March 25, 2019 • 50 mins
Where did Spotify come from and how did it change the way we listen to music? In this episode, we look at the origin and evolution of Spotify.
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Episode Transcript
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Speaker 1 (00:04):
Get in touch with technology with tech Stuff from how
stuff Works dot com. Hey there, and welcome to tech Stuff.
I am your host, Jonathan Strickland. I'm an executive producer
with How Stuff Works and I heart radio and I
love all things tech, and today I'm going to cover
the story of Spotify, really the origin of Spotify, and
(00:27):
then a bit about what it's been up to recently.
And just for the interests of full disclosure, I feel
I should point out that the company I work for,
I Heart Media, is a competitor to Spotify. But don't worry.
I'm going to cover this topic just like I would
any other, as objective as possible, and maybe with some
bad jokes and puns. And I think this will also
help lead into a discussion about the way consumer media
(00:49):
has changed significantly over the last couple of decades. That
might actually be a second episode that I'll focus on
a little bit later. The story of Spotify is tied
very close with its founders, uh mainly Daniel Eck but
also Martin Lawrenson. Those are two Swedish businessmen who set
out to change how people access music, and while the
service would launch in two thousand eight, the real story
(01:12):
begins much earlier with Daniel Eck and initially in two
thousand two, but we're going to go even earlier than that. See,
Daniel K was an enterprising kid, like super enterprising, and
an interview and the event that was called a Pando
Monthly in New York City back in two thousand twelve,
he talked about how as a young teen and I'm
talking about thirteen years old, fourteen years old, he started
(01:35):
making money by creating websites for local businesses in Sweden.
He was interested in coding and he was getting into
it and he started getting hired to make websites for
for companies. And we're not talking about small amount of money.
I mean his first job was about a hundred dollars,
and then he went up to about two hundred dollars
and it started going up from there. And according to K,
(01:55):
at one point he was pulling down about fifty grand
a month doing business. So imagine that being in high
school and your side gig is pulling you down fifty
thousand dollars a month. Yikes. That was going pretty well
until the Swedish tax Authority notified X that he owed
(02:16):
the government a substantial amount of money to the tune
of a couple hundred grand. X early fortune was pretty
much wiped out, and he learned a valuable lesson about
running a business, which is that you can't do it
on the q T forever. Around two thousand two, X
started thinking about the problem with digital music and piracy,
and it was definitely a big problem. Services like Napster,
(02:38):
new Tela, and kaza had been home to huge databases
of pirated music since the late nineteen nineties, or had
facilitated music piracy since the ninet Since not all of
them were really databases, they were more like peer to
peer networks. More on that in a little bit. So
governments around the world were responding by creating some pretty
(03:00):
draconian laws in an effort to curb online piracy. The
governments were largely responding to big media companies that were
putting a lot of pressure on elected officials to fix
this problem. Everyone could see that the Internet was going
to be an important component in all sorts of industries.
Apple had already staked its own claim with iTunes in
(03:20):
two thousand one, but there was a real concern that
piracy essentially translated into lost sales. Now to that point,
I want to acknowledge that it's not as simple as that.
If I walk into an old fashioned record store and
I shoplift an album, we're talking like old vinyl albums,
and I grab a copy of uh, Phil Collins Greatest
(03:43):
Hits because I'm real bad, and I slip it under
my my jacket and I and I step out the door.
That's a clear loss for the shop owner of that
music shop, right, because I've taken one physical album. The
shop owner has a limited number of physical copies that
they have ordered from the record label, so they've spent
a certain amount of money to get a certain number
(04:06):
of copies of each title. I just took one of those.
They can no longer sell that particular album, so they
are out the cost they incurred when they ordered it.
That's pretty clear, right, you can understand that's a direct loss.
But with digital media it's different. Maybe I never intended
to buy a certain song. Maybe I kind of want
that song, but I don't want it badly enough to
(04:28):
actually spend my money on it. So I decide I'm
just gonna pirate a copy. The original song, however, still exists.
The original copy of the song still exists. I didn't
take anything physical. Nothing is stopping a vendor from selling
just as many copies as they would have even if
I hadn't taken anything. So for that reason, you can't
(04:48):
really argue that stolen's songs directly translate into lost revenue
in the digital market, because it could be that the
people who downloaded songs illegally otherwise would have just never
bought the music at all, so they may have just
gone without. It's not a loss sale because it was
never going to be a sale in the first place. Now,
(05:09):
I don't want this to be one sided. While the
people downloading music for free, we're circumventing the legal route,
and they were effectively stealing music, whether you could argue
that it was causing direct harm or not. The music
industry wasn't exactly making a good case for purchasing music legally.
The music landscape was fractured, with some record labels signing
(05:32):
with certain online stores, other record labels would sign with
other stores. Sometimes it was very piecemeal, where certain albums
would be allowed and others wouldn't. And then there was
the matter of digital rights management or d r m uh.
This is a way of protecting digital property. Many companies
(05:52):
have been putting restrictive DRM on music files. It's meant
to prevent you from being able to make an infinite
number of copies of a digital file, because obviously that's
a downside to the digital format, at least if you
are in the business of selling stuff, Right, if the
thing you create it can be replicated infinitely by anyone,
(06:14):
then all you have to do is sell one of those,
and then immediately you never sell another copy because people
just start copying them and then distributing them everywhere. So
DRM was meant to be a counter to that. You're
to prevent people from being able to copy indiscriminately in
some way or another. But one of the nasty side
effects of DRM is that it can impact the experience
(06:37):
of legitimate customers. Right, So the purpose of DRM is
to protect digital media so that people can't just steal it.
But when that same DRM makes it harder to listen
to legitimately purchased music, the people who are actually buying
the stuff feel as though they've been punished for buying it. Right.
If you if you bought a song and it turns
(06:58):
out you can't listen to the song the way you
want to, despite the fact that you've spent money on it.
You're not, you don't have an incentive to keep doing that, right,
You're You're You've got a bad experience. Meanwhile, pirates would
spend some time and effort in order to strip files
from the DRM, or rather DRM from the files, so
that the versions that they would upload or allow to
(07:22):
be downloaded from their machines would be DRM free. So
you would actually have a better experience listening to the
pirated music than if you were to purchase the legal stuff.
So as a consumer, you had two choices. Essentially, you
could jump through some hoops and deal with a crappy
listening experience with official music that you pay for and
(07:43):
it's got DRM and everything, so it's got all this
baggage attached to it, or you could pop on over
to a piracy site or service and then download whatever
you want for free. Now, there always was a risk
that you could also end up downloading some malware on
top of the music files or whatever where it was
you were after, but for many it seemed like it
was worth the risk. So the whole thing was kind
(08:06):
of a mess, and X thought there had to be
a better way. There had to be some method to
making music available digitally. That would remove the hurdles that
the public would have to jump over to get to
what they wanted. And if he could crack that, if
he could build a real business out of it, then
he could stand to really make some money. And he
was thinking, there's gotta be a way to make the
(08:29):
experience seamless enough where the legal route is preferable to piracy.
