having those you know,
Speaker 2: high intent fans on Spotify.
Speaker 1: Okay, when you talk about AD, you're not talking about
Speaker 1: the free tier. You're talking about information that would be
Speaker 1: served up to subscribers. You're right, yes, and that information
Speaker 1: might be tour dates, might be merch anything else.
Speaker 2: So it could be content like here's a new release
Speaker 2: from an artist that you might have heard in a
Speaker 2: radio station. It could be like you said, concerts merch.
Speaker 1: And where would the user see that?
Speaker 2: Well, our main products are called Marquee, which is like
Speaker 2: when you open the app, if there's a relevant new
Speaker 2: release for you, you'll see a big screen when you
Speaker 2: open the app announcing the new release, usually on release day,
Speaker 2: and then we have a second format called Showcase, which
Speaker 2: is essentially a home shelf. You know how we have
Speaker 2: the shelves on home with different content recommendations. It's a
Speaker 2: sponsored shelf where you can feature not only a new release,
Speaker 2: but it could be a catalog, anniversary or kind of
Speaker 2: anything that you want to promote.
Speaker 1: Okay. Previous Spotify reports have said the most active listeners
Speaker 1: pick and choose their music as opposed to listening to playlists.
Speaker 1: Is that accurate?
Speaker 2: Well, I mean, it's certainly true that almost every user
Speaker 2: does both. So you know, users that are heavily engaged
Speaker 2: often have their own playlists and they're curating stuff for themselves,
Speaker 2: your favorite songs that you want to go back to
Speaker 2: over and over. But the vast, vast majority of users
Speaker 2: also have habits with our programming. Maybe they love hot
Speaker 2: country or they love their daily mix too. The healthiest
Speaker 2: users on Spotify have the most diverse habits. They listen
Speaker 2: to us on their phone and the card, they listen
Speaker 2: to programming and you know, the DJ, and they do
Speaker 2: a jam with their friends. Like, the more different parts
Speaker 2: of Spotify you're using, the more you're going to retain,
Speaker 2: the more you're gonna keep paying for your subscription.
Speaker 1: Okay, what is happening musically on Spotify? After all, we
Speaker 1: hear all this top line stuff. It's a hip hop world.
Speaker 1: Rock is dying.
Speaker 2: What is going on genre wise? You mean yes, well,
Speaker 2: you know earlier I said more nichefication. I think that's
Speaker 2: definitely true. But I think probably like the biggest trend
Speaker 2: that I see is how global. Those trends have been
Speaker 2: so regional Mexican music, K pop, afro pop, you know,
Speaker 2: music has gotten so global across the world, and now
Speaker 2: we're at a place where artists get the majority of
Speaker 2: their royalties from outside their home country. A third of
Speaker 2: artists get more than.
Speaker 1: Who wha wha, wha wha A little bit slower. Yeah,
Speaker 1: all artists around the world, both in small countries and
Speaker 1: in large markets US, Germany and UK, get most of
Speaker 1: their royalties outside their home country.
Speaker 2: The average is that the majority of an artist's royalties
Speaker 2: come from outside their home country.
Speaker 1: Okay, I interrupted, you continue, Yeah.
Speaker 2: So just to say I think that I think we've
Speaker 2: gone from a global music market that was a lot
Speaker 2: more western centric and it's you know, these kind of
Speaker 2: radio stations on Terrestra radio that fit into a certain
Speaker 2: format to a lot more niche genres, and a lot
Speaker 2: of those genres are driven outside the West, but are
Speaker 2: becoming really popular globally.
Speaker 1: Okay, we have the Spotify Top fifty, that's the most
Speaker 1: dominant chart in the world. It does not seem to
Speaker 1: have niche ification if you look down the road. Are
Speaker 1: these other niches going to grow or is that always
Speaker 1: going to be separate from the pool at large?
Speaker 2: I think so. I mean, when you look at the
Speaker 2: top fifty on Spotify, you gotta remember that's a little
Speaker 2: bit of a reflection of where our users are. But
Speaker 2: as India has become a bigger and bigger area of
Speaker 2: usage for Spotify, you see more and more music from
Speaker 2: India charting, and I think we're just going to see
Speaker 2: that as we've become more popular in Africa across Asia.
Speaker 2: I certainly think you're going to see that on the
Speaker 2: global chart.
Speaker 1: Okay, let's regional. Are we going to see an Americana
Speaker 1: act in the Spotify Top fifteen?
Speaker 2: I mean, I think that because of the fact that
Speaker 2: the way music is breaking is so different now. I mean,
Speaker 2: you know, like I said, in the nineties, you kind
Speaker 2: of had to fit into a certain set of radio formats.
Speaker 2: There are no rules now, Like, you can be whatever
Speaker 2: kind of music you want. You don't need to brand
Speaker 2: yourself with a specific genre or whatever. And if you
Speaker 2: have a fan base that's resonating with what you're doing
Speaker 2: because of your personality or the way you relate to
Speaker 2: them or whatever, you can grow. And so because of that,
Speaker 2: I think it's possible for really any type of music
Speaker 2: to break through. Like I yeah, I don't think there
Speaker 2: are really any rules boundaries anymore.
Speaker 1: Just going sideways for a second to what did we
Speaker 1: to tracks start on social media primarily TikTok and crossover,
Speaker 1: or start on Spotify, or start on TikTok and not crossover.
Speaker 2: Yeah, look, I mean we certainly see all of the above.
Speaker 2: I think typically, Well, let me divide into two types
Speaker 2: of tracks, just to massively oversimplify, there's two types of tracks.
Speaker 2: There's tracks that follow like a typical historical pattern, which
Speaker 2: is your biggest week is your opening week. You come
Speaker 2: out hot out of the gate, all the attention, and
Speaker 2: then slowly over time you kind of plateau and fade out.
Speaker 2: That's like one path that a track can have. A
Speaker 2: second type of path that we see is what I
Speaker 2: would think about as a momentum track, it gets released,
Speaker 2: it's kind of sitting there and then all of a
Speaker 2: sudden it gets picked up by something. It's in a
Speaker 2: Netflix show, it's in a TikTok trend whatever, and now
Speaker 2: it starts surging out of nowhere and it has this
Speaker 2: kind of big hill out of nowhere. So I think
Speaker 2: in terms of tracks that really spike on Spotify, it
Speaker 2: might be fifty to fifty ish in terms of the
Speaker 2: first pattern versus the second pattern. Typically for the first
Speaker 2: pattern tracks they really break first on Spotify, you see
Speaker 2: them spike out of the gate. They're getting you know,
Speaker 2: presence on playlists, and then they start getting picked up
Speaker 2: elsewhere in the world. For the second time of track,
Speaker 2: usually streaming is a little bit behind, maybe you know,
Speaker 2: a couple of days or a week after it's trending
Speaker 2: on social it starts, you know, we see the signals
Speaker 2: in the search algorithm and stuff, and it starts getting
Speaker 2: picked up by Spotify. But to your point about not sticking,
Speaker 2: you know, a lot of the stuff that is a
Speaker 2: trending sound to the background of a social media video
Speaker 2: isn't the stuff that people want to have in their playlist,
Speaker 2: and it doesn't actually you know, linger or really catch
Speaker 2: on were genuine music streaming. It's just, you know, a
Speaker 2: trend in a different sense.
Speaker 1: Okay. As you said, today, Spotify released its annual economics report. Well,
Speaker 1: those who haven't read it, can you give us some
Speaker 1: highlights for sure?
Speaker 2: I mean, to me, I would boil it down to
Speaker 2: two big things. First, the total pie continues to grow
Speaker 2: and grow and grow, which is great. I started in
Speaker 2: the music industry two thousand and eight to twenty fourteen,
Speaker 2: and every year it was how much are we going down?
Speaker 2: So I don't take it for granted that every year,
Speaker 2: you know, the industry grows. It's fantastic that total payouts
Speaker 2: in total revenues to the industry are going up and
Speaker 2: up and up every year. It's clear that streaming has
Speaker 2: gotten people to pay for music more and more and
Speaker 2: more people are coming out to the idea that paying
Speaker 2: for music every month is a great service, which is awesome.
Speaker 2: So ten billion with a B in total payouts from
Speaker 2: Spotify in twenty twenty four ten x growth from where
Speaker 2: we were in twenty fourteen. We paid out one billion
Speaker 2: in twenty fourteen. Ten billion in twenty twenty four the
Speaker 2: most that any retailer has ever paid to the music industry,
Speaker 2: So that's awesome. The total pie is growing. Second big
Speaker 2: thing that stands out is it's getting divided and shared
Speaker 2: in by more and more types of artist success stories.
Speaker 2: So the number of artists that are getting ten thousand
Speaker 2: dollars in payouts per year, one hundred thousand dollars in
Speaker 2: payouts per year, five million dollars in payouts per year,
Speaker 2: all those have tripled in the last seven years. So
Speaker 2: the number of artists seeing you know, meaningful amounts of
Speaker 2: royalty payouts is growing faster than the total pie is growing,
Speaker 2: which just means that we're finding more and more ways
Speaker 2: to program different types of artists to audiences and that's working.
Speaker 2: Fifty percent of payouts going to indies. That was never possible,
Speaker 2: you know, in the previous way that the industry works.
Speaker 2: So those are the two big things that stand out
Speaker 2: to me, total pie growth and then how it's getting
Speaker 2: shared by more and more types of artists.
Speaker 1: Can you give us, you know, this may be two minute,
Speaker 1: Can you give us a couple of stories of people
Speaker 1: were making a lot of money that I mean obviously
Speaker 1: Lady Gaga, Brude marsh and making a lot of money,
Speaker 1: but something domestic. We're speaking in English where people will
Speaker 1: be surprised how much money these people are making.
Speaker 2: Yeah, it's a good question. I don't know, you know,
Speaker 2: if I should owe any one artists specific payouts. But
Speaker 2: you know, actually I was just talking to there's a
Speaker 2: guy on our team who's employed by Spotify, but he
Speaker 2: does music with his band still as a side gig,
Speaker 2: and so we were looking at his stuff because I'm
Speaker 2: allowed to talk about him because he works here. I
Speaker 2: don't need to ask his permission. So they're bandy, you know,
Speaker 2: they all have jobs, but they put out music on
Speaker 2: the side still. They have maybe around one hundred thousand
Speaker 2: monthly listeners, a few million streams. They're generating about fifteen
Speaker 2: thousand dollars a year in payouts from Spotify, and so
Speaker 2: you know that's probably they're yeah, probably some something like
Speaker 2: the eighty thousand, you know, highest earning artists, and Spotify
Speaker 2: by no means is this like you know, their day job.
Speaker 2: But it just like gives you an example of the
Speaker 2: types of that type of success story wasn't really even
Speaker 2: a thing twenty years ago. So I thought that was cool,
Speaker 2: just as an example of what's possible.
Speaker 1: Okay, since your tenure at Spotify, there's been a change
Speaker 1: where you have to reach a certain threshold to get
Speaker 1: royalties at all. Yeah, what percentage of tracks reach that threshold?
Speaker 2: So ninety nine point five percent of tracks by stream
Speaker 2: share monetize. But the reason that we established that threshold is,
Speaker 2: you know, if I back up for a second, most
Speaker 2: of what we try to do every day grow the
Speaker 2: pie because it grows our revenues and it grows payouts
Speaker 2: to the industry. Right, very very infrequently, you can find
Speaker 2: a way to shift the payout that you're already doing
Speaker 2: around to get people paid more. But that's what we
Speaker 2: found with this. For tracks that were generating less than
Speaker 2: a thousand streams in the last year, on average, they
Speaker 2: were generating three cents in payouts. So that means if
Speaker 2: you went into your aggregator account and said I want
Speaker 2: to withdraw my three cents, you couldn't even do it
Speaker 2: because it's below the threshold of the fee to withdraw
Speaker 2: your money. Right and so literally, if you add up
Speaker 2: all those pennies of millions of uploaders generating a few pennies,
Speaker 2: we were allowed fifty one hundred million dollars to sit
Speaker 2: just between couch cushions getting wasted, and that seemed like
Speaker 2: a real missed opportunity. We had gotten so big that
Speaker 2: that amount of waste in the system seemed like a
Speaker 2: miss So we established a threshold to say, you know,
Speaker 2: until a track has one thousand streams the last twelve months,
Speaker 2: it doesn't generate royalties. That allows all the tracks that
Speaker 2: are generating royalties to get half a percent more payout,
Speaker 2: so it increases all of their payouts. Spotify makes no
Speaker 2: additional money by this policy. It just shifts the revenue
Speaker 2: to people that can actually withdraw their money. And because
Speaker 2: of that, we eliminated waste in the system and we're
Speaker 2: able to get everyone who's doing this a little bit
Speaker 2: more seriously paid a little bit more money.
