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SPOTIFY

‘Spotify earns us more than iTunes’: Sony BMG

Swedish digital streaming music service Spotify is proving to be the saviour of the music industry after years of falling sales. Music company Sony BMG Sweden confirms that revenues from Spotify now outstrip iTunes.

'Spotify earns us more than iTunes': Sony BMG

Sales of CDs in Sweden have been on the decline for over ten years and by 2008 they had collapsed to 14.7 million albums. Illegal file-sharing, widespread in hi-tech Sweden, has shouldered much of the blame.

But the explosive success of Spotify, a streaming music service launched in October 2008, has turned the financial tide for the hard hit music industry.

“Spotify is a success. Not just in terms of users but also with regard to revenues for music companies. Spotify is now bigger than iTunes in terms of our monthly revenue in Sweden,” Mark Dennis, head of digital music at Sony BMG Sweden, told The Local on Tuesday.

The convictions of four people behind The Pirate Bay on charges of being accessories to copyright infringement in April, as well as the passing of tough new anti-piracy legislation, have led to a dramatic fall in internet traffic, attributed to a decline in illegal file-sharing.

“Sweden has been more prone to illegal file-sharing than other markets. Spotify came at an opportune time and has filled a gaping hole in consuming music. The low cost entry level is the secret to its appeal to file-sharers,” Dennis said.

Spotify has rapidly grown to over a million users in Sweden on the back of a business model that allows users to obtain advertising-funded music for free, or alternatively for a low fixed monthly fee.

Despite the advance of Spotify’s subscription service and the continuing success of iTunes, Mark Dennis still sees a future for the CD – if the music companies get the packaging right.

“Our sales of CDs have actually increased slightly in Sweden in the first six months of 2009 and still account for 85 percent of revenues. I think the transition to digital music will eventually occur but people still like buying CDs.”

“Consumers are demanding more for their money though. We just have to develop the packaging and extra material,” Dennis said.

Dennis confirms that the Ipred law and the Pirate Bay case have provided a window of opportunity for music companies to catch up with the consumer and the market.

“After Napster the music companies were caught napping. They did not have anyone to advise them. iTunes speeded this process up, and a relaxation in licensing restrictions has accelerated development.”

He conceded that many of his arguments are those that file-sharers have being using for years with regard to the slow development of the music industry.

“I think that if you provide good services people will pay. That which has been previously lacking is a breadth of opportunities to consume music.”

Spotify’s success, Dennis argues, can only be good for all concerned.

“My hope is not that Spotify dominates the market but that it helps to create the incentive for other entrepreneurs to develop more services to meet demand. That way everybody wins,” he concluded.

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SPORT

Is football next for Spotify’s billionaire CEO? 

The owner of Spotify, Daniel Ek, has offered to buy Premier League club Arsenal amid supporter backlash against their unpopular American owner, Stan Kroenke.

Arsenal play to an empty stadium
Spotify's owner has set his sights on Arsenal. Photo: Adrian Dennis/AFP

Spotify’s billionaire CEO, Daniel Ek, who revolutionised on-demand music listening for millions of people now hopes to bring his business acumen to “the beautiful game”.

The 38-year-old, known for his no-nonsense attitude, has offered to buy Premier League club Arsenal amid supporter backlash against unpopular American owner Stan Kroenke.

Ek co-founded Spotify with Martin Lorentzon in 2006, and the company which made its debut on the New York Stock Exchange in 2018 now has a market capitalisation of $56 billion.

The Swedish billionaire 

Bald, bearded and usually seen in sneakers, T-shirt and a blazer, Ek is known for his reserved style and pragmatism. He’s a shy problem-solver with a creative streak who takes long walks to think things through and prizes collective teamwork over the individual.

Ek got into computer programming as a young child, and was a dollar millionaire by the age of 23 when he sold his online advertising company, Advertigo, in 2006 for a reported $1.25 million.

“But he’s more of a businessman than a tech nerd,” Sven Carlsson, co-author of “The Spotify Play”, told AFP, painting him as a visionary.

“He’s always thinking six months ahead. He’s not into the details. He’s known for having ambitious, lofty goals, with no understanding for how unrealistic they are,” he said.

“He thinks big, and he has patience” to see those projects through to fruition.

Ek was raised in Stockholm’s working-class suburb of Rågsved. His father left the family when Daniel was young.

“He’s always had something to prove… Being left by his dad was a formative experience,” Carlsson said.

Pelle Snickars, co-author of “The Swedish Unicorn: the Story About Spotify”, describes Ek as “quite Swedish in terms of values”.

“We don’t see him on magazine covers alongside celebrities, he’s not hierarchical and does not hesitate to showcase his collaborators,” Snickars told AFP.

With around 9 percent of Spotify’s capital and 37 percent of voting rights, Forbes put Ek’s fortune at an estimated $4.8 billion in April 2021.

“Innovations are never entirely new”

In 2006, Ek and Lorentzon came up with the idea of creating a platform to distribute music online legally, a practice that was dominated by illegal file sharing sites at the time.

The duo experimented with sharing MP3 music files between the hard drives on their computers. In October 2008 Spotify was finally ready to go live after Ek pleaded with music labels to open their catalogues.

“Innovations are never entirely new,” Ek told the Royal Institute of Technology (KTH) in Stockholm during a 2013 visit.

“The success comes from combining things that already exist and trying to solve a problem that one is really involved in,” he added.

Ek reportedly dropped out of the university’s engineering programme to pursue an IT career – though his enrolment at the school has never been proven, Carlsson noted.

He said Ek’s former colleagues nicknamed him “Spice.”

“They thought he always spiced up his stories a little to make them more interesting,” Carlsson said, adding that it wasn’t necessarily a bad thing.

“Storytelling is something Spotify and Daniel Ek have always been good at.”

Football next? 

Ek’s perseverance may have led to the remarkable rise of the start-up, but artists have over the years complained of it paying them too little and cannibalising sales from their albums.

Ek has repeatedly argued that streaming is a better alternative for artists and that “piracy doesn’t pay (them) a penny – nothing, zilch, zero.”

Snickars and co-author Rasmus Fleischer dispute the idea that Spotify was founded to end piracy and force consumers to pay for music.

They claim that neither Ek nor Lorentzon “had any experience with working professionally with music”, but they had a common background from digital advertising.

“They weren’t particularly interested in music…they could have worked on skin products instead,” Snickars told AFP.

Now, Ek is ready to dive into the football arena.

“As a kid growing up, I’ve cheered for Arsenal as long as I can remember. If KSE [Kroenke Sports Enterprises] would like to sell Arsenal I’d be happy to throw my hat in the ring,” Ek wrote on Twitter on April 23.

Kroenke has however insisted Arsenal is not for sale, despite growing supporter unrest at the American billionaire’s ownership of the club, whose last Premier League title came in 2003/04.

Article by AFP’s Pia Ohlin.

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