Spotify CEO Daniel Ek on Hitting 10 Million Subs, Apple-Beats Deal, IPO

On Wednesday Spotify revealed it now has ten million paying subscribers and 40 million active users. CEO and founder Daniel Ek spoke to Billboard about what the numbers say about where the industry and his own business is right now.

Billboard: What do these growth numbers say about the current state of the industry?
Daniel Ek: Not only have we proved that the more people play, the more likely they are to pay, but we’ve really become truly global now. Our two biggest markets now are the US and UK. Now this reflects actually what the global music market looks like — we’re not in Japan yet of course – (the third largest music market most years). This isn’t just a Nordic phenomenon anymore.

So what’s your fastest growing market?
As a region, Latin America is really growing fast. Brazil is coming in the last week of May. The US, UK and Germany are also growing really well.

What’s your most competitive market?
Of course the US. We don’t really think there is a service that’s “just like” Spotify – but of course it’s everything from YouTube and Pandora to Rdio.

What is driving the growth for Spotify right now?
We’ve seen a huge uptake in growth since we launched our mobile free service in December. We’re seeing a good chunk of those users wanting to pay for the service once they start to use it. So people are coming in on mobile and then turning into paid subscribers. I can tell you that about 80% of all people who sign up to Spotify, sign up on mobile first. The business has gone from being Europe-centric – to now being global where big music markets are also our big markets. Now we’re in Europe, US, Latin America and Asia and we’ve really become mobile-first. Users are spending more time using mobile devices – but there’s a lot of people who still have multiple devices depending on what they’re doing. If you look at a market like Latin America, it’s all mobile and tablet – no PCs.

Have you reached a tipping point now in terms of awareness? Is there a number that is “the benchmark” for making a difference?
I feel now that with ten million subscribers, we’re at the place where – if you look at similar services – this was the point where they started really taking off compared to the competition. Last year, there was a lot of talk about competing services being close to us. Now, no one is even close to where we are on the subscriber side.

How do you work out what is a reasonable amount of music for people to listen to and still be profitable?
We really don’t care much about that. We just think usage is good. If we focus on building the best possible product to get you to listen to even more music, we’re certain that people will pay. This isn’t like a gym membership where people are expected to sign up and never use the service! We want it, the labels want it, the artists want it.

What does the Apple acquisition of Beats mean to Spotify?
There has been a lot of people speculating on the news and what it means. I don’t know. I don’t like speculating about things that haven’t happened.

If Apple did buy a streaming service, do you generally think it makes the pie bigger or just more competitive?
The one thing I can say – we know streaming is the better model in music and we’ve said that for over 5 years — when everyone else said it wasn’t the case. I’ve always assumed Apple would offer a streaming service at some point – but we’re focusing on building the best possible product and feel pretty good about that. Users know the difference between something that really is the best product and not something that’s just bundled in – and 10 million subs is a good indication of that. We’re not fighting over market share here. The music industry is still smaller than it should be. And in the UK, we’re seeing that streaming (and we) are already growing the overall pie.

Is there a timeframe for how much longer you can use the freemium model to give away music?
Long term, we think that music has always been freemium. Music was free on radio and then you went and bought it. Streaming is the equivalent of that. We think that if you care about music, the more likely you are to pay – and the more we can get people into music (by listening more), the more will become a paying customer.

Given the never-ending reports about you going public, is this the year in which you feel you have to make a decision one way or the other?
No, not at all. There’s so much speculation but really that’s all it is. We’re not focusing on an IPO and I’ve said that publicly many times. It’s not something I’m spending a lot of time thinking about. Of course at some point our investors want to get their money back – and we’ll figure that out. But there’s no rush in that and no one is forcing us. The focus right now is building the company and growing faster. We’re still in the early days. I feel we’re running a lot faster than ever before and 10 million is not a bad number if you look at other comparables, so we’re on a great path.