That's the secret. If you can make it just as
easy or easier to buy music as it would be
to steal it, then more people are going to buy it.
And the reasoning was that a lot of people want
to actually spend money supporting the stuff they love. They
(08:52):
just if you make it frustrating, they'll go around that,
because who wants to deal with that kind of nonsense. Now,
this was back in two thousand two, but would still
be a few years before he would develop the idea further.
In the meantime, he worked for a couple of companies,
and he founded some other companies, including an online advertising
firm called Advertigo, which he would later sell for a
(09:13):
big profit. In fact, he ended up founding and selling
four companies in a relatively short time. This was right
after the wake of eBay purchasing Skype. It kind of
opened up the mergers and acquisitions market in Europe at
that time. And by then he was a millionaire, and
he was considering retiring at the ripe old age of
(09:36):
twenty three years old, but instead he thought about that
music challenge again, also millionaire by twenty three. Way to go, dude, man,
that that's some hustle right there. So Eck found a
partner in Martin Lawrence n He was actually the guy
who had acquired ad Vertigo from Daniel Eck, and that
(09:58):
was ex advertising plat Form. The two began to brainstorm
about making a legal music service that removed some of
the barriers that other official stores had kind of been
putting up. The reason that those barriers encouraged people to
resort to piracy, and the music industry as a whole
was hurting as and so something had to be done.
But if you just made it easier to get that
(10:19):
music you wanted legally, they figured people would do it,
just like I was saying earlier. So they created an
office out of a three bedroom apartment that was above
a coffee shop, and they began to work on their design.
Their plan was to leverage peer to peer networks to
deliver streaming music. So what exactly is a peer to
peer network and how does it work. Some of you
(10:40):
might be familiar with peer to peer. It's something that
was really big in the nineties. It's still quite big today.
It's just not talked about as much. A lot of
the conversation is shifted to cloud computing, but peer to
peer is still a very important methodology. So here's a
quick rundown. First, You've got a network of computers all
right there. They're connected, perhaps over the Internet, but it's
(11:01):
a it's a network within the Internet, it's not the
entire Internet. So each of those computers could be owned
by a regular person like yourself, and each computer in
that network is what we would call a peer. Each
computer on the network is running special software, which is
what makes them peers. It connects them, it creates this
network among all the peers on that particular connection, and
(11:24):
peers can share files with one another without having to
go through an intermediary server. So if I'm on the
network and you're on the network, we could share files
directly with one another. And typically the way this would
work is that you would designate a special folder on
your computer's hard drive to act as a share folder,
and anything you would put in that share folder could
(11:46):
be seen and copied by peers on the network, and
the more peers who have copies of a file, the
faster downloads go. As your computer can pull from the
best connection available across the network, you can get bits
and pieces from different computers and just download a file
much faster than if it were dependent upon a single source.
So the more computers on a peer to peer network
(12:08):
that are hosting a file, the faster those transfers will go. Now,
there's nothing illegal about this method of file transfer. It's
a great way to disseminate large files across a network.
It's efficient, and it removes the need for more hefty
network servers. But it also allowed for people to share
stuff illegally at a pretty alarming rate, at least alarming
(12:29):
to media companies, and so selling the idea of a
legal peer to peer network was a bit of an
uphill battle. However, the actual implementation of a peer to
peer network using Spotify service was a lot different from
the napsters and kazas of the piracy era. The plan
wasn't to allow users to build up an enormous library
(12:50):
of songs in their personal computers, which they then could
help distribute across an ever widening network and thus sap
the music industry of its revenue. Instead, the plan was
to use peer to peer relationships to create a good
listening experience for users to sidestep another problem. That problem
was if you wanted to create a centralized music on
(13:11):
demand service, you'd be beholden to the Internet connections between
your server, your giant music database, and all of your users.
Now this wasn't as huge a problem in Sweden, which
was a leading and still is a leading country when
it comes to rolling out high speed broadband internet, but
it would make it difficult to scale Spotify globally. So
(13:34):
let's say that you did go with this method, where
you went with a centralized approach. You have your big
music database that's sitting in a data center somewhere on
your property. If a connection were bad between a user
and this database, the user might have to wait for
a long time for a song to buffer far enough
along to start playing. That's irritating, or worse, the song's
(13:54):
quality might suffer in the middle of the song, or
it might stop playing. That you know it might midplay
through while the service tried to get the data from
the server side to the user's device and restart the song.
The peer to peer approach could help that. Now explain
how it works in just a moment, But let's get
back to the business side for a second. They met
(14:15):
with a lot of resistance from record labels because they
were going to have to get licensing agreements from those
record labels in order to do this. But their arguments
were persuasive. It took a long time, but they were
making some pretty sound arguments. They laid out the challenges
that I mentioned earlier with the older model of music.
They stayed in their case in terms of business plans,
(14:38):
and they said, are the licensing fees and royalties would
provide steady revenue to the record labels and presumably too
artists more than that in a second, But it was
challenging to get the record labels to agree. It was
also challenging to get investors on board because without the
backing of the music industry, there was no business for Spotify.
They had nothing to provide anybody, and many investors saw
(15:01):
the idea as a bad bet, So Lawrenson would end
up funding operations for a couple of years, just out
of out of pocket. Now, gradually record labels began to
come around, and they sort of had to because the
music industry revenues had peaked in nineteen ninety nine at
twenty seven billion dollars. That's a lot of cheddar, as
Ben Bolan would say, but that was the peak. It
(15:26):
went to decline after that, sales started flagging. This wasn't
just due to piracy, although to hear the music industry,
they would argue vehemently that piracy was what took the
largest chunk out of their, uh, their revenue. I would
say that there were a lot of different factors. But
by a decade later, in two thousand and eight, the
(15:47):
global industry was down to fourteen billion dollars. That's still
a lot of money, but that's like half of what
it was in nine and so it took Spotify about
two years from conception to launch. It was thought of
in two thousand two, it was seriously started in two
thousand six, and it was launched in two thousand eight,
(16:08):
in October two thousand eight, uh and launched in just
a few European countries at the time. It did get
the backing of the four major music labels. That would
be Warner Music, Sony, E and My Music and Universal. Now,
when we come back, I'll talk more about how the
service works and how it's evolved since two thousand and eight.