Speaker 1: Okay. Spotify is the largest player in streaming market, just
Speaker 1: like anybody who's the largest player, there's blowback. In addition,
Speaker 1: streaming is a different paradigm than it will in the
Speaker 1: pre Internet era. Is this just something that the public
Speaker 1: doesn't understand it needs to adjust to or what would
Speaker 1: your response.
Speaker 2: Be, Yeah, I mean it depends on the type of
Speaker 2: blowback you're talking about. I see it all, but you know,
Speaker 2: the one type that I see is it was better
Speaker 2: in the good old days. You know, everyone was making
Speaker 2: more money in the good old days. And I don't
Speaker 2: understand that. I haven't seen any data that at any
Speaker 2: point in music history we're artists making more money than
Speaker 2: they are now. I was looking at in loud and
Speaker 2: clear this year, if you were the one hundred thousandth
Speaker 2: most popular artists on Spotify last year, he generated six
Speaker 2: thousand dollars from Spotify, And usually, you know, Spotify is
Speaker 2: about a quarter of what you make from recorded revenue,
Speaker 2: so maybe you're making twenty twenty five thousand in total
Speaker 2: if you were one hundred thousandth most popular artists on
Speaker 2: Spotify in twenty twenty four. In two thousand and four,
Speaker 2: one hundred thousandth most popular artist was making six hundred
Speaker 2: dollars from Spotify. So it's ten x and in two
Speaker 2: thousand four, if I go back ten years, additionally, there
Speaker 2: was no Just.
Speaker 1: To be clear, because I think you missbooked, you're about
Speaker 1: twenty fourteen.
Speaker 2: Sorry, Yeah, So twenty twenty four it was generating six
Speaker 2: thousand dollars. Twenty fourteen it was generating six hundred dollars.
Speaker 2: And if I go back to two thousand and four.
Speaker 2: Ten years earlier, there was no such thing as the
Speaker 2: one hundred thousandth most popular commercial artists. The record stores
Speaker 2: did not have one hundred thousand different artists in it,
Speaker 2: so that didn't exist. They cut their demo, they didn't
Speaker 2: get signed, no thank you, you're out of the game.
Speaker 2: They weren't even allowed to play. So we've gone from
Speaker 2: you can't be in the game to you can generate
Speaker 2: a couple hundred dollars to you know, twenty twenty five
Speaker 2: thousand dollars a year from recorded revenue. Not that it's like, okay,
Speaker 2: quit everything, this is your but that's the kind of
Speaker 2: progress that makes it hard for me to understand how
Speaker 2: you could look at this and say anything other than
Speaker 2: the industry is so much healthier now than it's been
Speaker 2: at any point in its history. Maybe, you know, if
Speaker 2: you're a top ten, top twenty act and less of
Speaker 2: the streams, less of the attention goes to you, maybe
Speaker 2: it's it's, you know, a weaker phase of music industry
Speaker 2: at that tip of the iceberg. But in terms of
Speaker 2: the total revenue getting paid to artists, in terms of
Speaker 2: the number of artists achieving meaningful amounts of royalties or
Speaker 2: meaningful amounts of success. There's just no denying the fact
Speaker 2: that there's more you know, success now than there's ever been.
Speaker 2: So to me, this is the good old days of
Speaker 2: the music industry. And that's probably the criticism that confuses
Speaker 2: me the most of you know, streaming doesn't pay and
Speaker 2: we are so much better off in the CD era.
Speaker 2: I've just never seen a number or a fact to
Speaker 2: support that way of looking at it.
Speaker 1: Okay, how about all the people who say my track
Speaker 1: was streamed a million dollar a million times, but I'm
Speaker 1: getting buck.
Speaker 2: Gis, Yeah, totally, you know. One of the tough things
Speaker 2: that's it's hard to wrap your head around this. One
Speaker 2: point four million tracks on Spotify have gotten a million
Speaker 2: streams for more. It's just there's a lot of streams, right,
Speaker 2: So if if your track gets a million streams, it
Speaker 2: means you're in the top one point four million tracks
Speaker 2: last year. But just a million streams doesn't mean what
Speaker 2: it used to in terms of total popularity. So I
Speaker 2: think a lot of times when people are frustrated about payouts,
Speaker 2: and it's from maybe an artist that you haven't heard
Speaker 2: of before, or they haven't kind of built their brand.
Speaker 2: A lot of it is just the laws of popularity.
Speaker 2: Like you and I could record a song today and
Speaker 2: we could put it up on Spotify. There's twelve million
Speaker 2: people who have uploaded. Are we gonna have a hit?
Speaker 1: You know?
Speaker 2: It's the odds are stacked against us. So it just
Speaker 2: requires that much more popularity to break through today because
Speaker 2: there's hundreds of millions of people streaming, and there's trillions
Speaker 2: of streams every year, and so what might have seemed
Speaker 2: like a big number in a downloads era just really
Speaker 2: isn't the same in the streaming era.
Speaker 1: However, there are people, especially in the UK, keep saying, oh,
Speaker 1: you're putting out an artist out of business, they can't
Speaker 1: make a living.
Speaker 2: I just don't know if it's supported by facts, like
Speaker 2: I hear the anecdotes that you're talking about. But every
Speaker 2: single piece of data that I see is that there's
Speaker 2: more revenue being paid to artists that support more people
Speaker 2: being able to afford living through music than there were
Speaker 2: ten years ago or twenty years ago. I mean ten
Speaker 2: years ago the total industry had gotten to a bottom
Speaker 2: of thirteen fourteen billion, and now we're going to be
Speaker 2: over in the thirties. In total revenues for recorded music,
Speaker 2: So there's no doubt that more is being paid out.
Speaker 2: We are one hundred percent transparent with how we pay
Speaker 2: out and to who. No one's been more transparent than us,
Speaker 2: And so there are occasions I'm sure where money is
Speaker 2: getting lost in the pipes or it's not reaching the
Speaker 2: right hands. I don't want to diminish any of that,
Speaker 2: but overall, I think it to me, there's no denying
Speaker 2: the data that the industry is more healthy and more
Speaker 2: people are making a living for music than there were
Speaker 2: at any previous era.
Speaker 1: Okay, today, how many tracts are being uploaded a day
Speaker 1: or a week or a month.
Speaker 2: Yeah, I know it's in the tens of thousands, maybe
Speaker 2: towards one hundred thousand a day.
Speaker 1: I think now, Okay, you said something earlier that Spotify
Speaker 1: represents twenty five percent, one quarter of overall recorded music revenues.
Speaker 1: Where's the other three quarters?
Speaker 2: Well, I think in terms of let's see, I think
Speaker 2: in terms of streaming revenue, that's about that's become about
Speaker 2: eighty percent of the business now and we're about thirty
Speaker 2: five forty percent of that. And then outside of streaming,
Speaker 2: you know, you've got vinyl and CD and inside streaming
Speaker 2: you have essentially Spotify's competitors.
Speaker 1: Okay, you know the big competitors domestically are Apple and Amazon.
Speaker 1: Are we considering streaming people who are listening for free
Speaker 1: on YouTube also which pays? But I just want to
Speaker 1: know in the overall pie.
Speaker 2: Yeah, when we look at total recorded revenues for the industry,
Speaker 2: paid streaming is the biggest driver. Free streaming AD supported
Speaker 2: streaming from Spotify and YouTube is the second biggest, and
Speaker 2: then you know everything after that is pretty small, digital downloads,
Speaker 2: et cetera.
Speaker 1: To what degree do you personally pay or the company
Speaker 1: also pay attention to your competitors. Let me start on
Speaker 1: a gross level. Yeah, if you ever say, wait a second,
Speaker 1: something else has happened in there, we have to follow
Speaker 1: that trend.
Speaker 2: I think for the most part, you know, we've been
Speaker 2: more of a leader for the fact that this is
Speaker 2: really all we focus on, you know, like this is
Speaker 2: our whole business. If streaming music doesn't work for us,
Speaker 2: we don't work, like we have to make this work.
Speaker 2: So we focus a lot on how can we make
Speaker 2: the most valuable service that we possibly can so that
Speaker 2: more people pay for a music subscription so that we
Speaker 2: grow revenues and we grow payouts. We have to be
Speaker 2: obsessed with that. We don't have any other We don't
Speaker 2: have a cloud business or a you know, of books
Speaker 2: business or a hardware business to subsidize this thing. It
Speaker 2: has to work on its own. So I think because
Speaker 2: of that, we've been really focused. We've invested a ton
Speaker 2: in innovation of the product and R and D, you know,
Speaker 2: to be in front and have what I'm biased, but
Speaker 2: I think clearly the best consumer experience.
Speaker 1: It's a collegial small business. Do the other big companies
Speaker 1: have someone like you? Do you know them? To what
Speaker 1: degree is their infrastructure akin to yours?
Speaker 2: Yeah, it is a small ecosystem, and I think that,
Speaker 2: like you know, as much as we are competitors, I
Speaker 2: genuinely mean this. There's what It's somewhere between five hundred
Speaker 2: and six hundred million people paying for music music subscription
Speaker 2: around the world. Now there's seven eight billion people in
Speaker 2: the world. The big picture here is music is part
Speaker 2: of every single human being's life. There is still a
Speaker 2: ton of growth to get all of the world paying
Speaker 2: for streaming music, and so if other companies are finding
Speaker 2: ways to do that, I genuinely believe it's a good
Speaker 2: thing because that brings them into this market, and I
Speaker 2: think Spotify is the best product and so ultimately it's
Speaker 2: going to win that market. But that's like the big
Speaker 2: picture journey that we're on. I remember when I joined
Speaker 2: Spotify in twenty eleven, and you know, there's like industry
Speaker 2: analysis reports and they were like, the total addressable market
Speaker 2: for a paying music subscription, we think is between three
Speaker 2: to five million or you know, and Spotify was at
Speaker 2: nine hundred thousand subscribers. The big picture why the pie
Speaker 2: is growing, why there's more revenue in the industry, is
Speaker 2: we got hundreds of millions of people to pay for music.
Speaker 2: So I'm cheerleading everybody that's trying to make that happen.
Speaker 2: And because of that, you know, I try to take inspiration.
Speaker 2: There's a lot of Spotify alumni who've gone to YouTube,
Speaker 2: We've gone to Apple, We've gone to Amazon and built
Speaker 2: out similar things there, you know, Amazon Music for artists
Speaker 2: or similar tools that what we're doing, and I think
Speaker 2: that is a great thing.
Speaker 1: What do you say to people who say Spotify pays
Speaker 1: less per stream.
Speaker 2: Well, it's a it's a totally bogus ridiculous concept. There
Speaker 2: is no such thing as a There is no such
Speaker 2: thing as a per play rate, and this is probably
Speaker 2: the most misunderstood concept in the music industry. The thing
Speaker 2: that probably bothers me the most is when people in
Speaker 2: the music industry who fully know that it's bullshit and
Speaker 2: still talk about it as if it's a real thing
Speaker 2: because it serves their narraor. But there is no such
Speaker 2: thing as a per play rate. The reason that there's
Speaker 2: no such thing as a per play rate is because
Speaker 2: no consumer pays per play that they do, you know,
Speaker 2: they pay per month. So every music subscription pays the
Speaker 2: same way. We all charge the same retail price, and
Speaker 2: we all take our music revenues and pay two thirds
Speaker 2: of it to labels and publishers. Every music streaming service
Speaker 2: does that exactly the same way. So then if we're
Speaker 2: all paying, if we're all doing the same retail price,
Speaker 2: and we're all paying out two thirds of that retail revenue,
Speaker 2: why is the revenue per play higher in some streaming
Speaker 2: services than others. The reason is that on other streaming services,
Speaker 2: people play a lot fewer streams. So if you only
Speaker 2: use your service to play one track in a month,
Speaker 2: you got a per play rate of ten dollars. Congratulations,
Speaker 2: that looks amazing. If you use the service a lot
Speaker 2: and you're streaming thousands or tens of thousands of times
Speaker 2: a month, the effective quote unquote per play rate goes down.
Speaker 2: The only problem is if you look at what is
Speaker 2: the biggest predictor of churn of stopping paying for music,
Speaker 2: the biggest predictor of churn is low usage of the service.
