Lunch With Daniel Ek

It's about the data and the footprint.

In other words, the more information you have, the fewer mistakes you make, and if you're America-centric, you're gonna get your butt kicked by those who see the entire world.

Music is a dumb business.

Technology is not.

Musicians know the least about everything in life other than what they do. Which may be the result of total dedication to their craft. In other words, if you're not doing it myopically, you won't make it. But to listen to artists rail about the future and payment is to listen to uninformed crybabies wailing. You learn not to take children out of the crib. Leave the artists there too.

As for businessmen... It's all about relationships and intimidation and the music business did not see the technologists coming, they're still having their lunch eaten by people who see a future they cannot.

Like Daniel Ek.

I'm not saying Daniel is a rip-off artist hoodwinking the labels, he's got to play fair, because he needs their licenses. But living in Sweden, where the Internet connection is screaming, and growing up in the land of tech, he just sees things a bit differently.

Kind of like Pandora.

No one can compete with them because of their data.

You see every time you log on to Pandora, the service learns more about you. To the point that no one else can compete. Their suggestions are going to be better. Sure, you don't want to leave the same way you don't want to abandon Sprint for Verizon, but the truth is you're getting better service from Pandora, and despite all the press being about royalties, the reality is no one can compete with the service they're delivering. Certainly not Apple, whose iTunes Radio has had no impact since the launch date.

Kind of like BeatsMusic. You log on, check it out, and then...

You see Jimmy Iovine lives in the land of marketing, but the kings of tomorrow live in the land of data.

Spotify never launches a product that fails, because they've tested it long before it launches. Yes, up to 150,000 users might be employing new features without knowing it. So by time Spotify rolls the feature throughout the world, they know it's going to gain acceptance, they know it's going to work.

Kind of like free mobile access.

The company had more sign-ups in the one month they launched it than they did in the previous eleven. But they knew that, the data told them that in the test.

In other words, while the record labels are still dependent upon CDs, Spotify is multiple steps ahead.

Can anybody compete with them?

The labels certainly think so, because they're ignorant as to the winner take all nature of the web. Where one company dominates, whether it be Google, Amazon or Facebook. If you think we're going to have multiple streaming services per territory, you believe the history of the Internet will be upended, and the data shows us otherwise.

As for Amazon... They'd be profitable if they didn't spend $3 billion in China and $2 billion on entertainment rights.

Yes, Daniel Ek gave me that perspective, when I asked him about the profitability of Spotify. Were they going to be chasing the elusive profit for years, or...

If Amazon was interested in satiating its critics, it could stop spending on tomorrow and deliver the numbers everybody wants today, but it might not triumph in the future.

It's all about triumphing in the future.

Spotify's in so many countries around the world that you're probably unaware some of them exist. They're not in Japan, where people subscribe to rental kiosks, wherein they bring the CD home, rip it, and return it for another. Because the rights holders will not deliver reasonable terms. And there's no YouTube.

There's no music on YouTube in Germany, so Spotify subscriptions are huge.

In Scandinavia, they're running in excess of 10% of the population, paying.

And now they're part of Apple's CarPlay. And Android's automobile play too. Spotify is platform agnostic. And over the course of this year, Spotify chips will be embedded in so many entertainment devices, so your boom box or speaker will know what you were listening to last, and will play it on the touch of a button, or a command from your phone, streaming directly from the Internet, or your phone.

And the truth is Sonos streaming is hard.

Yes, Sonos is the streaming kahuna. Because it has figured out both hardware and software. That's how Apple succeeded. It's sill the recipe for modern success. You can build the chip, but can you build in the delay from speaker to speaker? Can they speak to each other?

And Bluetooth might rule in units, but does the sonically superior Sonos garner all the revenue?

This is very different from play my record because I made it. The pure intimidation paradigm the business has historically run upon.

Daniel Ek is building a service so good, that you'll want to pay for it and not abandon it.

Will Beats go free? Will it sell itself to Apple or Amazon?

Maybe. That's Jimmy's out. Because he's exhausted his marketing power. People tried out Beats and abandoned it. The curation is cool for a couple of days, but then you're done.

Or, we could have the ongoing discussion about how Spotify rips off artists and kills music dead.

But that's only for musicians. Labels are making a fortune from streaming services. Are they passing most of it on to artists? No. But that's not the streaming services' fault.

And streaming kills piracy. It's just not worth the effort.

And streaming is not only what the public wants, but what it's already embraced.

Spotify's vision is to have your music follow you everywhere. So it can be called up with the touch of a button.

As for the ability to sync only 3,333 tracks to your mobile handset...that's not technology speaking, that's rights holders speaking, they imposed that limit. Which might ultimately be lifted.

So Spotify wants to be in Japan. And China. And India. But most of the major territories are already covered, so profitability is imminent. Then again, there's constant reinvestment in the product. To make sure it doesn't hiccup, to make sure it delivers what you want. People rarely tolerate bugs anymore. They expect it to work, right away and forever. It's all about scale.

As for the purchase of Echo Nest... It's about predicting what people want to listen to. And that company with 70 employees was founded by M.I.T. people in Boston.

So techies have taken over the world.

That's the story of this decade.

The aughts were all about the freak-out, the disruption, the casting aside of the baby boomers who believed it was about going to lunch as opposed to knowledge.

But now it's all about tools. He who has the best wins.

And you ensure loyalty via data.

It's no different from Billy Beane and the Oakland A's.

You've got to collect the numbers and sift through them.

Which is why booking bands is cool.

But agents and promoters will be utilizing software to determine who plays and at what price in the future.

So either get on the bandwagon or get out of the way.

And know if you want to know what's going on, a meal with expensive wine tastes good, but you're probably gonna learn a lot more by lunching with the guy in a t-shirt.


--
Visit the archive: http://lefsetz.com/wordpress/
--
http://www.twitter.com/lefsetz
--
If you would like to subscribe to the LefsetzLetter,
http://www.lefsetz.com/lists/?p=subscribe&id=1

If you do not want to receive any more LefsetzLetters, http://lefsetz.com/lists/?p=unsubscribe&uid=0eecea7b60b461717065cbde887c8e25

To change your email address http://lefsetz.com/lists/?p=preferences&uid=0eecea7b60b461717065cbde887c8e25




-- powered by phpList, www.phplist.com --