NETFLIX REVIEW: The Playlist

Three tradeoffs learned from Daniel Ek, CEO of Spotify

Changing the world means making some noise.

This is the tagline for the Netflix mini series, The Playlist, which is a biography on the music-tech company, Spotify. In this six-part mini series, viewers are introduced to Swedish entrepreneur, Daniel Ek, who is played by Edvin Endre. Ek's relentless and ruthless pursuit to disrupt the music industry is a masterclass in business tradeoffs. In this post, I will breakdown three tradeoffs conveyed in this Netflix NFLX 0.00 series.

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Tradeoff #1 — Uncompromising Tech

Founders like Daniel Ek embody high levels of conscientiousness where there is a right and wrong way to perform tasks. Evidence of this was when the "coders" developed different iterations of the front-end interface of the Spotify platform. The lead coder, Andreas Ehn played by Joel Lutzow, wanted to develop something beautiful and Ek wanted something fast...extremely fast. As depicted in the mini series, the first iteration would have been fast enough for 95% of the population who use Spotify. But this was a failure to Ek. It needed to be faster.

After a few more iterations of the product, the coders were able to achieve the type of speed that met the high standard of Daniel Ek. And yes, even in the mini series, the difference in milliseconds to load songs was evident.

In the real world, I performed a simple desktop search on iTunes versus Spotify, and like the mini series, Spotify loads songs significantly faster than iTunes (no contest!). It is ironic that this difference in real life makes me appreciate the product and the coders behind it much more. If it weren't for a headstrong, conscientious person like Daniel Ek to raise the bar for the coders, then this feature of load time may not have separated Spotify from the competitors.

Tradeoff #2 — Attorney vs CEO

As Daniel Ek and his partner and co-Founder, Martin Lorentzon played by Christian Hillbord, pitched big record companies like Sony, Warners, and the like, their pitch was that the Spotify platform delivered free music to audiences with quality, design, and intelligence, and benefited everyone including artists. This business model was different than that of Pirate Bay, a file-sharing service, which dominated the market at the time and simply permitted users to illegally download music.

However, what wasn't made clear through Ek nor Lorentzon was the business model. How was a music platform, or better, music streaming service, benefiting everyone especially the artists. Enter attorney-at-law, Petra Hansson played by Gizem Erdogan.

The job of Hansson was to negotiate with the record companies use of their music through Spotify. Record companies countered back with all sorts of ridiculously high licensing fees and paywalls that would have turned Spotify into a parrot of these record companies. Ek was at the table with Hansson negotiating these deals, but the headstrong founder would not let any record companies dictate to him how his company was to be ran. Attorney Hansson attempted to rationalize the legal sense of the record companies to Ek, but to no avail. How was Hansson ever going to do her job when the founder saw it fit to do her job for her?

This second tradeoff in the mini series between Hansson and Ek was my favorite because it's a lesson in working with teammates. Hitting a brick wall one after another, Hansson finally had a breakthrough moment. What if Spotify users could use the platform for free and certain upgraded features of the platform would have to be paid for through a premium subscription? In this sense, it wasn't the record companies dictating the business model, it was Spotify. After deliberations, Ek approved and Spotify Premium was born out of the idea from attorney-at-law Petra Hansson and not Daniel Ek.

Tech entrepreneurs like Ek have a “healthy” level of narcissism which can be advantageous as evidence in tradeoff #1. But when someone else within the company creates such a pivotal idea, then that is a bitter pill to swallow. Yet, Ek begrudgingly acknowledged the brilliance of someone else’s idea.

Tradeoff #3 — The Company vs The Artists

The last tradeoff in the mini series is an ellipsis, or to be continued. It undoubtedly pits artists against Spotify.

When seeking capital funds, investors ask the question 'who is your customer?' This question has several layers to it like the song Bohemian Rhapsody. It forces businesses to ask additional questions like: what are the demographics of our customers, what are the psychographics, do we have more than one customer?

In the final episode, Spotify achieved product market fit and scaled to the point that a Swedish-born company has been "invited" to testify in front of the US Senate committee on antirust laws. The issue at stake is a double-edge sword for musical artists. While many of the big name artists like Drake or Taylor Swift are paid handsomely, there are many more artists who despite receiving hundreds of thousands of impressions per month, are paid pennies on the dollar. This conundrum leaves artists stuck between a rock and a hard place. Do artists publish their music on Spotify and allow Spotify to profit off their work, or do they risk not having access to the global audience that Spotify has built for them?

Bobbi T, played by Janice Kavander who is an actual Spotify artist, represents a cadre of other artists who are fighting Spotify for better pay. After providing her testimony in front of the US Senate committee, a testimony that even Daniel Ek was impressed with, the two face-off outside of the senate chambers. Defiantly, Ek tells Bobbi the "founder's story" of starting and building Spotify, and he mentions to her that he has one regret.

Daniel: You know what I regret most about Spotify? That I didn't walk out on the negotiations. When you're sitting there in the first talks about the music rights, I should have said that, "This is the future. If you want to be part of it, it has to be on our terms."

Bobbi: So what you're saying is that everything would have been better if you'd stopped listening to people?

Daniel: Yeah.

When a business becomes as important and successful as Spotify, then the question of 'who is your customer' bumps heads with another question, 'why are you building this company?' These two questions may have opposing answers, and hence, the tradeoff is not about right or wrong, but what is the path of least resistance.

In Spotify’s case, this is inevitably unfinished business.

Spotify’s SPOT 0.00 earnings call is on Tuesday, October 25th.