Speaker 2: So if you play five times a month or ten
Speaker 2: times a month, it makes your per play rate look amazing,
Speaker 2: and then next month you're probably canceling your description because
Speaker 2: you get no value from the thing. So all of
Speaker 2: the you know, anyone in the industry you're saying, we
Speaker 2: got to get the per play rates up. It's it's
Speaker 2: literally backwards for what we need to be trying to
Speaker 2: do as an industry. We need to be trying to
Speaker 2: get people to engage more in their service so that
Speaker 2: they're willing to pay more when we raise prices, that
Speaker 2: they retain better. And so you know, if a service
Speaker 2: has a lot of dormant accounts, you know, you sign
Speaker 2: up with your phone carrier, but you never actually use
Speaker 2: it, it makes your per play ray look amazing, but it's
Speaker 2: it's totally a distraction, and it's opposite from what the
Speaker 2: industry needs to be focused on. So it's so frustrating
Speaker 2: misunderstood in the industry.
Speaker 1: Okay, what is the demo of subscriber of Spotify compared
Speaker 1: to Apple and Amazon.
Speaker 2: It's younger, and it's more global.
Speaker 1: And it is also more active. Correct.
Speaker 2: Yeah, I mean, I don't know if you could call
Speaker 2: that a demo, but way more active. I think, on average,
Speaker 2: probably about twice as active.
Speaker 1: Okay. I was with a twenty something yesterday actually three
Speaker 1: days ago, and she said she subscribed to Apple Music,
Speaker 1: which shocked me. Okay, they're out there not getting into
Speaker 1: my own personal feelings about this. Let's just assume someone
Speaker 1: is listening and they don't have a subscription at all
Speaker 1: or there with a rival service, Why should would they
Speaker 1: be subscribing to Spotify instead.
Speaker 2: I'm like, in a live pitch them. Yeah, oh this
Speaker 2: is exciting. Well, I think you know, typically the things
Speaker 2: that we see people calling out is the reason that
Speaker 2: they come to Spotify or switch to Spotify is personalization.
Speaker 2: You know, all the mixes that we make for you,
Speaker 2: the way that the service kind of wraps around your
Speaker 2: taste and get to know you. The second is ubiquity,
Speaker 2: Like we've put in fifteen years into making sure run
Speaker 2: every speaker, every TV, every car, wherever you are you
Speaker 2: can get Spotify to work. That's a big part of it.
Speaker 2: And then recently, I think a lot of the investments
Speaker 2: that we've been making into kind of product innovation, being
Speaker 2: able to have a jam with your friends where you
Speaker 2: can all cue songs together, the DJ feature where you
Speaker 2: have someone giving you context about the music, and you know,
Speaker 2: serving recommendations. I think all those things have felt like
Speaker 2: you're getting a little bit more value from this service
Speaker 2: than maybe other places.
Speaker 1: Okay, there was a recent book that analyze Spotify and
Speaker 1: said there were tracks created and that these tracks were
Speaker 1: created mostly in lean back music. We're taking away royalties
Speaker 1: from the overall pool. Can you tell us about that?
Speaker 2: Not true? Spotify creates zero tracks period. Every track that's
Speaker 2: on Spotify comes from a third party, a licenser, which
Speaker 2: is a label or a distributor. They distribute us tracks.
Speaker 2: We publish and program the tracks, so we do not
Speaker 2: make our own music, and we do not like pad
Speaker 2: our service with you know, Spotify's own tracks.
Speaker 1: How about different royalty rates for different companies, like a
Speaker 1: music factory who's creating work for hire. Some guy comes in,
Speaker 1: creates an atmospheric track. They put these into a pile
Speaker 1: of let's say twenty five thousand tracks. You say, okay,
Speaker 1: we'll program that, but we'll pay you a lesser royalty.
Speaker 2: So we never say we'll program that period. But we've
Speaker 2: never said in a deal you give us this and
Speaker 2: we'll program it that. That's not a quid pro quo
Speaker 2: that we would ever do. If you're asking, would we
Speaker 2: pay the same royalty rate for uh SPA background music
Speaker 2: as Kendrick Lamar, of course, I think any sane person
Speaker 2: would assume we're not paying the same rate for forests,
Speaker 2: you know, wind sounds as we are for you know,
Speaker 2: the top acts in the world. That's always been the
Speaker 2: case in the history of the music industry. You have
Speaker 2: your production music in the bargain bin, you've got the
Speaker 2: hits that have a higher wholesale rate. There's I don't
Speaker 2: think anyone would be surprised by that. But as far
Speaker 2: as background music, it's really been an emergent behavior of
Speaker 2: the access model. Like what I mean by that is
Speaker 2: there weren't a lot of people buying White Noise CDs
Speaker 2: in the nineties, Are you really going to you know,
Speaker 2: pay eight dollars to have that CD on hand for
Speaker 2: when you want to listen to white Noise? Probably not,
Speaker 2: but in the access model and streaming where you've already
Speaker 2: paid your monthly subscription, but you want to have you know,
Speaker 2: your our meditation session, or you want to have the
Speaker 2: background noise so you're you know, toddler can take a nap.
Speaker 2: It's become you know, it's become an important use case
Speaker 2: to some people. It exists as an important playlisting category.
Speaker 2: For us, it's been pretty consistent out of around one
Speaker 2: to two percent of plays over the last decade. It
Speaker 2: probably is about one to two percent of what we
Speaker 2: think about day to day. It's Spotify, it's not a
Speaker 2: huge part. And so there's no you know, uh, there's
Speaker 2: no scheme, there's no I don't really know where the
Speaker 2: myths and the controversy come from, but it's sort of
Speaker 2: a natural evolution of having access to anything you want
Speaker 2: that these kind of use cases become something that people do.
Speaker 1: How do you decide which tracks get a lower royalty rate?
Speaker 2: Well, I mean everything is a negotiation. So if you're
Speaker 2: doing a deal with a production music company that specializes
Speaker 2: and by the way, some of them are very good
Speaker 2: at doing this really well. Like you have to make
Speaker 2: the music. I think boring is probably the right word, Like,
Speaker 2: don't distract the user when they're trying to meditate with vocals.
Speaker 2: It's got to kind of just recede into the background
Speaker 2: and be as like unnoticeable as possible. So I don't
Speaker 2: want to diminish the skill that it takes to create
Speaker 2: a great production library. It's it is certainly valuable. But
Speaker 2: if you're negotiating with that type of label, obviously the
Speaker 2: mechanics of that are going to be different than if
Speaker 2: you're negotiating with someone that drives a lot of their
Speaker 2: own demand that you know people are going to search
Speaker 2: for that artist. It's not something that you know it's
Speaker 2: just going to be a use case kind of music,
Speaker 2: but people actually care about that artists and going to
Speaker 2: search it out.
Speaker 1: Okay, it's mostly in the jazz soft jazz world. Artist
Speaker 1: you're saying, I put in all my effort I create
Speaker 1: this and and to save money. Spotify is programming stuff
Speaker 1: that's more from one of these music factories instead.
Speaker 2: You know, from what we see. They just don't. They're
Speaker 2: just not substitutional. Period. So, like, I'm a jazz fan,
Speaker 2: and there are times that I seek out jazz and
Speaker 2: I look for John Scholfield or Pamathany or I'm you know,
Speaker 2: I'm looking for music because I care that I'm listening
Speaker 2: to jazz. And then there's other times where I just
Speaker 2: want background music. I don't think that you can get
Speaker 2: someone who would be interested in jazz to be like,
Speaker 2: don't you want to meditate right now? Or don't you
Speaker 2: want to sleep right now? It's up to the user,
Speaker 2: you know, what need they have. So it's just not
Speaker 2: a viable idea to say, oh, let's take someone that
Speaker 2: would be looking for, you know, what's the latest in jazz,
Speaker 2: or let me go listen to Pamathany and instead give them,
Speaker 2: you know, background production music. It just doesn't work like that.
Speaker 1: Okay, are there any companies that makes soft jazz that
Speaker 1: you have an overall deal with that you pay less to?
Speaker 2: I don't know if any of the production music, I
Speaker 2: don't know how much it goes into soft jazz or
Speaker 2: if it's more the white noise kind of baby sleep
Speaker 2: nature sounds side of it. I'm sure there's some blurring
Speaker 2: of the edges, but what I can tell you is
Speaker 2: that for any of these playlists, like if you look
Speaker 2: at our noise meditation or our relaxation playlists or whatever,
Speaker 2: the people you know, just so you see what it
Speaker 2: looks like on the inside. Within the company, the people
Speaker 2: who are responsible for programming that playlist, they are accountable
Speaker 2: to that playlist performing the best with consumers. So they
Speaker 2: need to go in and say, every time I add
Speaker 2: some of the playlist, people skip less and they stream more,
Speaker 2: and so they need to put the stuff in it
Speaker 2: that is the best. That is their incentive is to
Speaker 2: program it with the you know, the content that people
Speaker 2: want for that use case or or for that playlist.
Speaker 2: They're not asked to, you know, do it from here
Speaker 2: or do it from there. They're asked to put the
Speaker 2: best stuff in there that's going to perform best for
Speaker 2: the user, because that's what gets people to retain in
Speaker 2: their subscription and grows our revenue.
Speaker 1: Okay, you're out there, you're somewhere, you're at dinner, you're
Speaker 1: at a show, you're at a party, and it comes
Speaker 1: out you work at Spotify. How do people react well?
Speaker 2: For the most part, people who are not in the
Speaker 2: music industry have lovely things to say about Spotify because
Speaker 2: from a consumer standpoint, it's been life changing. You know,
Speaker 2: like I feel like I get a amazing surplus of value.
Speaker 2: I get to listen to anything in the world. Your
Speaker 2: playlists are amazing. When I talk to people who are
Speaker 2: in the music industry, they have lots more interesting things
Speaker 2: to ask me about, you know, how do I get
Speaker 2: on playlists? And how do your royalty rates work? And
Speaker 2: all sorts of stuff. But you know, if you're talking
Speaker 2: about just day to day interactions, I think people have been,
Speaker 2: you know, overjoyed about the way that Spotify plays in
Speaker 2: their life, how it's soundtracked different moments of their life,
Speaker 2: the role it plays with the time they spend with
Speaker 2: their kids. I mean, that's really one of the things
Speaker 2: that has kept me at Spotify for now fourteen years,
Speaker 2: is like there's just so few products that have one
Speaker 2: a real role in people's lives, you know, that is
Speaker 2: used by so many different people, but two in kind
Speaker 2: of a I would argue, like a purely positive way.
Speaker 2: You know, you don't hear parents say I got to
Speaker 2: get my kid to spend less time with Spotify. I
Speaker 2: think more time that people spend with Spotify, whether it's
Speaker 2: you know, podcasts or music, it's you know, it's enriching,
Speaker 2: it's making your life. I don't know better in some ways,
Speaker 2: you don't feel like, oh that hour that I just
Speaker 2: spent has kind of robbed me of something or made
Speaker 2: me feel worse or something. So you know, that's usually
Speaker 2: what I hear about from most folks.
Speaker 1: Okay, we've covered Indie. Tell me about your relationship with
Speaker 1: the three major labels in large independence.
Speaker 2: Well, I think that right now our relationship with the
Speaker 2: industry is probably the healthiest it's been. I mean, look,
Speaker 2: in an industry like ours, you're always going to have
Speaker 2: your debates d jure about what's going on in the
Speaker 2: industry and things that you can argue about. But in
Speaker 2: a world where our incentives are so aligned, we all
Speaker 2: want to get more people in the world to pay
Speaker 2: for music. We all want to figure out how to
Speaker 2: raise prices in a way that's going to maximize revenue. Together,
Speaker 2: we all want to figure out a way to add
Speaker 2: more value to the subscription and so that we can
Speaker 2: add more tiers or things like that. The conversations that
Speaker 2: I feel like we're in day to day, we're more aligned,
Speaker 2: you know, we want the same things. Of course, there's
Speaker 2: always going to be things to figure out, but you know,
Speaker 2: if you talk about the state of those relationships, I
Speaker 2: think they're you know, they're as good as I've ever
Speaker 2: seen them. Being at Spotify for the last fourteen years.
Speaker 1: How often do you speak with people from the major labels?
Speaker 2: Definitely a few times a month.
Speaker 1: Okay, you're saying you could talk to someone from Innerscope
Speaker 1: once a month, three times a month.
Speaker 2: Well, in my role, I typically am interfacing more with
Speaker 2: people who are in the central corporate teams and the
Speaker 2: major labels more so than the frontline labels. The frontline
Speaker 2: labels have teams they can work with at Spotify on
Speaker 2: this is the new release coming from this artist. We
Speaker 2: want to give you heads up about it. We want
Speaker 2: to get prepared how we're going to partner around it.
Speaker 2: That's you know, that's that's less of my day to.