But first let's take a quick break. Okay, so let's
(16:37):
talk about the Spotify service. To access Spotify, you first
need to download the client software for whatever platforms you
plan to use. Now, originally this was limited to desktop computers,
so your first step was downloading some software to your
machine and installing it. This would act as your interface,
allowing you to search for songs on the service, but
(16:59):
it also served as the peer to peer software to
make your machine part of the overall sharing network. This
client can pull music stored on your computer into your
Spotify library, assuming the music you have isn't stored in
a protected M four P file. That's actually a little
bit redundant because in four P stands were IMPEG four
(17:20):
protected audio. Uh. This was a file extension that Apple's
fair Play digital rights management system used. The format restricted
the devices that could play the associated audio file and
limited to authorized devices only, So if an device was
authorized to play the file, it could otherwise it could not.
Spotify just to sidestep any problems, said we can't handle
(17:44):
any of those types of files. However, if you did
happen to have songs in that format, Spotify would look
to see if it had a license for those tracks
on its service. So if you happen to have a
track of an artist that was on Spotify, and that
song was on Spotify, it would match the track with
what was in your library and just go ahead and
(18:06):
put that in your playlist. It's just you wouldn't be
listening to the version that was on your computer. You
would actually be listening to one that was on the
Spotify service itself, and it would be a a non
uh M four P DRM version. All other songs, whether
in Spotify's licensing agreements or not, would appear in your library,
assuming you have DRM free versions on your computer. So
(18:29):
even if you had a whole mess of songs in
your computer's memory, if it was in its hard drive
that were not on Spotify. Let's say that you had
all the Beatles albums, and Beatles was one of those
groups that wasn't being carried by Spotify, it would show
up in your library because you had them on your
hard drive, but no one else would be able to
(18:51):
listen to those using Spotify, you know, pulling it over
the network. The format Spotify uses when streaming music is
the Vorbis method of audio compression. Vorbis is an open
source software project, and it uses the file extension dot
o g g or og for compressed audio files. So
(19:12):
you often hear people talk about as Aga Vorbis, which
sounds like a character from Game of Thrones. Now, actually
it does trace its name to a fantasy series, but
one that's a little more lighthearted than George R. R.
Martin's epic Saga because the name Vorbius comes from Terry
Pratchett's fantasy comedy series Discworld, a fantastic comedy fantasy series.
(19:34):
If you've never read any of the Discworld books, I
highly recommend checking them out. But this name was specifically
from the book Small Gods. Aug is also a name
that shows up in Terry Pratchett's works, but that was
just a coincidence. The uh the Age extension was not
named after the Terry Pratchett character uh Nanny Ogg in
the Discworld books. I've talked about audio compression before, but
(19:59):
here's a quick reminder. The purpose for compression is that
audio files tend to be pretty large, and the larger
the file size, the more time it takes to send
over a network, and that time is experienced by the
user as a lag between hitting the play button and
hearing any sound, or in the form of having a
song stop part way through while the data transfer continues
(20:20):
in the background, or having the quality of the sound
drop in the middle of play through. So compression means
you take these files and you make the file size
is smaller and thus easier to transfer across a network.
And there are two broadways to do this. There's lossless
and lossy. Now, lossless compression means that you take a file,
(20:42):
you squish it down, you compress it, and when you
un squash it when you when you expand it back,
you have the bit for bit identical file as the
pre compressed version. So you have song file A, you
compress it into compressed format B, and when you take
it back out of compression is back to song file A. Again,
(21:05):
this is not easy to do, and typically you only
reduce the file size by a relatively small amount. Some
files can only be compressed down maybe five cent, which
does not save you a whole lot of space, and
you might be able to get down as much as
fifty with certain types of lossless compression. But if you're
really looking at a high quality audio file and it's
(21:27):
a large audio file, even the reduction is still still
means you're dealing with a big file. It still might
be too big for you to easily stream. Lossy compression
can squish files down much smaller than lossless, but they
do so at drumroll please a loss. Lossy compression ditches
(21:48):
some of the data in the audio file during the
compression process. Now, ideally, the information the compression format ditches
represents stuff that you wouldn't be able to notice anyway,
because human hearing can only pick up a range of frequencies,
and typically we describe it as the average human can
hear between twenty hurts to twenty kill a hurts. Anything
(22:11):
that is above or below that range is outside what
we could directly perceive. So if the audio file has
any information about sounds beyond human hearing, then it might
just sweep that stuff under the digital rug before compressing
the rest. It might say, well, no one could hear
this anyway, so there's no point in keeping it, and
I'm just gonna not include that information. There are a
(22:34):
lot of different rules for compression and different codex to
follow different philosophies, but they're all based on the psychoacoustic
model of how we perceive sound. So if it determines
that we would not have perceived that sound, it can
go out out the door at the end of the day.
If it's important, it's supposed to go into the compressed file,
and if it's not, it doesn't. The question is who
(22:56):
determines what exactly is important. That's what the different codex do.
Moving on, so, Spotify chose the ag vorbis format because
it represented a great return on investments. Plus, being open
source and in the public domain meant that the company
could use the format without worrying about licensing issues, so
there was no fear that one day they would turn
(23:17):
around and encounter resistance from some vendor that had them
over a barrel by holding onto a compression license in
return for more money. That no one's gonna say to them, oh, well,
I see that you're doing really well now, so we
want a bigger cut of the profits. Also, according to
Kevin Goldsmith, who was the vice president of engineering at
Spotify for several years. The ag vorbis format provided good
(23:41):
audio quality relative to the bandwidth needed to stream the audio,
so they just felt like they were getting the best
results with it. The standard audio quality for Spotify's desktop
app is one sixty kilobits per second. Now, technically that
refers to the audio files bit rate, or the number
of bits used per unit of playback time to represent audio.
(24:02):
Generally speaking, the higher that number, the better quality of
audio you get. Essentially, you're saying you're using more information
to to present that sound per unit of time. One
sixty kill a bits per second is kind of in
the middle of audio quality for streaming. If you were
to upgrade to premium Spotify UH and more on that later,
(24:23):
the bit rate would be increased to three killabits per second,
so you would have higher quality audio files. The actual
quality of the audio you would experience would be dependent
not just on bit rate, but other stuff, sample rate
and all that good stuff, plus the quality of the
speakers you're using, So in some cases you might not
really be able to tell the difference between hundred sixty
(24:46):
killabits per second and three killabits per second. If you
had really low quality headphones, for example, you might listen
to the exact same track and not be able to
tell the difference between the good version and the bad
version quote unquote, or the good version and the better
version if you prefer, uh, if your headphones are are crappy.
So it's dependent on lots of different things. Plus it's
(25:06):
dependent upon our perception, which is not reliable all the time.
