“The old model favored certain gatekeepers,” he wrote in a letter to prospective investors in February 2018. Musicians could use social media to promote their work and Spotify to distribute it. But Ek thought streaming would begin an era when artists didn’t need labels. Three record label groups control the majority of new music releases, giving them power over Spotify in negotiations. For every $5 that comes in, about $3.75 goes right back out.Įk had long argued that the answer would come from changing how the music business operated.

But investors have never made sense of Spotify’s business model. Wall Street is obviously capable of forgiving years of a company’s losses (see Amazon, Netflix, Tesla, etc.). So despite building the most popular paid music service in the world-it would take in $6.1 billion in sales in 2018- Spotify Technology SA hadn’t turned a profit since Ek co-founded it in 2006. But in exchange for that bottomless buffet, he agreed to return more than 70% of every dollar Spotify earned to rights holders. When Spotify went public in April 2018, Daniel Ek had been struggling with this question for more than a decade: How would the company make money? The Swedish entrepreneur had saved the music business from 15 years of declining sales with an app that can stream millions of songs on demand.

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