Speaker 1: Day just staying on that. Yeah, lessons daity, how does
Speaker 1: that actually work?
Speaker 2: Well? I mean, as you know, so much of a
Speaker 2: new releases promotional cycle now has shifted to the pre
Speaker 2: release phase, building hype, teasing it, getting people excited about it.
Speaker 2: And one of the ways that Spotify and markets its
Speaker 2: service is in collaboration with artists. So we try to
Speaker 2: do co marketing with artists that not only attract attention
Speaker 2: to them, but might be the reason that someone joined
Speaker 2: Spotify for the first time. Like if you're sixteen and
Speaker 2: you see, oh, here's chaperone advertisement with Spotify, I want
Speaker 2: to make sure I get that new release on release day,
Speaker 2: and that could be the reason that you join Spotify.
Speaker 2: So a lot of times you try to coordinate, you know,
Speaker 2: sort of co marketing together around a new release.
Speaker 1: Well what about people who say that Spotify is run
Speaker 1: presently streaming in general's run present like radio, where the
Speaker 1: majors have a dominant relationship in market share and mind share.
Speaker 2: Every data point says the exact opposite thing. I mean,
Speaker 2: if you're if the assertion is that the majors dominate
Speaker 2: more than ever before, that's certainly not what we're seeing, right.
Speaker 2: We're seeing more share go to indies than ever before.
Speaker 2: We're seeing more DIY success than ever before. So I
Speaker 2: don't I haven't seen any data to support the idea
Speaker 2: that the industry is getting more and more dominated by
Speaker 2: major labels.
Speaker 1: Okay, it is a relationship business. I personally know people
Speaker 1: who have relationships with people at Spotify and work them
Speaker 1: on records. Yeah, somebody who's in Timbuctoo's got a record
Speaker 1: doesn't have that relationship. Relationship must pay dividends.
Speaker 2: Well, I think so if we separate two things, we
Speaker 2: talk about marketing, we talk about playlisting. Earlier I talked
Speaker 2: about our playlist pitching system where we've tried to make
Speaker 2: as level of a playing field as possible, and so
Speaker 2: it's not about who can get in the building and
Speaker 2: play their record on a stereo. It's it all comes
Speaker 2: through the same tool. People evaluate it with their headphones on.
Speaker 2: They decide, you know, our editors decide what they want
Speaker 2: to get behind. So that's one piece of it. And
Speaker 2: then on the co marketing side, we are our interest
Speaker 2: is in partnering with artist brands where they're bringing something
Speaker 2: to the table, an audience, an excitement, right, and so
Speaker 2: when we see that, it can be from any angle.
Speaker 2: It could be an independent artist, it could be an
Speaker 2: indie major distributor urist, it could be a major as
Speaker 2: signed artist. If it's if it's an artist that doing
Speaker 2: a marketing tie up can be beneficial to both sides
Speaker 2: because it allows us to have an interesting camp pain
Speaker 2: and speak to a demo or a fan base that
Speaker 2: we'd like to reach. It doesn't really matter. Yeah, the
Speaker 2: exact kind of deal structure they have with their label.
Speaker 1: Okay, I know people who have worked for Spotify no
Speaker 1: longer worked there anymore for whatever reason.
Speaker 2: Uh huh.
Speaker 1: And they said traditionally drop date is Friday. And they said,
Speaker 1: with some of these major racks, they can tell by
Speaker 1: early afternoon whether the albums is stiff for a success.
Speaker 1: Can you speak to that?
Speaker 2: I think that. Yeah, So typically stuff is coming out
Speaker 2: Thursday night midnight, and yeah, signals tend to emerge pretty
Speaker 2: quickly in terms of again, how often are people sharing
Speaker 2: the track, saving the track, repeap, playing the track. Those
Speaker 2: signals start coming through pretty quick.
Speaker 1: What would you tell someone who has, you know, a
Speaker 1: household name to a degree everything you say it's an
Speaker 1: interest today that the indicators are not good at first,
Speaker 1: what would you tell them to try to prop up
Speaker 1: the music?
Speaker 2: Well, so everything is context dependent. What I mean by
Speaker 2: that is, you know, if you take a song and
Speaker 2: put it in hot country and it doesn't perform well,
Speaker 2: it could be because it's just not a song that's
Speaker 2: going to resonate with anyone. But it also could be
Speaker 2: that the people who are listening to that playlist, they're
Speaker 2: not your people. You got to find some different people.
Speaker 2: Our system tries to do that automatically. But sometimes it's
Speaker 2: also about like, you know, who's this artist partnering with,
Speaker 2: where are they talking what? You know, like what culture
Speaker 2: are they trying to like appeal to. And sometimes it's
Speaker 2: about finding your zone a little bit. And you know,
Speaker 2: I think that sometimes it can be a track that
Speaker 2: will perform, just needs to be in a different type
Speaker 2: of context.
Speaker 1: Okay, let's just talk to someone who's truly a household names. Yeah,
Speaker 1: they dropped their new album, numbers are not good. It
Speaker 1: wouldn't be about classifying the niche. What might you tell
Speaker 1: them to say, this is a way for you to
Speaker 1: make the album sustain.
Speaker 2: It's hard to fight gravity. So I don't know that
Speaker 2: I have any magic answers to that, but you know,
Speaker 2: at the very least, you're always gonna have, like, if
Speaker 2: you're talking about an established name, you're probably gonna have
Speaker 2: some diehards that are gonna be with you no matter what.
Speaker 2: And so some records are gonna be the kind that
Speaker 2: are like I was even with you on that album,
Speaker 2: even though it didn't kind of cross over to be
Speaker 2: a pop hit. You always have that. But I don't
Speaker 2: know that I have a magic answer outside of that.
Speaker 1: Okay, let's assume I'm an act with some fan. Should
Speaker 1: I put out a single? Should I put out an EP?
Speaker 1: How frequently should I put out my music? Yeah?
Speaker 2: I think there can be a lot of for success.
Speaker 2: But I do think one of the big challenges with
Speaker 2: music is the long periods that can sometimes happen between releases,
Speaker 2: where you kind of people start forgetting or fraying a
Speaker 2: little bit. So I do think that there's a pretty clear,
Speaker 2: you know, evidence that if you can keep a heartbeat
Speaker 2: of engagement and keep you know, a touch point with
Speaker 2: the fans, it's a little bit easier when the next
Speaker 2: big project drops to have them ready and warmed up
Speaker 2: and waiting. Dripping singles has been a pretty effective strategy
Speaker 2: for that. So it tends to work a little better if,
Speaker 2: you know, if you've got a big release coming in
Speaker 2: three months, if you can drip out one to five
Speaker 2: singles along the way, every single one of those drops
Speaker 2: is an opportunity to drive word of mouth and attention
Speaker 2: and algorithmic you know, signal and relevancy. That just increases
Speaker 2: the chances that when the full project drops, you know,
Speaker 2: gonna do as well as I can possibly do.
Speaker 1: And what about the number of tracks on an album.
Speaker 1: You know, there's been a trend of acts. I mean,
Speaker 1: listening to Morgan Wallen's a perfect example. The last couple
Speaker 1: of albums have been double albums. One of the analysisses, well,
Speaker 1: they're gonna make more money.
Speaker 2: I you know, maybe I'm thinking too artistically puist, but
Speaker 2: in my gut it is if you've got eighteen amazing
Speaker 2: tracks that you really believe in, put out all eighteen.
Speaker 2: If you've got nine and you try to force another nine,
Speaker 2: it's not gonna work. I mean, you can make an
Speaker 2: eighteen album, but I don't think you can mathematically engineer
Speaker 2: these things.
Speaker 1: Now.
Speaker 2: Certainly, if you've got a twenty track album and people
Speaker 2: start listening to it from the beginning and they play
Speaker 2: through the end, that's gonna generate more royalty bearing streams.
Speaker 2: That's just math. But the songs have to be good
Speaker 2: enough where they don't skip and they don't tune out,
Speaker 2: So at the end of the day, it's really like
Speaker 2: what you have that should dictate the release strategy.
Speaker 1: If you talk to certainly the acts that are less popular,
Speaker 1: they say they have to make an album. That's the
Speaker 1: only way they can get press. Otherwise, if they put
Speaker 1: out a single, they can't get press and they can
Speaker 1: get no action on streaming. What do you say to that.
Speaker 2: I just don't think there's one way. I mean the
Speaker 2: traditional like I'm going to drop an album, I'm going
Speaker 2: to do a press tour around the album. That is
Speaker 2: a way you can do it that way. But I
Speaker 2: think there's plenty of examples of a single EP or
Speaker 2: a single track having its own moment, and that's cool too.
Speaker 1: Okay, let's go back to the artist tools for Spotify.
Speaker 1: Let's just make it an independent artist because they're more
Speaker 1: wet behind the years. I am putting on a track
Speaker 1: on Spotify and I want to have a career. This
Speaker 1: is not something I did in my basement when I
Speaker 1: got home from being a CPA. Yeah, I used a distributor.
Speaker 1: The track is populated on Spotify. What can I do
Speaker 1: in terms of all the tools you were mentioning earlier.
Speaker 2: Yeah, So to name a few I think we we
Speaker 2: tend to think about this stuff in the release cycle.
Speaker 2: So pre release, we have a tool called the countdown page.
Speaker 1: UHHOA let's start at the raw level. I am an artist. Yeah,
Speaker 1: I have a track that's going to come out on Spotify.
Speaker 1: Is there a general dashboard that I sign up for?
Speaker 2: Yes, that's the Spotify for Artists tool.
Speaker 1: Okay, so I sign up for that. What's my next
Speaker 1: step or my next options?
Speaker 2: Well, we try to take you through this journey, so
Speaker 2: we have recommended steps for you that kind of guide
Speaker 2: you through. So if I can just take it in
Speaker 2: a timeline countdown page, first step, so you and that
Speaker 2: a project is coming and people can see there's like
Speaker 2: a placeholder pre save it now, there's going to be
Speaker 2: music here soon. That's an opportunity to gain attention. And
Speaker 2: in that countdown page you can drip out stuff, so
Speaker 2: you can do a clip of you in the studio,
Speaker 2: you can tease you know, twenty seconds of an upcoming song.
Speaker 2: You can tell a story with video tools, so that's
Speaker 2: an important part of it. Then there's a bunch of
Speaker 2: stuff to do to get ready to have your your
Speaker 2: best audience on release day. So typically we see a
Speaker 2: good pattern of using discovery Mode on catalog leading up
Speaker 2: to release day, So warm up your catalog, get people
Speaker 2: hearing your catalog more so that there's more people who
Speaker 2: have followed you or are fans of you on release
Speaker 2: day that it's going to get blasted to. Then on
Speaker 2: release day, you know, you drop your album. There are
Speaker 2: a couple free to use tools that are pretty important.
Speaker 2: One is canvas, so having moving visuals with the track
Speaker 2: as opposed to just stat at cover art. That's something
Speaker 2: you can upload in the tool that increases engagement. That's important,
Speaker 2: show your brand, let people see what you're about a
Speaker 2: little bit more. And also the playlist pitching tool that
Speaker 2: I mentioned before. Those are important things to do for sure.
Speaker 2: And then there's a paid tool on release day called Marquee,
Speaker 2: which is to announce your new release to people who
Speaker 2: are listeners or potential listeners. And then after release day
Speaker 2: to sustain engagement, like discovery Mode on the actual record
Speaker 2: that you put out, can be a good tool. Coming
Speaker 2: back and adding maybe more of a deluxe version by
Speaker 2: adding clips behind each track, telling a story behind the track,
Speaker 2: what it means, how it was written, things like that.
Speaker 2: Those are things that can maybe take something that's starting
Speaker 2: to die off and give it a reason to get
Speaker 2: reconsidered again and have a little bit of a second life,
Speaker 2: if that makes sense. So we try to guide people
Speaker 2: through that whole journey in the Spotify for Artists product, And.
Speaker 1: That's all your Internet. It's not talking to anybody, it's
Speaker 1: clicking and uploading.
Speaker 2: Everything that I just went through is self serve and
Speaker 2: accessible to anyone, you know, with there are sometimes minimum
Speaker 2: viable audience thresholds you need to have, like I was
Speaker 2: mentioning earlier about discovery Mode, but other than that, it's
Speaker 2: accessible to anyone in Spotify Artists.
Speaker 1: Okay, So staying on that point, if I'm a new artist,
Speaker 1: you're not going to be able to push out to
Speaker 1: my fans pre release information.
Speaker 2: Correct, That's right. So really the best system that we
Speaker 2: have for brand new artists, like if you're coming out
Speaker 2: from from zero, is our Fresh Fines franchise. So we
Speaker 2: have an algorithm that looks at all the listeners that
Speaker 2: tend to listen to stuff before it really breaks out.
