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FEATURES/Cross Border | Jan 28, 2012 | 80125 views

The Most Important Man in Music

Spotify's Daniel Ek created a free, Facebook-enabled platform that could save the recording industry from piracy and iTunes
The Most Important Man in Music
Image: Harry Benson for Forbes; Micro Plaid Shirt and Thin-Wale Corduroy by De Corato
A DIFFERENT TUNE Ek once considered making his living as a professional musician. Now he plays for fun

This model has proven it can save the music business—in Sweden. One-third of Ek’s home country has signed up, and about one-quarter of those pay for premium access. According to Mark Dennis, who runs Sony Music in Sweden, Spotify single-handedly stemmed a decade of nonstop revenue drop when it launched in 2008; in 2011 Sweden’s music industry will likely see its first growth since the Clinton Administration, with Spotify accounting for 50 percent of all sales (up from 25 percent last year). This in a country that has long been a hotbed of piracy.

Extrapolate that on a global scale and the industry will have its magic bullet. With the stakes nothing less than the future of the recording business Ek arrived in the US in July for a three-front battle with Apple, Amazon and Google. Some 400,000 Americans have already subscribed to the premium plan, according to a well-placed music executive, lending credence to Ek’s pitch that he can rescue the record labels by giving their product away for free.

The two facets of Spotify—music and technology—were introduced to Daniel Ek at age 5, when over the course of a few months he received a guitar (his mother’s parents had been an opera signer and a jazz pianist) and a Commodore 20 computer (his father left the family when Ek was a baby, but his stepfather worked in IT). He was a natural at both instruments.

At 14, Ek latched onto the late-1990s dotcom mania, making commercial Web sites in his school’s computer lab. The going rate then for a commercial home page was $50,000, but Ek charged $5,000 and made it up in volume: He recruited his teenage friends, training the math whizzes in HTML and the artists in Photoshop. Soon he was netting $15,000 a month and buying every videogame out there (one favorite: A business game called Capitalism).

True to the first generation to grow up online, he sought to master everything Internet. He bought some servers to see what made them tick, and wound up earning another $5,000 a month hosting Web pages. At 16, obsessed with Google’s speed, he applied to be an engineer there (“Google said come back when you have a degree”) and then set out to build his own search company.

That project failed, but led to a gig at a company called Jajja, where he worked on search engine optimisation. The money was good, but the high schooler wasn’t really into it. He used the paychecks to buy more servers and tuners to chase his latest obsession: Recording every programme on TV at once (he had no clue TiVo was pulling off the same trick).

After high school, Ek enrolled in Sweden’s Royal Institute of Technology to study engineering. After eight weeks, realising that the entire first year would focus solely on theoretical mathematics, he dropped out. Eventually a Stockholm-based ad network called Tradedoubler asked him to build a program to tell them about the sites they contracted with, and Ek built something so effective that the company paid him about $1 million for the rights to it in 2006; he made another $1 million selling related patents.

Then things fell apart. A self-made millionaire at 23, Ek found himself holed up alone in the woods 20 miles south of Stockholm enduring a harsh Swedish winter and a harsher bout of depression. Seeking the fast life, he had bought a three-bedroom apartment in central Stockholm, a cherry-red Ferrari Modena and entrée to the city’s hottest clubs. But it was still hard to attract girls, and the big spending attracted the wrong ones.

Miserable, he sold the Ferrari and moved into a cabin near his parents, where he played guitar and meditated. Ek had already started three tech companies, but he now toyed with the idea of getting by as a professional musician. (Ek plays guitar, bass, drums, piano and harmonica; he doesn’t sing). “I wouldn’t be rich, but I could have made a living.” There in the woods Ek finally decided he’d somehow marry music and tech, the two passions that drove him.

During this time Ek started hanging out with Tradedoubler’s chairman, Martin Lorentzon, an energetic 42-year-old who works out twice a day. A Silicon Valley veteran (Alta Vista), Lorentzon took Tradedoubler public in 2005, netting himself $70 million. No longer involved in the day-to-day operations, he too was bored and adrift. The first time Ek visited Lorentzon’s Stockholm apartment he found only a mattress and a laptop balancing on an IKEA chair. “I asked him when he had moved in,” says Ek. “When he said it had been more than a year ago, I knew he wasn’t happy.”

The pair bonded over marathons of gangster films like the Godfather trilogy and Carlito’s Way (a ritual they repeat each year). “I got a very strong feeling when I met Daniel,” says Lorentzon. “To partner up I have to like the person like a brother, because we’ll face so many problems. The value of a company is the sum of the problems you solve together.”

This article appeared in the Forbes India magazine of 03 February, 2012
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