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Viewpoint: Flushed! An open letter to Spotify’s Daniel Ek

Spotify gets 30 percent less now from each user than they did in 2016. They’re still asymptotic to profitability. Three years ago they spent ONE BILLION DOLLARS on podcasts to fix that. Clearly, it didn’t work. Here’s why: Mature companies aren’t like startups. I’ve run both and I can say that with certainty.

Spotify gets 30 percent less now from each user than they did in 2016. They’re still asymptotic to profitability. Three years ago they spent ONE BILLION DOLLARS on podcasts to fix that. Clearly, it didn’t work. Here’s why: Mature companies aren’t like startups. I’ve run both and I can say that with certainty.

The Milan office of streaming audio service Spotify.
The Milan office of streaming audio service Spotify. (Handout photo courtesy Spotify, Graphic by The Desk)

A startup is like a petulant child. It will tell you exactly what it wants. If you don’t deliver, you’ll hear about it – quickly and loudly.

Older companies are like older kids. They’ll sulk in their rooms, leaving you to guess what they want. Their ambivalence will waste your time, energy, efforts, and resources. They didn’t teach me that in B-school.

Spotify is bringing back memories of life with my first obstreperous startup. It went like this.

I could go to SI.com and read what I wanted for free. Or, I could pay to have SI mail me the NASCAR stuff I never read. I cancelled my subscription. Apparently, millions of other people dropped print too.

We fixed the mass media problem in a “my media” world. Our tech built and delivered your issue; not your copy. It curated content and overlaid an ad network. All in print.

We were SaaS-ing along nicely when the president of a giant publisher called me. “We want our print to be personal. But…we can’t put [big title] on your thing unless you work with a big printer. Too much risk.” So, I met with the CEO of a big printer.

I hadn’t thought about the downstream effects of non-me media on printing. So I was pretty surprised when the CEO of Big Print Co. took my call.

His business was in a death spiral. He called it a prolonged slump. Potato. Potahto.

He had an unslump plan. Flush with $250 million he had just borrowed from banks (plural), he was going to buy toys – like digital print SaaS – that he could give away for free to make clients, “More sticky.”

Today, you would think a strategy that malformed would have been crafted by a committee of environmentalist hippies sitting around a drum circle, just returned from a peyote-infused vision quest. Then rewritten by ChatGPT while chatting with a Stanford MBA class prepping for a hackathon.

Big Print Co. bought 18 fledgling companies in 18 months. Mine was one of them. Don’t bother with the math. It wasn’t proportional. I drive a Fiat; not a Ferrari.

His very grown up business was very insufficiently petulant. He didn’t realize that it doesn’t matter how many freebies you give a publisher who’s losing customers, they won’t print more magazines with you. He flushed one quarter of a billion dollars. I quit after six weeks. Big Print Co. is bankrupt now.

Spot-ify the similarities.

In 2019, Spotify spent one billion dollars buying podcasts to make their music listeners, “More sticky.”

Spotify CEO, Daniel Ek, didn’t realize that it doesn’t matter how many freebie podcasts you give music listeners, they won’t spend more money to subscribe to your music.

Mr. Ek’s problem is that his startup has grown up. It’s sulking in its room, listening to emo music on iTunes through AirPods, and it’s ignoring its founder when he asks, “What do you want for dinner?”

As we know, AI ingests junk and spits it back out. When Mr. Ek asked ChatGPT for a plan, it said to be, “Everything audio.” Seriously, CEOs stop getting strategic advice from a glorified search query auto-filler wrapped in a chatbot and hyped in 17.3 percent of posts in your LinkedIn feed.

Mr. Ek needs someone petulant to tell him what’s core. That’s me. He can pay me what people pay him to listen to Joe Rogan chat about COVID with that My Pillow guy.

An open letter to Daniel Ek on how to grow Spotify

When you think of YouTube, Instagram, or TikTok it’s impossible not to think of their intertwined talent. Mr. Beast on YouTube. The Kardashians on Instagram. Whoever TikToks. Those platforms identify, nurture, and leverage their stars. Stars, not doodads and gewgaws, make their platforms sticky.

For 500+ million people, Spotify is the platform for music. No one has ever made that claim.

Still, you worry that Spotify will become the next Walkman. Or Blaupunkt. Or iPod. You know that while our music is evergreen, we’re a whole lot more fickle about what plays it. So, be the music.

Taylor Swift is Universal Music Group’s star. UMG is Drake’s label too. You just stream their songs.

Mr. Ek, you need music stars; not podcasts.

With Spotify’s data, you could find artistic needles in stacks of vinyl. You could out-pitch any label for talent. “Why sign with UMG? They’re just a label. We’re going to make you a stahhh.” You could manage and promote your stars.

YouTube only gets ad dollars. Spotify could get ad dollars plus residuals when your stars’ songs play on radio. When your stars tour with Taylor Swift, Spotify gets a cut. Spotify could do a production deal with NBC for How to Spot-ify America’s Next Top Talent. And, one on ITV for Britons.

Stickiness doesn’t come from buying tangential stuff. It comes from circling your strength. Your strength is music. You could be more powerful in music than YouTube is for video or Instagram is for pictures.

All that is just off the top of the head of someone who doesn’t listen to music. All I hear are the screams of petulant startups.

Coda

Companies that are flush with cash and short of ideas buy things. Lots of things. They overpay in the name of synergies. Really, they just have to listen. Listen to the petulant startup inside that sullen teenage company.

Charles Benaiah is the CEO of Watzan, a techy company for medical media. When he’s not running a media company, he reads about media, thinks about it, pull out what’s left of his hair dealing with it, and then he writes about it over on unCharles. Follow him on LinkedIn by clicking or tapping here

The opinion reflected in this article is the author’s own and do not necessarily represent the viewpoints of TheDesk.net or its parent company, Solano Media LLC.

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About the Author:

Charles Benaiah

Charles Benaiah is the co-founder of Medspoke and the founder and CEO of Watzan.