Speaker 2: They tend to be like way on the beginning of
Speaker 2: the curve, what are they listening to right now? And
Speaker 2: then we and then we feature those artists in these
Speaker 2: Fresh Finds playlists, and we have them for every genre.
Speaker 2: And this is like the create Diggers. Like, if you
Speaker 2: want to be a year ahead of who's going to
Speaker 2: be the cool new indie artist, that's the place to look,
Speaker 2: and we try to feature those people in Fresh Finds.
Speaker 2: So if you're building a little bulls on social or like,
Speaker 2: you know, people are talking about you on the Internet,
Speaker 2: and then people start listening to you who are ahead
Speaker 2: of the curve, you get featured there and then a
Speaker 2: lot of times that builds up enough of a listenership
Speaker 2: where some of these other tools are accessible to you.
Speaker 1: Okay, I'm a brand new artist, theoretically I might be
Speaker 1: able to be on Fresh Finds. This is all without
Speaker 1: people involved. You're collecting data from socials. How do you
Speaker 1: know that I have some traction outside Spotify?
Speaker 2: Well, one of the biggest signals is on Spotify data,
Speaker 2: but listeners who are just ahead of the curve, so
Speaker 2: we look at what they're listening to. Now, So what
Speaker 2: I meant by that was if you're really buzzy on
Speaker 2: social media, that might get people who are trendsetter listeners
Speaker 2: to listen to you. And that's the biggest contributing factor
Speaker 2: to whether you get on the Fresh Fines playlist.
Speaker 1: Can you give us an example of somebody who started
Speaker 1: on Fresh Fines and then kind of blew up?
Speaker 2: Oh that's a great question. I feel like almost every
Speaker 2: artist that has has broken over the last you know,
Speaker 2: ten years, has been that example. So yeah, I mean
Speaker 2: I think literally almost every name that you could come
Speaker 2: up with.
Speaker 1: Okay, well, let me use a specific example. Zach Brian
Speaker 1: put out his albums independently, then went to Warner Brothers. Yep,
Speaker 1: they get a hold of me, come to the will Turn.
Speaker 1: I was there every now that I play stadium, So
Speaker 1: this is at the beginning of the blow up. Everybody
Speaker 1: there knows every song the album had an X I
Speaker 1: think fourteen or eighteen tracks. Were you aware of the
Speaker 1: act that something was going on there? I don't.
Speaker 2: I don't know the Zach Bryan like on platform history
Speaker 2: off the top of my head. We tend to be, yeah,
Speaker 2: especially our editorial team tends to be very on top
Speaker 2: of that type of stuff, So I wouldn't be surprised,
Speaker 2: But I'm not sure what that specific example.
Speaker 1: Well, you know, Chapel Road had been in the marketplace
Speaker 1: for a while suddenly he's doing these live shows where
Speaker 1: I'm getting email. Hey, you know, there's a big reaction.
Speaker 1: Here's some videos cocomminentally, were you seeing this on Spotify? Yeah?
Speaker 2: And Chapel is a great example because I think a
Speaker 2: lot of people know her story now because of her
Speaker 2: Grammy win. But she had this up and down journey
Speaker 2: right where she she put out a couple songs, she
Speaker 2: was dropped by the label, she went back home, she
Speaker 2: researched even that first leg of the journey where she
Speaker 2: put out a couple songs and then was subsequently dropped.
Speaker 2: She was getting Spotify editorial support even at that phase.
Speaker 2: And you know, she's been an editorials playlist on Spotify
Speaker 2: I think continuously for the last seven years. So I
Speaker 2: think that's actually a great example of we tend to
Speaker 2: be yeah, ahead of the curve on those kind of things.
Speaker 1: How many people are an editorial.
Speaker 2: Globally, I think it's around one hundred and fifty two
Speaker 2: hundred something like that.
Speaker 1: Let's just talk domestically, it tens.
Speaker 2: I don't know the number off my head.
Speaker 1: Okay, So I have a new album or I'm a
Speaker 1: new artist, I go through the release phase. Now, Spotify
Speaker 1: for artists, What else will it give me? First of all,
Speaker 1: let's talk very specifically in terms of data. Yeah, what
Speaker 1: data will I get?
Speaker 2: If anything, we get the feedback that it's too much.
Speaker 2: But at a high level, you're looking at audience metrics.
Speaker 2: So how many light listeners, heavy listeners, fans do you
Speaker 2: have consuming your music?
Speaker 1: Well, just stop right there. How do you break those
Speaker 1: categories down?
Speaker 2: So light listener is like, you know, maybe I listened
Speaker 2: to today's top hits, right, and so Chapel Roone is
Speaker 2: on that. I'm a listener, but I've never searched for
Speaker 2: Chapel Roone. I've never put her in my playlist. So
Speaker 2: I would be a light listener, but I would not
Speaker 2: be a you know, high intent listener, if that makes sense.
Speaker 1: Okay, take me up the next two levels.
Speaker 2: So, yeah, we have a couple levels of fandom and intent,
Speaker 2: and part of what we try to do is show
Speaker 2: you how the different things that you can do can
Speaker 2: help to move audiences up. So maybe you want to
Speaker 2: target the people that have only heard you on playlists
Speaker 2: and have a goal of your campaign to be to
Speaker 2: have them, you know, save you and listen to you
Speaker 2: in their library instead. So that's like one level of
Speaker 2: data that we give you in Spotify for artists is
Speaker 2: the intent level of the audience, and you can see
Speaker 2: both total size of the audience, the intent level, the
Speaker 2: geographic breakdown, the demographic breakdown, all that kind of stuff.
Speaker 2: Then you also get data on each individual track, So
Speaker 2: what playlist is it getting added to? You can see
Speaker 2: Spotify playlists, you can see user playlists, what kind of
Speaker 2: pickup is it getting, what kind of performance is that
Speaker 2: track getting, and you can compare that to like, how
Speaker 2: is this signal single doing compared to my last one,
Speaker 2: to get a sense for how it's coming out of
Speaker 2: the gate. Probably the most popular data feature is on
Speaker 2: release day. We have a live listener account, so you
Speaker 2: come in and its release day and you can see
Speaker 2: there's like a little heartbeat that's showing, you know, twenty
Speaker 2: four nine and sixty four people are listening to this
Speaker 2: you know artist right now. And you know, people have
Speaker 2: fun on release day having their phone out and just
Speaker 2: seeing the number climb and climb and climb, and their
Speaker 2: baby is born and they get to see the world
Speaker 2: kind of listening to it in real time. Yeah, So
Speaker 2: those are you know, some of the bigger categories of data.
Speaker 1: The heartbeat is how many people have listened in that day,
Speaker 1: or how many listen simultaneous.
Speaker 2: Second like this right now the audio is coming out
Speaker 2: of their speaker. How many people listening right now to
Speaker 2: this track?
Speaker 1: Okay, if I'm an artist, can I do that any day? No?
Speaker 2: I think it was for like computational load or something.
Speaker 2: We had to limit it to the first release week.
Speaker 2: I think it is, and then you know, so you
Speaker 2: get that like concurrent right now metric for anything that's
Speaker 2: released in the last seven days, but not every track
Speaker 2: in perpetuity.
Speaker 1: Okay, so my track has some traction. People have listened
Speaker 1: to it on playlists. What can I do as an
Speaker 1: artist to get higher consumption?
Speaker 2: Well, you know, to drive consumption on Spotify. A lot
Speaker 2: of the Spotify for Artist tools are kind of purposely
Speaker 2: designed for that. So, whether it's Discovery mode for more
Speaker 2: lean back or the native ads for more high intent
Speaker 2: driving listening, those are great, you know, places to start.
Speaker 2: If I think more broadly outside of you know, just
Speaker 2: kind of our first party tools, a lot of what
Speaker 2: we see people having success with are collaborations, so that
Speaker 2: you can kind of share across people's different fan base
Speaker 2: and that tends to work really well. We don't have
Speaker 2: a tool for that. It's just a lot of times
Speaker 2: what people do when they're starting to get momentum is
Speaker 2: you know, start that chain of collabse to sustain.
Speaker 1: We covered it, but just go back. Yeah. Native ads
Speaker 1: would be paying to put information in front of the listener,
Speaker 1: and it might be tour dates, merch whatever.
Speaker 2: It's it's for music primarily, So it's you can open
Speaker 2: the app and on the homepage you might see, you know,
Speaker 2: new release from this artist that you have some knowledge of,
Speaker 2: and that's a placement that they've said, I want to
Speaker 2: pay for a certain amount of clicks on that announcement,
Speaker 2: and then we try to route it to the most
Speaker 2: relevant listeners of that you know, who'd be interested in
Speaker 2: that promotion.
Speaker 1: How much might that cost?
Speaker 2: So it's it's a cost per click model. It's similar
Speaker 2: to like buying native ads on Facebook or Google. It's
Speaker 2: in the same ilk.
Speaker 1: As far as putting information tour dates in merch Do
Speaker 1: I have to pay for that.
Speaker 2: Free to do so? We aggregate as many concert listings
Speaker 2: as possible through all of our partnerships. We partner with everybody.
Speaker 2: We want every possible toward a listed on Spotify, and
Speaker 2: then we partner primarily with Shopify. On the merch side,
Speaker 2: the industry has increasingly, you know, gotten onto Shopify as
Speaker 2: the main place to do listings, and all that stuff
Speaker 2: is listed on people's artist page for free. There's no
Speaker 2: additional fee for you know, having that on Spotify.
Speaker 1: And is Spotify going to take a cut?
Speaker 2: We have like a pretty standard on the concert side,
Speaker 2: like the affiliate you know percentage if you click through
Speaker 2: the link and you and you buy in that session,
Speaker 2: we get an affiliate revenue for that. It's not a substantial,
Speaker 2: you know, amount of money for for Spotify. We we
Speaker 2: mostly do it because it's super important to artists, is
Speaker 2: their most important revenue stream and something that you know,
Speaker 2: fans find really interesting. But yeah, that affiliate model exists
Speaker 2: in the background. And what about merch, I don't think
Speaker 2: there's any I know, there had been some affiliate conversations
Speaker 2: in the past. I don't think there's any cut that
Speaker 2: goes back to Spotify and that.
Speaker 1: To what degree do these work?
Speaker 2: Yeah, I mean concerts has become a huge use case,
Speaker 2: so tens of millions of people buying concert tickets through Spotify,
Speaker 2: hundreds of millions of dollars in concert sales driven through Spotify.
Speaker 2: So yeah, it's become substantial for sure.
Speaker 1: Okay, So going back to my dashboard, I can get
Speaker 1: simultaneous listeners with the heartbeat yep. I can get to
Speaker 1: what degree are people, you know, casual listeners more active listeners.
Speaker 1: I can get regional data any other vertical that we
Speaker 1: haven't covered.
Speaker 2: When you say vertical, what do you mean by that,
Speaker 2: any other area of information? Yeah, I think you co
Speaker 2: for most of them.
Speaker 1: Okay, to what degree is the demographic and regional information
Speaker 1: broken down?
Speaker 2: Yeah, So I think that it's been helpful because it
Speaker 2: gives you things like age and gender, so you can
Speaker 2: have an idea of kind of the segments that you're
Speaker 2: appealing to. And then from a geo perspective, it's pretty
Speaker 2: cool because sometimes things happen, you know, in regions that
Speaker 2: people wouldn't expect for reasons they don't even fully understand.
Speaker 2: But knowing like oh maybe I could do a Latin
Speaker 2: American tour, I didn't realize, like, you know, is this
Speaker 2: big and that part of the world. So I think
Speaker 2: the fact that we have country level, city level listener
Speaker 2: data stream data can be directly helpful for routing strategies.
Speaker 1: And to what degree is a broken down demographically.
Speaker 2: Age and gender is the main way And to.
Speaker 1: What degree in your tenure Spotify have you seen domestic
Speaker 1: us product spread around the world and what walls do
Speaker 1: you hit?
Speaker 2: Yeah, I mean export in every direction is increasing. Things
Speaker 2: are just getting less confined to their domestic market. I
Speaker 2: mean even country that people think of is maybe a
Speaker 2: more I don't know, Waldoff Country is bigger in the
Speaker 2: UK than it's ever been. But yeah, like I said before,
Speaker 2: you know, the majority of artists seeing the majority of
Speaker 2: their revenues from outside of their home country. And not
Speaker 2: only that, but in terms of at an artist level,
Speaker 2: artists that are making hundreds of thousands of dollars, so
Speaker 2: artists that are generating more than one hundred thousand dollars
Speaker 2: in royalties from Spotify. Those artists last year recorded in
Speaker 2: over fifty languages. So the amount of diversity of artists
Speaker 2: recording in all different languages around the world that are
Speaker 2: actually having you know, very substantial audiences and payouts on
Speaker 2: Spotify is way more diverse than it's ever been. I
Speaker 2: think those numbers are up, you know, five ten x
Speaker 2: over the last ten years.