All right. While Spotify relied on DRM free Music to
pull into the music library, the format Spotify uses to
stream includes DRM, so that's also something to remember. In
addition to the songs that you've already got stored on
your device, you can search the Spotify service for specific tracks.
(25:30):
So these would be things that you don't own that
are on your hard drive, and Spotify has an agreement
with whatever entity holds the right for that music, the
track should pop right up. So let's say you play
on a track that you want to hear. You you
have decided you want to hear S O B by
Nathaniel Rateliff in the Night Sweats, which is a phenomenal song.
(25:51):
You don't have that song in your hard drive, though,
so you open up Spotify and you type it in
and you see that it's available there, Spotify serves up
a streaming version of the song to you, and rather
than serve it to you from a central server, it
consults the network of Spotify users and it finds copies
of the song on those peers, those users whose devices
(26:15):
are currently connected to the network, and it sends the
file to you streaming. By relying on this network, this
helps ensure that you get an uninterrupted experience played at
a decent sound quality. And while you're listening to the music,
Spotify is actually storing the song in a memory cash
on your computer, and that serves two purposes. First, because
Spotify is staying a little ahead of you in your
(26:37):
listening experience, you're listening to music that's stored on your
device's memory, not pouring directly in from the Spotify feed.
So as long as the data going into your memory
is outpacing the playback speed, you won't have any interruptions. So,
in other words, they're filling up the bucket faster than
you can empty the bucket. But more importantly for Spotify operations,
(27:00):
those songs that are stored in the cash memory of
your device stay there so they can be used in
the peer to peer sharing. I was talking about So
the next time someone else in the network wants to
listen to S O B, Spotify might be in part
relying on your computer because you happen to have listened
to that song earlier, and it happens to be stored
(27:20):
in your cash, so your device helps keep Spotify's service going.
Sometimes the cash material might cause some other issues on
your device. If you've got an awful lot of stuff
on there, maybe you don't have a lot of space
on your device, and you might notice that things aren't
running as smoothly as they normally do. So Spotify allows
users to go into their settings and see where offline
(27:41):
songs are stored. This would be the cash that they
rely upon. You can then go to that folder and
delete the files in that folder to clear out the cash.
That's just for the desktop version. For iPhones, it's a
little bit more of a pain. Spotify advises iPhone users
to reinstall the Spotify app. You know, essentially you're taking
(28:02):
it off your phone and putting it back on again,
which will clear out the apps cash, but it will
also log you out of your account, so you have
to log back in. You have to re sink any
offline music you have stored on your phone with your account,
you have to reactivate any preferred settings you might want
on there, So that's kind of a hassle. On Android devices,
it's a little bit better. You can go into your library,
(28:22):
mean you choose settings, select other in the options, and
then delete cash and save data. It's not exactly straightforward,
but it's perhaps a little bit better than having to
reinstall the whole app. Now, I'm not surprised that it's
a bit of a headache to clear out the cash
because Spotify's operation depends upon this peer to peer infrastructure,
and the songs in your cash are what help ensure
(28:44):
a smooth experience for people in the network. So your
device is effectively working for Spotify, which is why they
probably don't make it super easy for you to clear
that cash. Your device is effectively working for Spotify. Now,
I've got a lot more to say about Spotify, but
before I get into that, let's take another quick break
to thank our sponsor. Okay, So Spotify launches in two
(29:15):
thousand eight in Europe and uses this peer to peer
technology to help deliver high speed streaming to users. The
company had managed to make some deals with enough record
labels to create a compelling but by no means universal
music service, and it rolled out operations gradually, originally relying
on an invitation only approach to adding listeners so as
(29:36):
to guarantee a good experience and not get overwhelmed. Riyal
the gate Plus they had two tiers of users. They
had free users and premium users. The free users were
the only ones that had to be invitation only if
you wanted to pay for the service. They as many
people could join as possible for that. They didn't want
to limit that at all. Understandably, that's not snark, that's
(29:59):
just I mean, that's just makes sense. Uh. The invitation
served another purpose because it also gave the service and
air of exclusivity. Nothing makes people want to try something
out more than being told there's a limit to the
number of users who will be accepted. And we saw
the same thing when Google Plus launched. Each user would
(30:20):
have five invites they could extend to other people, So
finding someone on the service who hadn't already dedicated all
five invites became a bit of a common pastime. You
would look for your friends and say, hey, do any
of you have an invite to Spotify? And like I said,
the service did have two tiers. The free tier was
(30:40):
supported by advertising still is supported by advertising. Um it
has had a limitation on the number of hours that
users could stream music per month, and the service also
placed limits on the number of times you could listen
to any particular track over a given amount of time,
and those were really Spotify is way of of bowing
to the music and the street to get these negotiations
(31:02):
to work out. So if you listen to Spotify on
the service, uh, you'd get a commercial between every few songs,
and if you try to mute the audio on commercials,
it would just pause the ad, so really you're just
putting off the inevitable. The desktop application would likewise display
ads over the user interface, so you could get both
audio and visual ads to generate revenue for Spotify, and
(31:24):
occasionally video ads playing as well. In addition, Spotify introduced
a premium tier, so for a monthly fee which has
changed a few times over the years, but for a
certain amount per month, you could get unlimited access to
the music that was available over Spotify. There were no
monthly restrictions on use. You weren't capped at a certain
(31:44):
number of hours and you also had no ads with premium.
Premium users could also listen to Spotify offline. Obviously, that
service would rely on the music stored on the device
you're using, and you would get an unlimited number of
skips of songs. If something was playing and you didn't
care to listen to it, you could skip it, and
then if you didn't like the next six songs, you
(32:06):
could skip those as well, and you'd never run out
of the skips. Oh and you would also get that
higher bit rate for your audio files that kill abits
per second. That was another benefit for the premium use.
Still is another benefit I keep saying was, but this
is still a thing. The company posted a four point
four million dollar loss in two thousand and eight, But
(32:28):
then it's kind of hard to imagine a scenario where
that wouldn't have happened. The company had to deal with
startup costs, all those music licensing fees, had to pay
for operations, and had to pay out royalties. Spotify says
they pay out seventy of their revenue and royalties to
different music companies music labels, and it had only just
(32:49):
gotten started. And it's also the sort of business that
really generates serious revenue after its scales up. It actually
is kind of a money losing venture on till it
gets to a certain size, but turns out that the
loss was just the first in a long series of
annual losses. Spotify was starting to get investors, but it
(33:10):
wasn't turning a profit. In fact, it wouldn't officially turn
a profitable quarter until February two thousand nineteen, so for
more than a decade Spotify lost money, though in one
quarter in two thousand eighteen, it appeared profitable, but that
was because of a one time tax benefit that Spotify
(33:30):
received due to its stake in another music streaming service
called ten Cent Music Entertainment Group out of China. Now
that story gets a bit weird and complex, but it
boils down to this. Ten Cent was going to hold
an I p O in the United States. It was
going to go public in the US, which meant as
part of that process, it had to declare the company's
(33:52):
value in an effort of going public. That also meant
that Spotify had to re evaluate the value of its
in sment Intencent. Because Spotify owned a percentage of stocks
in the company, they had to reevaluate how much those
stocks were actually worth instead of what was believed to
be worth. That then led to Spotify being eligible for
(34:15):
a big tax benefit, and that technically put them in
the black in two thousand and eighteen for one quarter.
