| Top Beneficial Owners | Ordinary Shares Number | Percent |
| Daniel Ek | 31,931,376 | 16.5% |
| Martin Lorentzon | 21,514,864 | 11.1% |
| Baillie Gifford & Co | 27,937,554 | 14.5% |
| T. Rowe Price | 16,102,881 | 8.3% |
| Tencent | 16,631,969 | 8.6% |
The multi-billion music streaming company Spotify is primarily owned by its founders, Daniel Ek and Martin Lorentzon. As of 2023, Daniel Ek has 16.5% ownership of ordinary shares and 31.7% of the voting power. Martin Lorentzon has 10.9% of ordinary shares and 42.6% of the voting power.
Another key shareholder is Baillie Gifford & Co, a Scottish-based money management firm, followed by Morgan Stanley, T. Rowe Price, and Tencent.
Who is Daniel Ek?
- Daniel Ek is a Swedish entrepreneur and billionaire who co-founded Spotify in 2006 alongside friend and business partner Martin Lorentzon.
- Ek was making around $50,000 per month from his bedroom as an 18-year-old selling websites and hosting services. He then decided to study at university after receiving a hefty tax bill from the Swedish government.
- Ek dropped out of university after just eight weeks to focus on his passion for IT. He eventually founded the online advertising company Advertigo and then created Spotify with its founder Martin Lorentzon.
Who is Martin Lorentzon?
- Martin Lorentzon is a Swedish entrepreneur best known as the co-founder of the music streaming platform Spotify and digital marketing company Tradedoubler.
- Lorentzon’s first business success came from a company called Netstrategy which he founded in 1999 with Felix Hagnö. Lorentzon met Hagnö at Cell Ventures in Silicon Valley and together, they decided to launch Tradedoubler to take advantage of the emerging affiliate marketing industry.
- Lorentzon met Daniel Ek when Tradedoubler acquired his firm Advertigo in 2016. The pair were wealthy but unfulfilled, so they founded Spotify to revolutionize the music industry and give their lives purpose. Since his success with Spotify, Lorentzon has been involved in university programs to encourage the next generation to become entrepreneurs.
This is how Spotify’s business model works.
Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership.
Founded in 2008 with the belief that music should be universally accessible, it generated €9.66 billion in 2021.
Of these revenues, 87.5%, or €8.46 billion, came from premium memberships, while over 12.5%, or €1.2 billion, came from ad-supported members.
By 2022, Spotify had 195 million premium members and 273 million ad-supported users.
Spotify is the world’s largest music streaming platform, with over 489 million users across the world.
Martin Lorentzon and Daniel Ek founded the company in 2008 in response to the shutdown of the peer-to-peer music service Napster.
Spotify became a success because it was the first company to determine how to distribute the music legally and compensate the music industry simultaneously.
The platform now offers curated music discovery services, music stations, audio customization, and private listening.
Recently, it has also ventured into streaming audiobooks, podcasts, comedy, poetry, and short stories.
And it’s ramping up its advertising network!
In addition, Spotify leveraged an effective agile methodology over the years, which they called Spotify Model.
The Spotify Model is an autonomous approach to scaling agile, focusing on cultural communication, accountability, and quality.
The Spotify model was first recognized in 2012 after Henrik Kniberg and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility.
Therefore, the Spotify model represents an evolution of agile.
Origin Story
Spotify is a music streaming service that was founded in Sweden in 2006 by Daniel Ek and Martin Lorentzon.
Initially only available in Sweden and a select few European countries, Spotify can now boast over 500 million users around the world.
How did the company come to be? Let’s detail some key moments below.
Impetus for Spotify
The idea for Spotify came to Ek in 2002 after Napster had been shut down the previous year.
While similar platforms like Kazaa and LimeWire soon took Napster’s place, Ek realized that the music industry faced a problem.
In a later 2010 interview with The Daily Telegraph, Ek reflected on the problem:
“I realised that you can never legislate away from piracy. Laws can definitely help, but it doesn’t take away the problem. The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry. That gave us Spotify.”
Spotify is founded
In 2006, Ek became a millionaire at age 23 after selling his ad-tech start-up Advertigo to Tradedoubler, a Swedish digital marketing company.
He initially decided to retire and made lavish purchases that included a Ferrari, but ultimately found the lifestyle to be unrewarding.
Ek soon decided to come out of retirement and start work on Spotify.
He was joined by eventual Spotify co-founder Martin Lorentzon who had overseen the Advertigo acquisition as CEO of Tradedoubler.
Spotify was founded on April 23, 2006, and there is some confusion around the origins of its name. Many believe the word is a combination of “spot” and “identify”, but this interpretation was fabricated after the name had already been decided.
In truth, Ek and Lorentzon sat in the former’s Stockholm flat trying to think of a catchy name. They discussed a few names and even used an online jargon generator to come up with ideas, but the name “Spotify” is the result of Ek mishearing a word that Lorentzon shouted to him.
Convincing the record companies
The pair then registered the domain name and started work on the project with a team of designers and engineers that included µTorrent co-founder Ludvig Strigeus.
While work on the platform itself took only a few months, its launch had to be postponed until negotiations with the record companies were complete.
Ek was instrumental in convincing the record companies that Spotify was a good idea.
He approached each with a bold proposition: to make their music available for consumers to rent (rather than buy) and also for free. But with the Napster disaster still fresh in their minds, most record companies were still wary.
The negotiations took a total of two years, but several factors saw the outcome in Spotify’s favor.
For one, the record companies were able to demo the platform and soon recognized that music streaming on smartphones would be lucrative. Spotify itself was also well-run, well-capitalized, and endorsed by the likes of Mark Zuckerberg and Sean Parker.
Lastly, the labels agreed to give Spotify a license for the Swedish market as an experiment. History will show that a license for other European countries and the key North American market soon followed.
Spotify is launched
Spotify was launched on October 7, 2008, as a streaming music playback application for computers.
Users could choose a free account but had to be invited by another person to use the platform. For those who wanted instant access, there was also a paid subscription option.
The Spotify app for iOS devices was released in 2009 with $100 million from Russian investment firm DST used to fund its launch into the United States in 2011.
Spotify took much longer than expected to launch in North America, with Parker once noting that “I expected it would take twelve weeks to get Spotify into the U.S. Deals with record companies took 2.5 years.”
As for the reasons behind the delay, Parker suggested that Apple was threatened by Spotify’s business and took steps to prevent it from entering the continent.
Direct listing
Spotify went public on April 3, 2018, on the New York Stock Exchange.
The company did not follow the traditional IPO route and instead opted to go public with a direct listing. In other words, it was the first to list (and then offer) shares without underwriting from the banks.
The company decided on this route because it was in a strong liquid position and felt that selling shares to raise capital would dilute existing shareholders.
But the direct listing was also indicative of Spotify’s innovative, cutting-edge, and risk-taking culture.
Key takeaways:
- Spotify is a music streaming service that was founded in Sweden in 2006 by Daniel Ek and Martin Lorentzon. Initially only available in Sweden and a select few European countries, Spotify can now boast over half a billion users around the world.
- Spotify was founded on April 23, 2006. Ek and Lorentzon registered the domain name and started work on the project with a team of designers and engineers that included µTorrent co-founder Ludvig Strigeus. The name “Spotify” does not come from a portmanteau but is instead the result of Lorentzon mishearing a word when the pair were brainstorming ideas.
- After two years of negotiating with record companies, Spotify was launched on October 7, 2008, as a streaming music playback application for computers. Users could choose a free account but had to be invited by another person to use the platform.
Read More: Spotify Business Model, Subscription Business Models, Business Models.
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