Speaker 1: So how big is Latin in the US market? Massive?
Speaker 2: I don't have a number for you, but it's it's huge.
Speaker 1: Well, well, let's talk different genres. Yeah, there's Latin, there's country,
Speaker 1: there's jazz and classical, but they've historically been to minimus.
Speaker 1: There's rock, there's hip hop. These genres, what have you seen?
Speaker 1: What's going up? What's going down?
Speaker 2: I think the interesting thing about rock is it's becoming
Speaker 2: a lot less monolithic and a lot more cut up.
Speaker 2: You know, indie, shoegaze, you know, all these different micro genres.
Speaker 2: I think somewhat in the same story with rap drill music,
Speaker 2: and I mean maybe this is really a cross genres trend,
Speaker 2: not so much in country, but just the smaller scenes
Speaker 2: that are having their own moments and their own communities
Speaker 2: that do things a different way.
Speaker 1: So, but can you give us an overall trend. I mean,
Speaker 1: it used to be a rock world. Then there was
Speaker 1: a hip hop world. You hear people, you know, prior
Speaker 1: to this Kendrick Drake thing. You hear people saying, oh,
Speaker 1: it's not as innovative. Then you have questlove the Kendrick
Speaker 1: Drake saying oh it's the end of hip hop. Are
Speaker 1: you seeing anything going up and down? I mean, there's
Speaker 1: gotta be some movement up and down with all these genres. Yeah.
Speaker 2: I think in terms of things that are ascendant, certainly
Speaker 2: K pop, Latin, more recently afropop, these things have been
Speaker 2: rising a lot, kind of at the expense of everything else.
Speaker 2: I don't think there's been one big loser to stand out,
Speaker 2: but as those things grow, they kind of eat into
Speaker 2: the averages of everything else.
Speaker 1: And let's use K pop as an example that tends
Speaker 1: to have a wall Yeah, people who were really into
Speaker 1: it and then people couldn't give a shit. Do you
Speaker 1: think that K pop and latin are going to start
Speaker 1: permeating people who traditionally would not be fans for this music.
Speaker 2: I think so. I mean, you know, I think one
Speaker 2: of the things that the editorial team that Spotify is
Speaker 2: really proud of, justifiably is they started programming kate pop
Speaker 2: when it was really walled off and people didn't know
Speaker 2: exactly what to make of it. But I don't think
Speaker 2: it is wald off anymore. I think you see stuff
Speaker 2: you know, seventeen and bts and that this stuff resonates
Speaker 2: and can chart and do well in the US, like
Speaker 2: other genres can because I think it takes some time
Speaker 2: for people to get you know, comfort and familiarity. In
Speaker 2: the US, maybe around something, but yeah, I think the
Speaker 2: stuff crosses over and I think that you know, that's
Speaker 2: that's absolutely true of Latin music. Latin music is massive
Speaker 2: in every corner of the of the world for sure.
Speaker 1: Going back to the days of MTV, which is not
Speaker 1: a perfect analogy, yeah, they would literally have changes. They
Speaker 1: would say, oh, we're not going to program any more
Speaker 1: hard rock, We're going to program this. Do you guys say, well,
Speaker 1: you know, we got to vibe on K pop. Let's
Speaker 1: push it out to the listeners more. Yeah.
Speaker 2: I think one of the things that the editorial team
Speaker 2: tries to focus on, or maybe the things that the
Speaker 2: algorithm isn't automatically going to pick up, right, Like, the
Speaker 2: algorithm is good at picking up things that are trending
Speaker 2: in the numbers, but in terms of things that are
Speaker 2: picking up speed in the amount that you know, it
Speaker 2: has a cultural attention or zeitgeist or how much people care,
Speaker 2: what's interesting, what's got people talking. I think the editorial team,
Speaker 2: you know, that's where humans shine. The whole system that
Speaker 2: we've made is tried to be the best combination of
Speaker 2: man and machine, kind of working in harmony. And that's
Speaker 2: the piece that I think humans do really well.
Speaker 1: Let's go back to the dashboard. Yeah, we have the
Speaker 1: act that's brand new. We have the superstar. Let's assume
Speaker 1: I'm more of a journey person. I'm putting out my
Speaker 1: third or fourth album. Yeah, is it just identical. Well,
Speaker 1: we have the pregame, we have this or that, or
Speaker 1: once I'm in the game, are is there more information?
Speaker 1: Are there more tools that you can help me to grow?
Speaker 2: Certainly, I think that all the tools I don't know.
Speaker 2: I I think that most of the tools that we
Speaker 2: have really shine in the in the kind of middle state.
Speaker 2: If you're a superstar and you're super saturated, certainly our
Speaker 2: tools are valuable, but they're going to provide less lift overall,
Speaker 2: you know, because you're already out there so many people
Speaker 2: know you, maybe people have made up their mind about you.
Speaker 2: And if you're brand new and we hardly know about you,
Speaker 2: it's hard for the tools to do their job. Where
Speaker 2: they really shine is in the middle where you're not
Speaker 2: overexposed yet we know a little about where you're resonating
Speaker 2: and can maybe try to help help you, you know,
Speaker 2: do more. The tools tend to I mean, they're the
Speaker 2: same if it's your second album or your fourth album.
Speaker 2: But what's hopefully changed is you know your audience that
Speaker 2: you can tap it. The people who have been there
Speaker 2: for you and your first album, your second album or
Speaker 2: third album. Now those people are there for you to
Speaker 2: target and try to resurrect and be on the next
Speaker 2: part of the journey with you.
Speaker 1: I know it's not your purview exactly, but the editorial
Speaker 1: they're human beings and people would certainly believe someone with
Speaker 1: an ongoing relationship with an editorial person is going to
Speaker 1: get their music in playlist.
Speaker 2: Can you say more and what you mean by that?
Speaker 1: Okay, Hey, this is traditional with distribution. I have a
Speaker 1: steady stream of product. If you have a steady stream
Speaker 1: of product, there's more of a reason to have an
Speaker 1: ongoing relationship with someone. I have a steady stream of product,
Speaker 1: a certain amount has been successful. I find out who
Speaker 1: is the programmer in my genre. Okay, I take him
Speaker 1: to dinner, I send him some music, I send him
Speaker 1: a birthday card, ask him about his wife, and then
Speaker 1: I say I have a new release. Wouldn't you know
Speaker 1: just on a human level, people would say that person
Speaker 1: would tend to play that record or play list that record.
Speaker 2: I see what you're getting at. I think, first of all,
Speaker 2: I want to be clear, there's a very rigorous code
Speaker 2: of conduct. You mentioned a birthday gift. I think at
Speaker 2: some point in that sequence gifts favors not allowed fireable
Speaker 2: offenses at Spotify. So we take it super seriously. Anything
Speaker 2: that edges on you know, bribery, this stuff we take
Speaker 2: super seriously. But the broader point you're making about like, Okay,
Speaker 2: this is an established manager. They've successfully recognized ten acts,
Speaker 2: and they say this next one is just like their
Speaker 2: first ten, and this next one is going to be
Speaker 2: really good. That's a signal for sure. I don't actually
Speaker 2: think it even matters whether you get the phone call
Speaker 2: from someone, if you just look up online. This is
Speaker 2: the team they have around them. I think it's good
Speaker 2: for the editorial team to notice that and take that
Speaker 2: into account. It's like, oh, okay, well that's part of
Speaker 2: the full story that I'm seeing around this artist. These
Speaker 2: people think they're going to be great, They're going to
Speaker 2: have the you know, creative support of those people. I
Speaker 2: think that's legitimate as a signal, you know, and you
Speaker 2: can never take out all bias from a system. I
Speaker 2: think we've done a really good job of trying to
Speaker 2: mitigate it every possible place we can and have a
Speaker 2: level playing field. But I take your point that it's
Speaker 2: never a perfectly flat playing field. At the end of
Speaker 2: the day, the thing that matters the most is the
Speaker 2: music comes out. And if you try it in new boots,
Speaker 2: which is like the feeder playlist to hot country, and
Speaker 2: it's not performing, if it's been there for four days
Speaker 2: and it's not performing, all that other stuff that you
Speaker 2: took into account, it doesn't really matter anymore. The fans
Speaker 2: have decided now, right so you can't keep you know,
Speaker 2: forcing it. And so I think that's the biggest difference
Speaker 2: between the terrestrial radio era and this era that we're
Speaker 2: in right now, is the fans give you signal very quickly,
Speaker 2: and they walk with their feet and you know, they decide.
Speaker 2: So that's the ultimate remover of bias.
Speaker 1: Tell me more about the code of ethics.
Speaker 2: You know, when you take the job, you agree to
Speaker 2: not going to do any of these things, and if
Speaker 2: I do them, I know that means I lose my job.
Speaker 1: So they're all, oh, yeah, yeah, what are some of
Speaker 1: those things? If I take you to dinner, that's not
Speaker 1: a code of ethics violation.
Speaker 2: I think it is. I'll look up. I mean, I
Speaker 2: I think we make sure we were splitting the bill
Speaker 2: or we're taking people out.
Speaker 1: You know, that's important.
Speaker 2: Yeah, we don't want to do that, so.
Speaker 1: I give you a ticket to the show. Is that
Speaker 1: a code of ethics violation?
Speaker 2: Well, now you're gonna quiz me on all the things.
Speaker 2: Let me let me you know, like go back.
Speaker 1: Hey, if you can't remember, that's okay. But you know,
Speaker 1: it's like if you look for work for a major newspaper,
Speaker 1: they paid for their tickets. Is it that strict at Spotify?
Speaker 2: I know it is very strict. I like, you know,
Speaker 2: I don't remember the exact details of this concert ticket
Speaker 2: thing or whatever. I mean some of the you know,
Speaker 2: we we want our people to go to shows, right,
Speaker 2: We want them to see the acts live, to contribute,
Speaker 2: but like, yeah, we don't want it to be through
Speaker 2: a favor. We want them to go, you know, on
Speaker 2: Spotify's dime. These are things that are important, and like
Speaker 2: I said, i'm the details, I'm I'll look into. But
Speaker 2: I know that this has been a big point of
Speaker 2: emphasis and something that isn't just theoretical. It's affected, you know, employment,
Speaker 2: and we take super seriously.
Speaker 1: Okay, a complaint that I get, and you know, you
Speaker 1: and me are in the same world. There are people
Speaker 1: going to complain. People say, oh, I had my track
Speaker 1: on Spotify, I had my alm on Spotify. Yeah, and
Speaker 1: they took it down because they thought it was spam.
Speaker 1: And I put in this money for this and that
Speaker 1: literally got that email yesterday. What would you say to
Speaker 1: that person.
Speaker 2: I feel so bad for artists who are in this situation.
Speaker 2: And the reason I feel bad for them is because
Speaker 2: if you look at these marketing sites, they are so predatory.
Speaker 2: Like these marketing sites, they're like, you know, put in
Speaker 2: one hundred dollars and we'll get you ten thousand totally
Speaker 2: organic bot free streams, which is obviously total bs. There's
Speaker 2: no such thing as that. But if you fall for
Speaker 2: that scam and you pay one hundred dollars and you
Speaker 2: genuinely think, oh, they said it's bop free. I'm doing
Speaker 2: this all on the up and up, this is great,
Speaker 2: you know. The truth is is that then they're getting
Speaker 2: a bunch of bots to stream your song, and we
Speaker 2: take that extremely seriously. We catch it very accurately. We
Speaker 2: immediately remove all royalties paid out so we don't pay
Speaker 2: for fraudulent streams. We remove the play counts, we remove
Speaker 2: the monthly listener accounts, and we send notifications to the distributor,
Speaker 2: so we say, hey, distributor, this thing is getting bodied.
Speaker 2: And then if it's getting bodied really bad, we charge
Speaker 2: the distributor a fee because we want to incentivize them
Speaker 2: to say, don't keep letting this person do that. You
Speaker 2: need to maybe charge them a fee, Maybe you need
Speaker 2: to give them a strike. You need to ultimately, you know,
Speaker 2: remove it if they keep doing it over and over again.
Speaker 2: So we take it super seriously. We try to make
Speaker 2: sure that there are as few as possible, like wrongly accused.