But that sort of thing is obviously not replicable. It's
not sustainable. It's no way to run a business. You know,
you can't count on that happening every quarter or so.
The transition to profitability in early two thousand nineteen is
more of a good sign for the company, and it's
(34:38):
also interesting because it's a company that's valued at billions
of dollars despite having operated at a financial loss for
nearly all of its existence. It's another way of reminding
me that business is crazy. That you can run a
business that is losing money year after year after year,
and yet the value of your company that is not
(35:00):
making money is going up and up and up to
a point where you know, eventually one of two things
needs to happen. Either your company needs to start making
money so that all of that investment in that company
is justified, or everything falls apart and everybody loses their
shirt and a lot of people are out of jobs.
(35:21):
I obviously prefer option A to option B. But it
still blows my mind that companies like Spotify. Spotify is
not alone in this Twitter is another great example. But
companies like Spotify could operate for so long without making
money and uh and yet still see the value of
the company on the rise. It's crazy anyway. Jumping back
(35:43):
to two thousand nine for a second. In February two nine,
Spotify drop the requirement for invitations and launched registrations in
the UK, so if you wanted a free Spotify account,
you could sign up. If you were in Europe and
no specifically in the UK, you could sign up for
a free account right off the bat. It also launched
the Spotify Mobile service. It was pretty primitive in the
(36:05):
early incarnation, but it did expand its offerings to mobile
phone users. I think this is a good time to
mention it was sort of a serendipitous issue of timing
for Spotify to launch in two thousand and eight because
Apple had introduced the iPhone in two thousand seven, and
Apple had effectively opened up the gates for an era
of consumer smartphones, because up to that point, smartphones had
(36:27):
largely been reserved for executives and for bleeding edge early
adopters and no one else. The smartphone revolution really created
a market for services like Spotify. People like having a
portable music source. But Spotify executives would even admit later on.
Daniel Eck admitted later on that the company was a
(36:47):
little late to create a truly robust mobile app, that
they were a little late to the game on that one.
They still managed to capitalize on it, but they probably
should have moved earlier than they did. However, even that
early limited mobile service was a big hit, so much
so that Spotify would actually close down those open registrations
(37:10):
in the UK went back to the invitation only model
back in September of two thousand nine, so users could
opt for the premium service without the need for an invitation.
Yet again and again, it makes sense Spotify wasn't going
to say no, we're gonna limit the number of people
who want to give us money. Meanwhile, Spotify was dealing
with some of the other issues that tech companies have
(37:31):
had to face throughout their own histories, like data security
being a big one. In March two thousand nine, Spotify
representatives announced that the security team at the company had
detected a security flaw in the Spotify service, which could
have meant that someone had gained unauthorized access to private
account information for people who had registered before December nineteen,
(37:53):
two thousand eight. Whether anyone had actually done that was unknown,
but it was technically possible. Spotify patched that vulnerability. Also
in two thousand nine, a guy named Mark Zuckerberg you've
heard of it um, posted on a little platform that
he had co founded called Facebook that he thought Spotify
was quote so good end quote kind of like sweet Caroline,
(38:18):
and that was an early hint of things to come
in the United States. Would take a couple of years
to come to fruition, but Facebook and Spotify would be
BFFs at that point. Spotify also introduced a music purchase
option in some markets in two thousand nine, which meant
users in those markets could buy music tracks right off
Spotify and use Spotify like an online music store similar
(38:41):
to iTunes. That feature would stick around until early two
thousand thirteen, and Spotify then discontinued it, but for a
while that was another revenue source was acting as a
servant online retailer. In January, Spotify had another headache to
deal with the anti virus software Semantic identified Spotify as
(39:02):
a trojan horse form of malware, which seems pretty harsh
to me, but you can kind of understand it because
since it used this peer to peer relationship, it meant
that there was a lot of stuff going on in
the background and that could look suspicious to an anti
virus software if they thought, oh, it looks like some
program is trying to gain administrative access or some sort
(39:26):
of backdoor access to a computer. So it was proactively
blocking Spotify from working. So users with semantic antivirus software
found their Spotify programs were being nullified. So that was
a big pain for a lot of people for at
least a short while until it was all patched out.
Two thousand eleven was when Spotify was finally able to
(39:47):
enter the US market, So it launched in two thousand
and eight. People over here in the U S had
heard about it, but no one was able to actually
access it without using you know, VPNs or some other
method to get around the that their computers were. In
the US. It taken more time for the company to
negotiate with music labels. Um they had to you know,
(40:09):
every time they want to move into a new market,
they have to renegotiate with music labels because the music
labels want to be able to dictate how their music
is sold in any given market, and the US is
a particularly big market, so it took a lot of negotiations.
Spotify said it has paid billions of dollars in royalty
(40:30):
fees over the years that there have been some other
stories that kind of raise questions about this. So, for example,
one famous story that tends to get quoted all over
the place, and I think it dates all the way
back to two thousand nine, is that Lady Gaga's track
poker Face had hit a few million streams early in
Spotify's history, and yet generated only one hundred sixty seven
(40:54):
dollars in revenues, hundred sixty seven thousand, just one sixty
seven and a hundred bucks plus sixty seven more bucks,
and that's it. Spotify doesn't have a stock per play
royalty rate, but I've seen estimates of per play a
track earning point zero zero six dollars, so point six
(41:16):
cents to point zero zero eight four dollars or point
zero eight four or point eight four cents, I should say,
so not even a full penny per play, So you
got to rack up a lot of plays to earn
a dollar, let alone a hundred sixty seven. Now, that
has led some artists to complain about Spotify, saying that
this company is benefiting unfairly from the artist's work. And
(41:39):
you can see where they're coming from. If they're saying,
millions of people are listening to my music and I
got a hundred bucks for it, that does seem to
be pretty unfair. But then Spotify kept operating at a loss.
