Daniel Ek’s Spotify: Music’s Last Best Hope

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A glass-enclosed corner has been allotted to Ek, but he sits in an open-plan cluster with the company’s chief technology officer, general manager for Europe, vice-president for growth, and chief product officer, an arrangement he adopted from Facebook. He says “Mark” sometimes, as in “Zuckerberg,” but blushes at the informality, and he’s quick to point out that they aren’t particularly close. Ek doesn’t invest in other companies, doesn’t like to go to conferences, and until now has avoided profiles. Startup stories need megalomaniacs, and he’s wary of being trapped in that role. He isn’t shy or insecure; he’s Swedish. The entire country treats its accomplishments the way people who went to Harvard talk about college: faintly embarrassed that you might see their pride.

Ek likes to say—often—that to succeed, any music service needs to be more convenient than piracy. Spotify is. You open an account. You download a program. And you can listen to any one of 15 million tracks, the result of two years of negotiations with the world’s music conglomerates that began, says Ek, rubbing the wisp and stubble that covers his head, back when he had hair.

Spotify is slick, intuitive, and fast; it can, for a verifiable fact, instantly serve Graceland to a phone resting in your shirt pocket on a highway in North Carolina at 1 a.m. In Europe, if you want to listen longer than 10 hours per month, avoid ads, or move offline with a music player, you pay a subscription fee that comes to about $15 a month. According to the company, 1.5 million Europeans already do. Although it serves only seven countries, Spotify is the second-biggest digital retailer in Europe after iTunes, according to the IFPI. On July 14, it arrives in America, and people familiar with both companies say a Spotify music sharing function on Facebook is in the works.

It plans to repeat its European compromise between cool and revenues. To seed the market, Spotify will invite a lucky beta crowd to stream for free, unlimited and with advertisements, for six months. Everyone else can listen up to 10 hours per month free of charge, after which Spotify will offer two tiers: $5 a month to listen without ads on your desktop, $10 to go mobile.

In an e-mail, Irving Azoff, executive chairman of Live Nation Entertainment, the world’s largest entertainment company, writes: “Spotify is going to be a great resource for artists and the music industry.” Azoff also manages Christina Aguilera. “It’s refreshing,” he writes, “to finally see emerging companies get a chance to change a broken playing field.”

According to filings obtained by ComputerSweden, a Stockholm-based magazine about the IT industry, Spotify was launched with €12 million in venture capital (about $17 million) from Creandum and Northzone, both based in Stockholm. After the European launch in 2009, Wellington Partners, a British venture fund, contributed €7 million, and Li Ka-shing, a Hong Kong magnate and the world’s 11th-richest man, kicked in €20 million. Based on Wellington’s stake, the round left Spotify with a valuation of €170 million. After it closed, Ek got an unsolicited e-mail from Sean Parker—that Sean Parker—telling him what was wrong with his service. The two began a correspondence. “For the first time,” says Ek, “someone had thought about this more than I have.”

Parker introduced him to Peter Thiel, and to money from the Founders Fund. This June, Spotify confirmed for Bloomberg Businessweek that it had taken on capital from Accel Partners, DST Global Solutions, and Kleiner Perkins Caufield & Byers. At Davos this year, British Prime Minister David Cameron, describing how big ideas flourish in free societies, offered two examples: Facebook and Spotify.