Speaker 2: No system is perfect. I think our system is very
Speaker 2: very good. But this, this whole you know, streaming fraud
Speaker 2: thing is a scourge on the industry and something we
Speaker 2: try to combat as in every way that we can.
Speaker 1: So where are you from?
Speaker 2: Like where did I grow up? Yeah, grew up near
Speaker 2: new Haven, Connecticut.
Speaker 1: Oh wait wait, I'm from Connecticut where.
Speaker 2: I grew up in Cheshire and then Madison.
Speaker 1: And what did your parents do for a living?
Speaker 2: Nothing to do with what I do. They were both
Speaker 2: medical doctors, so I ran the other way.
Speaker 1: Okay, so there are medical doctors. How many kids in
Speaker 1: the family, Me and my older brother? And what your
Speaker 1: older brother do?
Speaker 2: He's at Google. I've been a Spotify fourteen years. He's
Speaker 2: been at Google like seventeen eighteen years. So we're both
Speaker 2: crazy lifirst.
Speaker 1: Do you have a close relationship.
Speaker 2: I do, Yeah, love my brother.
Speaker 1: I mean the fact that he's at a tech company,
Speaker 1: You're in a music tech company. Is there anything in
Speaker 1: the background that would predict that.
Speaker 2: I'm not sure. He's more on the sales side. I'm
Speaker 2: more on the product side. But you know, my we
Speaker 2: came out it totally different ways. I've been obsessed with
Speaker 2: music my whole life. I started playing guitar and piano
Speaker 2: from a very young age. I had delusions of being
Speaker 2: a performer myself, I you know, dismissed those thought. I
Speaker 2: wanted to be a producer. Wrote my college thesis on
Speaker 2: how the music industry should escape from napster. I mean,
Speaker 2: I've been kind of like a single track mind about
Speaker 2: you know, the music ecosystem and the music business and
Speaker 2: how things could work better for artists and fans. My
Speaker 2: whole life been obsessed with it. That's my whole journey.
Speaker 2: That's what I've been always most interested in, and that's
Speaker 2: really the way I came to Spotify, not through tech
Speaker 2: but more through music.
Speaker 1: So how serious a musician were you?
Speaker 2: I was like recording my own stuff in high school
Speaker 2: and college and doing you know, a couple like small
Speaker 2: gigs here and there, but nothing serious. I learned pretty
Speaker 2: quickly that I was that was not going to be
Speaker 2: my superpower.
Speaker 1: How did you learn?
Speaker 2: You know, like performing wasn't like fun for me. I
Speaker 2: was just worried about it going bad. I wasn't enjoying
Speaker 2: going well. And I just I, like, you know, I
Speaker 2: wasn't great. I was good. I was just I wasn't great.
Speaker 2: I could tell that there were other people that were
Speaker 2: going to be offering way more in the world in
Speaker 2: terms of recording and performing music than I was going to.
Speaker 1: So you were like a solo actor? There were bands?
Speaker 2: Yeah, like a couple of people I were, you know,
Speaker 2: just duos, trios that we were recording with in high
Speaker 2: school and college.
Speaker 1: And where'd you go to college?
Speaker 2: At Penn in Philly?
Speaker 1: Okay, you go to college at the height of the
Speaker 1: dapster era.
Speaker 2: Yeah, pretty much.
Speaker 1: So what was it like being in college during Napster? Yeah?
Speaker 1: It was wild.
Speaker 2: I mean I remember getting to the dorm and having
Speaker 2: one of the ras or you know, the older kids
Speaker 2: that tell you what to do, being like, this is
Speaker 2: the server you connect to to see everybody else's hard drives,
Speaker 2: and this is how we all share our music together.
Speaker 2: It was like part of like, you know, a new
Speaker 2: student orientation is like this is how the piracy is
Speaker 2: going to work. So you just you know, it was
Speaker 2: a totally different you know, era and world at that point.
Speaker 2: And but you know, what I will say is the
Speaker 2: social music discovery through that and being at college and
Speaker 2: seeing like, you know, you're sitting in high school with
Speaker 2: your own playlist and then you get to college and
Speaker 2: you see everybody else's place. Oh you're into that and
Speaker 2: you're into that. It was one of the most exciting
Speaker 2: times for me as a music fan, just to see that,
Speaker 2: even though like the business side of it was totally broken.
Speaker 2: Definitely took some inspiration from that.
Speaker 1: So what music were you're listening to? Oh?
Speaker 2: Everything? But I grew up being mostly into jazz, into country,
Speaker 2: indie rock, classic rock, Yeah, everything.
Speaker 1: And you major in what in college.
Speaker 2: In Anneburg they call it communication, but it's basically like
Speaker 2: media industry stuff and music minor.
Speaker 1: Yeah, and what did your thesis say?
Speaker 2: It was actually more pessimistic than it turned out to be.
Speaker 2: I thought people were gonna need to be like more
Speaker 2: altruistic and be gifting artists and more like Patreon kind
Speaker 2: of vibes. You know, the fact that products were made
Speaker 2: that were actually better than piracy, that got people to
Speaker 2: pay because they got something from it, not because of
Speaker 2: the purity of their hearts. I think is a much
Speaker 2: better evolution and a much bigger business for everyone to
Speaker 2: be in. But I was, yeah, I was looking at
Speaker 2: what are other ways that businesses have monetized freely available
Speaker 2: goods like water to bottled water and you know these
Speaker 2: kind of things, and how do you how do you
Speaker 2: do that?
Speaker 1: So why do you think you were wrong?
Speaker 2: Well, so what I what I had conviction in was
Speaker 2: you need to meet consumers where they are. Every young
Speaker 2: person had the assumption music is free. So if you
Speaker 2: put a paywall in front of people, you lost them already.
Speaker 2: There has to be a free tier to get people
Speaker 2: to pay. So my first, like real job was at
Speaker 2: LimeWire where they were trying to build. My job was
Speaker 2: to build a licensed MP three store, and we were
Speaker 2: going to try to migrate people from file sharing into
Speaker 2: a licensed subscription. And that was one idea of how
Speaker 2: we could migrate people from like meet them where they are,
Speaker 2: meet them with free, get them moved over. If I
Speaker 2: did that so exceptionally well, the free to paid funnel
Speaker 2: that's been built by getting people to come in and
Speaker 2: discover and invest in their library and then get so
Speaker 2: invested that they want to remove the ads, and they
Speaker 2: want to play on demand, and they want to convert
Speaker 2: to premium. It just works so incredibly well to take
Speaker 2: a population of the world that had no intention of
Speaker 2: being a paid music subscriber now to a place where they,
Speaker 2: of course I would never cancel that subscription. And it's
Speaker 2: all been through crafting a really good, you know, product experience,
Speaker 2: I think.
Speaker 1: And you know what the churn rate is, Oh, it's
Speaker 1: very low.
Speaker 2: I mean, especially on premium, you know, low, low single digits.
Speaker 1: Okay, you graduate from college, your first job is with LimeWire.
Speaker 2: Well, let's see, I was in college, so when I
Speaker 2: wanted to be a producer, I first worked at recording
Speaker 2: studios and I thought I was going to like, you know,
Speaker 2: get a turn on the pro tool set up, and
Speaker 2: I was you know, rolling mike cable and taking out trash.
Speaker 2: So it was like, Okay, that's not going to be
Speaker 2: the route for me. And then the big turning point
Speaker 2: for me was an internship I had at EMI. So
Speaker 2: I got to be the intern for summer for Digital
Speaker 2: Biz Dev for EMI when they were a major label,
Speaker 2: and I met every single person in two thousand and
Speaker 2: seven that wanted to license EMI, Spiral Frog and all
Speaker 2: the ideas that people had. You know, Amazon was going
Speaker 2: DRM free, MP three's, you know, everyone's trying to figure
Speaker 2: it out. And one of the companies that I met
Speaker 2: with that summer was LimeWire and they were like, we
Speaker 2: have one hundred million monthly active users. We're trying to
Speaker 2: get them onto a license thing. And I was like this,
Speaker 2: this I can believe might work. So I was there
Speaker 2: for three three or four years. That's where I learned
Speaker 2: you know, product and software, and we made a run
Speaker 2: at it. We built a product that would have been
Speaker 2: competitive Spotify. There were some progressive people in the industry
Speaker 2: that like the idea of migrating user from from Limeware
Speaker 2: to that, but ultimately, you know, it got shut down
Speaker 2: and then Spotify decided it wanted to start a US
Speaker 2: office and had heard that you know, I and a
Speaker 2: couple other folks were you know, trying to make this
Speaker 2: thing happen in Limeware and reach out, and that's where
Speaker 2: we started talking about starting the US team for Spotify.
Speaker 1: They found you. Yeah, okay, so what year do you
Speaker 1: start working for Spotify?
Speaker 2: February twenty eleven.
Speaker 1: Okay, so what was your job then?
Speaker 2: In the beginning, it was building out a US product team.
Speaker 2: So the whole company was, you know, one hundred and
Speaker 2: fifty folks, mostly in Sweden at that time, but we
Speaker 2: wanted to have a tech team in the US, and
Speaker 2: initially we were building our you know, we decided to
Speaker 2: get into recommendation. Spotify had never done recommendation prior to that.
Speaker 2: We decided to build our own recommendation features up a
Speaker 2: team to do that. We were also building the the
Speaker 2: ad support of the free tier, how to run ads
Speaker 2: and also how to kind of construct the freemium model,
Speaker 2: what you get for free, what you need to you know,
Speaker 2: get by converting. Those were some of the initial things
Speaker 2: that I was accountable for when it was the US team.
Speaker 1: And how did you move up the ladder to where
Speaker 1: you are now.
Speaker 2: Well, probably the biggest change that happened was Daniel. I
Speaker 2: think it was probably twenty fifteen or something. Daniel, our CEO, said,
Speaker 2: we really need to have a creator team. We really
Speaker 2: thought of ourselves as we license music and then we
Speaker 2: have a consumer product. You know, we didn't have we
Speaker 2: didn't have the idea of a of a creator team
Speaker 2: back then. But at that time, like if you think
Speaker 2: the misconceptions in the industry today are bad, I mean
Speaker 2: then it was like no artist knew whether they had
Speaker 2: ten streams on Spotify or a million streams, Like it
Speaker 2: was a total black box and we really needed to
Speaker 2: build a bridge. And so he asked me, I had
Speaker 2: like a team of I don't know, one hundred and
Speaker 2: two hundred folks, and he was like, yeah, I want
Speaker 2: you to give all that up and start this new thing.
Speaker 2: It'll just be you in the beginning and build up
Speaker 2: some you know, figure out what we should do on
Speaker 2: the creator side. And that kind of felt daunting or
Speaker 2: and exciting at the time, but that was kind of
Speaker 2: a big turning point. Because everything that I've done since then,
Speaker 2: building out Spotify for artists are business on the supply
Speaker 2: facing side, and then now you know, leading the music
Speaker 2: vertical more broadly is all kind of built on getting
Speaker 2: really close to the artist's side, what they need, what
Speaker 2: they want more out of Spotify. That's, you know, really
Speaker 2: what I've been focused on for the last ten years.
Speaker 1: Do you have stock?
Speaker 2: You know, like all employees, you get you know, stock
Speaker 2: as part of your package.
Speaker 1: Well, when public, do you already have an interest? Yeah?
Speaker 2: I mean even from the beginning when because I joined
Speaker 2: what seven eight years before we went public?
Speaker 1: So and have you sold any stock?
Speaker 2: I'm not sharing my you know, personal uh, you know,
Speaker 2: financial stuff, but I've sold some of hold some Yeah.
Speaker 1: Well I mean it launched, yeah, went down ultimately, and
Speaker 1: now it's through the roof.
Speaker 2: Mm hm.
Speaker 1: You know, is this like a traditional startup if you
Speaker 1: wanted to quit your job, would you have to continue
Speaker 1: to work?
Speaker 2: I mean, look, in the grand scheme of things, like
Speaker 2: the success I've had is any much greater than anything
Speaker 2: I was ever hoping for. Like I'm you know, I
Speaker 2: consider myself very lucky in that way. I am obsessed
Speaker 2: with what I do. I love what we're doing. I
Speaker 2: feel really passionate about what I'm doing. That's the primary,
Speaker 2: you know, reason that I do what I do for sure.
Speaker 1: Yeah, So what are the opportunities left for you in Spotify?
Speaker 2: Well, look, I go back to I think there's two
Speaker 2: big things in terms of our overall mission to grow.