The company itself wasn't making an enormous amount of money,
and according to Spotify again, they were giving the vast
majority of their revenues back as royalty payments to record labels.
(42:04):
So maybe you could argue the record labels had some
responsibility for this, since they were so vehement in their
negotiations with Spotify, But I think overall, it really just
points out what a complicated industry, the entertainment industry is
in general. So Spotify partnered with Facebook for the United
(42:25):
States rollout, and US users could download Spotify on their
computers and uh they could create an account using their
Facebook login information and automatically connect Spotify to Facebook. That
helped drive adoption in the US. It also lead to
some controversy. There was a two thousand eighteen piece in
The New York Times, a report that found Facebook had
(42:48):
some pretty liberal data sharing agreements with various partners, including Spotify,
and that those agreements gave companies extensive access to user
data and that included thing Spotify, Netflix, and the Royal
Bank of Canada the ability to read private messages between users. Yikes,
(43:09):
So why would they do that? Why would they give
these companies the ability? Well, the thought was, at least
for Spotify, that users could send updates on what they
were listening to to their friends on Facebook. Through this
messaging service, you could essentially say, Oh, I'm listening to
Lady Gaga and my buddy Shay really loves Lady Gaga,
so I'm going to remind Shay. Hey, hey, listen, I'm
(43:31):
listening to Lady Gaga right now. Check it out and
send her a message. Uh. This, by the way, was
a messaging service that predated Facebook Messenger, the current version
of Messenger that Facebook uses. But in order to do this,
in order to activate this ability, Facebook had to grant
some access to the messaging service to Spotify, so it
(43:52):
wasn't necessarily intentionally awful, but it doesn't take a lot
of imagination to conjure up how a system could be
really badly abused in this way. But the idea was
sort of similar to giving up the rights to a
work so that it can be displayed on a on
a cloud service. Right if you if you create a
(44:14):
document on Google Docs, you give up some of the
rights of that document. But it's not meant to transfer
the intellectual property over to Google. Rather, it's to give
Google their permission to show you that document no matter
what computer you're using, because otherwise Google would effectively be
(44:34):
circumventing those rules for intellectual property. That was the same
idea with this, but you can see how it was
not particularly well thought out. In two thousand eighteen, Spotify
became the world's most valuable music company after its public
listing on the New York Stock Exchange, which pushed the
company to a valuation of twenty five billion dollars. And
(44:57):
keep in mind that at that point the company had
still yet to turn a profit. Unbelievable. Now these days,
Spotify has around nineties six million paid subscribers, many more
use the free option, and in early two thousand nineteen,
Spotify made another big move by acquiring Gimlet Media and
(45:17):
a company called Anchor, both of which are big players
in the podcast world. Anchor is a company that creates
tools for podcasters to build, monetize, and publish podcasts, and
gimblet Media is a startup podcast network. Spotify plans to
use those acquisitions to build out original programming on their platform,
and the company estimates that in the future, non music
(45:39):
media will account for twenty of all streaming on Spotify,
and the company wouldn't have to dole out royalties to
the music industry for podcast streams, so that reduces costs
for that particular part of its business. As of this recording,
Spotify plans to spend another half billion dollars on podcasting
(46:00):
in twenty nineteen. Serious business. It remains to be seen
how this will impact the podcasting industry as a whole,
which obviously I am very interested in since I'm in
that industry, But there's potential for some pretty big shake
ups coming down the line. There are a lot of
questions about how Spotify will handle its in house podcasts
(46:20):
versus those from outside the company, as well as how
it will handle ads that will play within podcasts. Any
show that Spotify produces, they can probably monetize it any
which way. For shows that they carry that are produced
from outside Spotify, that's a little more tricky. Right, Like
(46:41):
the shows I produce, we have ad breaks. I'm sure
you've noticed them. Obviously, we would want those ad breaks
preserved if we were to have our shows on other
platforms like Spotify, which we do, and that's important because
if they were stripped out, then we wouldn't be able
to monetize those episodes, and somebody else will be making
(47:02):
money off of our content, and it wouldn't be It
wouldn't make our advertisers happy, it wouldn't make us happy.
So it's it's a delicate thing. Presumably Spotify will preserve
that they are currently preserving the ads from out of
network podcasts, and then there are the Spotify exclusives that
listeners will only be able to listen to if they
(47:22):
happen to use Spotify service, and all of this, I'm
sure is going to get hashed out over time. On
one last thing, just before I finished the notes for
this particular episode, some more news broke that Spotify is
bringing an antitrust lawsuit against Apple in the European Union.
The main charge that they are bringing is that Apple's
(47:44):
policy is to take a thirty cut of app revenue
and that this is specifically harmful to streaming services that
compete against Apple, saying, well, if you take that cut
for us to operate on your platform, then and considering
how much revenue we have to spend for our our
(48:04):
royalties and everything, Uh, it actually costs us money to
work on your on your system. So what you're doing
is you are discouraging other companies to compete with you
on that space. So this is anti competitive and thus
uh indicative of a monopoly. So that's where the charge is. Obviously,
that's going to take some time to to suss out
(48:25):
over in the EU, So I'm sure I'm gonna have
to do a follow up at some point. There's a
lot more to talk about, but I'm going to save
that for another show. I also plan on doing an
episode that's sort of more philosophical, touching on some of
the ideas I've talked about here about how our consumption
of media has changed in my lifetime, how that has
(48:46):
changed significantly, and what that has meant over the different
eras of of media consumption. That I have seen, because
it is a really interesting journey and it had as
shape not just the technology we use, but the way
we use it. So look for that episode in the
(49:06):
near future. It'll probably be me being a contankerous old
man saying in my day when we listen to podcasts,
we had to do it uphill both ways, four ft
deep in snow, or something along those lines. In the meantime,
if you have any suggestions for future episodes of tech Stuff,
why not write me. The address is tech Stuff at
how stuff works dot com, or you can pop on
(49:28):
over to our website that's tech Stuff podcast dot com.
You will find links to our social media presence where
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maybe just say hi and maybe say hey, could you
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on over to our merchandise store that's over at t
(49:49):
public dot com slash tech stuff. Every item you purchase
over there goes to help the show, and we greatly
appreciate it. And I will talk to you again really
soon for more on this, and thousands of other topics.
Is it how stuff works? Dot com, m
Get in touch with technology with tech Stuff from how
stuff Works dot com. Hey there, and welcome to tech Stuff.
I am your host, Jonathan Strickland. I'm an executive producer
with How Stuff Works and I heart radio and I
love all things tech, and today I'm going to cover
the story of Spotify, really the origin of Spotify, and
(00:27):
then a bit about what it's been up to recently.