Speaker 2: You know, one of the things I love about this Spotify,
Speaker 2: but streaming in general, the incentives are so aligned. We
Speaker 2: want to grow a revenue, and every time we grow revenue,
Speaker 2: two thirds of that goes to rights holders. So a
Speaker 2: lot can be made of disputes in the industry, but
Speaker 2: by and large, what's good for us is good for
Speaker 2: the industry. That is just true. And as we go
Speaker 2: about trying to grow the pie together. The two big
Speaker 2: things that stand out to me is one what I
Speaker 2: said before, we have five hundred six five hundred and
Speaker 2: six hundred million people paying for a music subscription around
Speaker 2: the world. That's awesome. I don't think anyone thought we'd
Speaker 2: get there. But there's billions of people in the world,
Speaker 2: and we need to figure out how we're going to
Speaker 2: adjust the offering and the freemium funnel and the different
Speaker 2: skews to get everyone in the world paying for music.
Speaker 2: So I think that's a really fun opportunity. And then
Speaker 2: the second one is is kind of breaking out of
Speaker 2: the one size fits all. I think for the vast,
Speaker 2: vast majority of people paying one hundred and twenty dollars
Speaker 2: a year ish I'm rounding in a music subscription raises
Speaker 2: their total amount of spend because they wouldn't have spent
Speaker 2: one hundred and twenty dollars, you know, in a previous era.
Speaker 2: But for some the biggest super fans, that's under optimizing,
Speaker 2: like they would be willing to spend more and they're
Speaker 2: more passionate about music, and there's opportunities to make sure
Speaker 2: that there's more points along the supply demand curve where
Speaker 2: people can you know, get a more valuable service and
Speaker 2: drive more revenue to the industry in return. So I
Speaker 2: think both of those things are huge opportunities.
Speaker 1: Okay, just go because it has been such you know,
Speaker 1: a talking point. Yeah, other than higher quality music which
Speaker 1: Amazon and Apple bake in for the same price, what
Speaker 1: am I going to from my additional dollars?
Speaker 2: Well, first of all, let's let's talk about high fidelity music.
Speaker 2: So if you go back and in the recent history
Speaker 2: of the last few years. I don't think there's any
Speaker 2: evidence that hi fi is something that gets more people
Speaker 2: in the boat. If you don't have a music subscription
Speaker 2: at all. Is adding high fi going to be the
Speaker 2: thing that gets you over the hump to say, oh,
Speaker 2: now I want a music subscription. I don't think so.
Speaker 2: I haven't seen any evidence of that. So I think
Speaker 2: it's a pretty big missed opportunity to just chuck it
Speaker 2: in premium. I think that it under leverages what it
Speaker 2: can do for the industry because really it's the most
Speaker 2: leaned in, passionate people who care about that, and I
Speaker 2: think you have to charge more. So I don't take
Speaker 2: for granted that the status quo as it exists today
Speaker 2: will exist or should exist in that way. But then,
Speaker 2: you know, to answer your question beyond that, I think
Speaker 2: that you know, if you think about what Spotify is
Speaker 2: today compared to what it was ten years ago, we've
Speaker 2: added tons of stuff that probably appeals more to you know,
Speaker 2: big fans rather than casual listeners. And we've got a
Speaker 2: road map of you know, twenty thirty forty things that
Speaker 2: are going to be in that category rolling forward. So
Speaker 2: I think there's going to be an opportunity to always
Speaker 2: have a version that's you know, best in class and
Speaker 2: appeals to the most ardent fans, while the vast majority
Speaker 2: of people are totally satisfied with you know, the proposition
Speaker 2: they get on premium.
Speaker 1: What percentage of people would upgrade to this higher level
Speaker 1: for you to be satisfied for the company to be honest.
Speaker 2: Fine, I don't know. It's all upside, So I don't
Speaker 2: think there needs to be a certain number to be satisfied.
Speaker 2: It's it's it's pure incremental, both for us and for
Speaker 2: everyone in the industry.
Speaker 1: Well, I mean, if you want to go deeper, Spotify
Speaker 1: stock is going way up. Analysis says, you know, there's
Speaker 1: constant innovation. You look at the labels, their stock has
Speaker 1: been somewhat morribn because they say, well, you know, there's
Speaker 1: no innovation, so they're banking on this additional tier. Lucy
Speaker 1: Grange is going on and on, We're going to tap
Speaker 1: into the super fan. Okay, they're not. I mean, yes,
Speaker 1: on Netflix you can pay extra for four K Okay,
Speaker 1: but on most of these other streaming services you pay
Speaker 1: maybe at you know, compared to music streaming, television is
Speaker 1: so fuck up and antiquated My point is, I cannot
Speaker 1: think of a similar business. We're the main product is
Speaker 1: not what you're upgrading. We're of a significant you know. Listen,
Speaker 1: I just got to bug up my rear end about
Speaker 1: this because they've been saying this to analysts. You know,
Speaker 1: title never turned into anything. You know, originally it was
Speaker 1: a Norwegian company that was something different whatever they were incompetent.
Speaker 1: So I subscribe to my music service for the music
Speaker 1: unless you're gonna let me meet the act or you
Speaker 1: get me better concert tickets. You know, what is it
Speaker 1: you're gonna give me.
Speaker 2: I think you're gonna like it. We'll see you. We'll
Speaker 2: talk in a year and we'll see if you like it.
Speaker 2: But I think look, in a lot of ways, we've
Speaker 2: already started on the journey. Like you know, to your point,
Speaker 2: with family plans, you have more parental controls, you have
Speaker 2: more accounts. We added audio books as an additional value proposition.
Speaker 2: It's not like this is a brand new, you know idea.
Speaker 2: We have reps under our belt for you know, how
Speaker 2: to version the skews. I'm you know, I'm very optimistic
Speaker 2: that there'll be opportunity to grow and change.
Speaker 1: But let's just say you know, we're all very familiar
Speaker 1: with the different things et SAT round audiobooks don't take
Speaker 1: from the royalty stream, and then the recent thing of
Speaker 1: you know, lowering royalties overall through other things. Let's leave
Speaker 1: all that aside. I'm a music fan. You want me
Speaker 1: to pay an additional ten dollars other than a higher
Speaker 1: quality sound blue skyet. I can't think of anything you
Speaker 1: can give me the way. I'm going to say to
Speaker 1: a significant number of people, that's better because it's about
Speaker 1: the music. We've already established that the record companies don't
Speaker 1: want exclusives, So yeah, you don't want to get into
Speaker 1: a war of you can listen to it before everybody else.
Speaker 1: That'll be a disaster. As I say, your point of Spotify,
Speaker 1: it's total upside. I get it, okay, but the record
Speaker 1: industry is banking on this, okay, and so far they've
Speaker 1: filled in the blanks not at all. They say, well,
Speaker 1: you don't higher quality stream and then nothing, we're gonna
Speaker 1: pay the superfans. I was that person. You know, I'm
Speaker 1: not paying to begin with. About one hundred and twenty
Speaker 1: dollars a year is an incredible bargain relative to what
Speaker 1: I used to spend on music. But I was buying music.
Speaker 1: That was it. In addition, if I was a big
Speaker 1: music fan, I knew we could get the cheapest records. Yeah,
Speaker 1: I might go for the contract tickets. I don't know
Speaker 1: where else in the ecosystem there there's a spot for
Speaker 1: me to give it. You're gonna give me more services
Speaker 1: that doesn't speak to the music. The US, the big
Speaker 1: super fan, they know what they want to listen to.
Speaker 1: You're gonna give me audio bunk. You can give me
Speaker 1: a blowjob whatever. It's got nothing to do with the music.
Speaker 2: Well, look like I said, I mean, we're gonna do
Speaker 2: it our own way. I'm sure that there's gonna be
Speaker 2: twists and turns along the way. And then you'll be
Speaker 2: the judge. I'll read your letter and we'll see what
Speaker 2: you think.
Speaker 1: Okay, before I leave you, Oh, Bob.
Speaker 2: Hold on one second. You earlier said something I have
Speaker 2: to react to because I'm too easily triggered. You said
Speaker 2: audio books recent thing, we lowered the royalty rate. I
Speaker 2: just want to be clear. Our payouts have only gone
Speaker 2: up every year they've gone up. There has not been
Speaker 2: a lowering of our Wait.
Speaker 1: Wait, wait, wait wait wait, audio books Spotify said would
Speaker 1: not affect music royalties.
Speaker 2: Yeah, it's taken out of a different different.
Speaker 1: But this is all public information. Spotify is going to
Speaker 1: a bundle model such that less of the subscription price
Speaker 1: would go to music royalties.
Speaker 2: Yeah, so can I expand on that?
Speaker 1: You got the platform, go for it?
Speaker 2: Okay, so total royalties going up? You're right that with
Speaker 2: bundles the royalty rate does go down. Of course it
Speaker 2: needs to because you need to accommodate at putting other
Speaker 2: things in bundle. But let me explain how we got here. So,
Speaker 2: as you well know, statutory rates in the US, these
Speaker 2: are heavily negotiated things every four years or so. We
Speaker 2: had phono records for We settled in twenty twenty two
Speaker 2: after a long negotiation about how these new rates, these
Speaker 2: new statutory rates in the US should work. And if
Speaker 2: you go back to the press release that announced that
Speaker 2: deal in twenty twenty two, it talked about two things.
Speaker 2: Publishers were getting the headline rate increase that they were
Speaker 2: looking for, and the streaming services were getting the bundle
Speaker 2: accommodations to be able to have lower to rate for
Speaker 2: services that were a bundle. The deal was celebrated by
Speaker 2: both sides. Bundles are important. The reason bundles are important
Speaker 2: is because there's a lot of people like you and
Speaker 2: me that would gladly pay for a pure play music subscription,
Speaker 2: but when we want to get the world to pay
Speaker 2: for music, there's a lot of people who need maybe
Speaker 2: a couple other things to get interested. The vast majority
Speaker 2: of YouTube music subscribers are to YouTube Premium that includes
Speaker 2: music and ad for YouTube. The vast, vast majority of
Speaker 2: Amazon subscribers are the kind that get music bundled with
Speaker 2: Prime and all the other stuff that comes with Prime,
Speaker 2: not the pure play music subscription. Apple's got the Apple
Speaker 2: one thing with music and you know eight other things.
Speaker 2: So this is important to grow the pie. Spotify last
Speaker 2: year or recently we added audiobooks. That was a big move.
Speaker 2: It helped us grow revenue, it helped us convert better,
Speaker 2: It added more value to the subscription so we could
Speaker 2: get more people in the boat and grow the pie.
Speaker 2: And because of that, Spotify, just like YouTube with YouTube
Speaker 2: Premium and Amazon with Prime, it became a bundle in
Speaker 2: the same way, and so we were on the bundle rate,
Speaker 2: which is a lower royalty rate for on the publishing side,
Speaker 2: than the headline rate that was challenged in court. The
Speaker 2: judge looked at it, dismissed the lawsuit with prejudice, and said,
Speaker 2: Spotify is doing exactly what the deal was as negotiated.
Speaker 2: They're paying exactly as you agreed to pay in this deal.
Speaker 2: So because of that, the facts are pretty clear about
Speaker 2: what happened beginning, middle, and end. That being said, we
Speaker 2: don't want to be focused on arguing about the past
Speaker 2: and a deal we did in twenty twenty two. We
Speaker 2: want to figure out how to grow the pie moving forward.
Speaker 2: So the deals we did recently with Warner and Universal
Speaker 2: on the publishing side out us to say, yeah, let's
Speaker 2: have the rates go up on the publishing side, even
Speaker 2: four bundles. But in coordination with that, let's have Spotify
Speaker 2: get rights that it needs to innovate and have new
Speaker 2: propositions and things that are going to help us grow
Speaker 2: the pie in other ways. And that's been great. So
Speaker 2: now we can put this you know, accounting dispute behind
Speaker 2: us with Universal and Warner, and now that that template
Speaker 2: is there, I'm very optimistic that we can have that
Speaker 2: same you know thing roll out across the industry. But
Speaker 2: I just wanted to be clear that yes, the royalty
Speaker 2: rate is lower for the bundle products than it is
Speaker 2: for the pure play products, but in terms of total
Speaker 2: payouts to publishers, they went up more than ten percent
Speaker 2: last year. They didn't go down because of that royalty rate.
Speaker 2: Our total payouts to publishers have gone up every year,
Speaker 2: and last year was no exception. So I just wanted
Speaker 2: to make sure that that wasn't, you know, lost in
Speaker 2: the in the soup.
Speaker 1: You get the last word, Charlie. I want to thank
Speaker 1: you for taking this time with my audience, been very informative.
Speaker 2: Thanks so much for having me as a present.
Speaker 1: Till next time. This is Bob LOVESI