And just for the interests of full disclosure, I feel
I should point out that the company I work for,
I Heart Media, is a competitor to Spotify. But don't worry.
I'm going to cover this topic just like I would
any other, as objective as possible, and maybe with some
bad jokes and puns. And I think this will also
help lead into a discussion about the way consumer media
(00:49):
has changed significantly over the last couple of decades. That
might actually be a second episode that I'll focus on
a little bit later. The story of Spotify is tied
very close with its founders, uh mainly Daniel Eck but
also Martin Lawrenson. Those are two Swedish businessmen who set
out to change how people access music, and while the
service would launch in two thousand eight, the real story
(01:12):
begins much earlier with Daniel Eck and initially in two
thousand two, but we're going to go even earlier than that. See,
Daniel K was an enterprising kid, like super enterprising, and
an interview and the event that was called a Pando
Monthly in New York City back in two thousand twelve,
he talked about how as a young teen and I'm
talking about thirteen years old, fourteen years old, he started
(01:35):
making money by creating websites for local businesses in Sweden.
He was interested in coding and he was getting into
it and he started getting hired to make websites for
for companies. And we're not talking about small amount of money.
I mean his first job was about a hundred dollars,
and then he went up to about two hundred dollars
and it started going up from there. And according to K,
(01:55):
at one point he was pulling down about fifty grand
a month doing business. So imagine that being in high
school and your side gig is pulling you down fifty
thousand dollars a month. Yikes. That was going pretty well
until the Swedish tax Authority notified X that he owed
(02:16):
the government a substantial amount of money to the tune
of a couple hundred grand. X early fortune was pretty
much wiped out, and he learned a valuable lesson about
running a business, which is that you can't do it
on the q T forever. Around two thousand two, X
started thinking about the problem with digital music and piracy,
and it was definitely a big problem. Services like Napster,
(02:38):
new Tela, and kaza had been home to huge databases
of pirated music since the late nineteen nineties, or had
facilitated music piracy since the ninet Since not all of
them were really databases, they were more like peer to
peer networks. More on that in a little bit. So
governments around the world were responding by creating some pretty
(03:00):
draconian laws in an effort to curb online piracy. The
governments were largely responding to big media companies that were
putting a lot of pressure on elected officials to fix
this problem. Everyone could see that the Internet was going
to be an important component in all sorts of industries.
Apple had already staked its own claim with iTunes in
(03:20):
two thousand one, but there was a real concern that
piracy essentially translated into lost sales. Now to that point,
I want to acknowledge that it's not as simple as that.
If I walk into an old fashioned record store and
I shoplift an album, we're talking like old vinyl albums,
and I grab a copy of uh, Phil Collins Greatest
(03:43):
Hits because I'm real bad, and I slip it under
my my jacket and I and I step out the door.
That's a clear loss for the shop owner of that
music shop, right, because I've taken one physical album. The
shop owner has a limited number of physical copies that
they have ordered from the record label, so they've spent
a certain amount of money to get a certain number
(04:06):
of copies of each title. I just took one of those.
They can no longer sell that particular album, so they
are out the cost they incurred when they ordered it.
That's pretty clear, right, you can understand that's a direct loss.
But with digital media it's different. Maybe I never intended
to buy a certain song. Maybe I kind of want
that song, but I don't want it badly enough to
(04:28):
actually spend my money on it. So I decide I'm
just gonna pirate a copy. The original song, however, still exists.
The original copy of the song still exists. I didn't
take anything physical. Nothing is stopping a vendor from selling
just as many copies as they would have even if
I hadn't taken anything. So for that reason, you can't
(04:48):
really argue that stolen's songs directly translate into lost revenue
in the digital market, because it could be that the
people who downloaded songs illegally otherwise would have just never
bought the music at all, so they may have just
gone without. It's not a loss sale because it was
never going to be a sale in the first place. Now,
(05:09):
I don't want this to be one sided. While the
people downloading music for free, we're circumventing the legal route,
and they were effectively stealing music, whether you could argue
that it was causing direct harm or not. The music
industry wasn't exactly making a good case for purchasing music legally.
The music landscape was fractured, with some record labels signing
(05:32):
with certain online stores, other record labels would sign with
other stores. Sometimes it was very piecemeal, where certain albums
would be allowed and others wouldn't. And then there was
the matter of digital rights management or d r m uh.
This is a way of protecting digital property. Many companies
(05:52):
have been putting restrictive DRM on music files. It's meant
to prevent you from being able to make an infinite
number of copies of a digital file, because obviously that's
a downside to the digital format, at least if you
are in the business of selling stuff, Right, if the
thing you create it can be replicated infinitely by anyone,
(06:14):
then all you have to do is sell one of those,
and then immediately you never sell another copy because people
just start copying them and then distributing them everywhere. So
DRM was meant to be a counter to that. You're
to prevent people from being able to copy indiscriminately in
some way or another. But one of the nasty side
effects of DRM is that it can impact the experience
(06:37):
of legitimate customers. Right, So the purpose of DRM is
to protect digital media so that people can't just steal it.
But when that same DRM makes it harder to listen
to legitimately purchased music, the people who are actually buying
the stuff feel as though they've been punished for buying it. Right.
If you if you bought a song and it turns
(06:58):
out you can't listen to the song the way you
want to, despite the fact that you've spent money on it.
You're not, you don't have an incentive to keep doing that, right,
You're You're You've got a bad experience. Meanwhile, pirates would
spend some time and effort in order to strip files
from the DRM, or rather DRM from the files, so
that the versions that they would upload or allow to
(07:22):
be downloaded from their machines would be DRM free. So
you would actually have a better experience listening to the
pirated music than if you were to purchase the legal stuff.
So as a consumer, you had two choices. Essentially, you
could jump through some hoops and deal with a crappy
listening experience with official music that you pay for and
(07:43):
it's got DRM and everything, so it's got all this
baggage attached to it, or you could pop on over
to a piracy site or service and then download whatever
you want for free. Now, there always was a risk
that you could also end up downloading some malware on
top of the music files or whatever where it was
you were after, but for many it seemed like it
was worth the risk. So the whole thing was kind
(08:06):
of a mess, and X thought there had to be
a better way. There had to be some method to
making music available digitally. That would remove the hurdles that
the public would have to jump over to get to
what they wanted. And if he could crack that, if
he could build a real business out of it, then
he could stand to really make some money. And he
was thinking, there's gotta be a way to make the
(08:29):
experience seamless enough where the legal route is preferable to piracy.
That's the secret. If you can make it just as
easy or easier to buy music as it would be
to steal it, then more people are going to buy it.
And the reasoning was that a lot of people want
to actually spend money supporting the stuff they love. They
(08:52):
just if you make it frustrating, they'll go around that,
because who wants to deal with that kind of nonsense. Now,
this was back in two thousand two, but would still
be a few years before he would develop the idea further.
In the meantime, he worked for a couple of companies,
and he founded some other companies, including an online advertising
firm called Advertigo, which he would later sell for a
(09:13):
big profit. In fact, he ended up founding and selling
four companies in a relatively short time. This was right
after the wake of eBay purchasing Skype. It kind of
opened up the mergers and acquisitions market in Europe at
that time. And by then he was a millionaire, and
he was considering retiring at the ripe old age of
(09:36):
twenty three years old, but instead he thought about that
music challenge again, also millionaire by twenty three. Way to go, dude, man,
that that's some hustle right there. So Eck found a
partner in Martin Lawrence n He was actually the guy
who had acquired ad Vertigo from Daniel Eck, and that
(09:58):
was ex advertising plat Form. The two began to brainstorm
about making a legal music service that removed some of
the barriers that other official stores had kind of been
putting up. The reason that those barriers encouraged people to
resort to piracy, and the music industry as a whole
was hurting as and so something had to be done.
But if you just made it easier to get that
(10:19):
music you wanted legally, they figured people would do it,
just like I was saying earlier. So they created an
office out of a three bedroom apartment that was above
a coffee shop, and they began to work on their design.
Their plan was to leverage peer to peer networks to
deliver streaming music. So what exactly is a peer to
peer network and how does it work. Some of you
(10:40):
might be familiar with peer to peer. It's something that
was really big in the nineties. It's still quite big today.
It's just not talked about as much. A lot of
the conversation is shifted to cloud computing, but peer to
peer is still a very important methodology. So here's a
quick rundown. First, You've got a network of computers all
right there. They're connected, perhaps over the Internet, but it's
(11:01):
a it's a network within the Internet, it's not the
entire Internet. So each of those computers could be owned
by a regular person like yourself, and each computer in
that network is what we would call a peer. Each
computer on the network is running special software, which is
what makes them peers. It connects them, it creates this
network among all the peers on that particular connection, and
(11:24):
peers can share files with one another without having to
go through an intermediary server. So if I'm on the
network and you're on the network, we could share files
directly with one another. And typically the way this would
work is that you would designate a special folder on
your computer's hard drive to act as a share folder,
and anything you would put in that share folder could
(11:46):
be seen and copied by peers on the network, and
the more peers who have copies of a file, the
faster downloads go. As your computer can pull from the
best connection available across the network, you can get bits
and pieces from different computers and just download a file
much faster than if it were dependent upon a single source.
So the more computers on a peer to peer network
(12:08):
that are hosting a file, the faster those transfers will go. Now,
there's nothing illegal about this method of file transfer. It's
a great way to disseminate large files across a network.
It's efficient, and it removes the need for more hefty
network servers. But it also allowed for people to share
stuff illegally at a pretty alarming rate, at least alarming
(12:29):
to media companies, and so selling the idea of a
legal peer to peer network was a bit of an
uphill battle. However, the actual implementation of a peer to
peer network using Spotify service was a lot different from
the napsters and kazas of the piracy era. The plan
wasn't to allow users to build up an enormous library
(12:50):
of songs in their personal computers, which they then could
help distribute across an ever widening network and thus sap
the music industry of its revenue. Instead, the plan was
to use peer to peer relationships to create a good
listening experience for users to sidestep another problem. That problem
was if you wanted to create a centralized music on
(13:11):
demand service, you'd be beholden to the Internet connections between
your server, your giant music database, and all of your users.
Now this wasn't as huge a problem in Sweden, which
was a leading and still is a leading country when
it comes to rolling out high speed broadband internet, but
it would make it difficult to scale Spotify globally. So
(13:34):
let's say that you did go with this method, where
you went with a centralized approach. You have your big
music database that's sitting in a data center somewhere on
your property. If a connection were bad between a user
and this database, the user might have to wait for
a long time for a song to buffer far enough
along to start playing. That's irritating, or worse, the song's
(13:54):
quality might suffer in the middle of the song, or
it might stop playing. That you know it might midplay
through while the service tried to get the data from
the server side to the user's device and restart the song.
The peer to peer approach could help that. Now explain
how it works in just a moment, But let's get
back to the business side for a second. They met
(14:15):
with a lot of resistance from record labels because they
were going to have to get licensing agreements from those
record labels in order to do this. But their arguments
were persuasive. It took a long time, but they were
making some pretty sound arguments. They laid out the challenges
that I mentioned earlier with the older model of music.
They stayed in their case in terms of business plans,
(14:38):
and they said, are the licensing fees and royalties would
provide steady revenue to the record labels and presumably too
artists more than that in a second, But it was
challenging to get the record labels to agree. It was
also challenging to get investors on board because without the
backing of the music industry, there was no business for Spotify.
They had nothing to provide anybody, and many investors saw
(15:01):
the idea as a bad bet, So Lawrenson would end
up funding operations for a couple of years, just out
of out of pocket. Now, gradually record labels began to
come around, and they sort of had to because the
music industry revenues had peaked in nineteen ninety nine at
twenty seven billion dollars. That's a lot of cheddar, as
Ben Bolan would say, but that was the peak. It
(15:26):
went to decline after that, sales started flagging. This wasn't
just due to piracy, although to hear the music industry,
they would argue vehemently that piracy was what took the
largest chunk out of their, uh, their revenue. I would
say that there were a lot of different factors. But
by a decade later, in two thousand and eight, the
(15:47):
global industry was down to fourteen billion dollars. That's still
a lot of money, but that's like half of what
it was in nine and so it took Spotify about
two years from conception to launch. It was thought of
in two thousand two, it was seriously started in two
thousand six, and it was launched in two thousand eight,
(16:08):
in October two thousand eight, uh and launched in just
a few European countries at the time. It did get
the backing of the four major music labels. That would
be Warner Music, Sony, E and My Music and Universal. Now,
when we come back, I'll talk more about how the
service works and how it's evolved since two thousand and eight.
But first let's take a quick break. Okay, so let's
(16:37):
talk about the Spotify service. To access Spotify, you first
need to download the client software for whatever platforms you
plan to use. Now, originally this was limited to desktop computers,
so your first step was downloading some software to your
machine and installing it. This would act as your interface,
allowing you to search for songs on the service, but
(16:59):
it also served as the peer to peer software to
make your machine part of the overall sharing network. This
client can pull music stored on your computer into your
Spotify library, assuming the music you have isn't stored in
a protected M four P file. That's actually a little
bit redundant because in four P stands were IMPEG four
(17:20):
protected audio. Uh. This was a file extension that Apple's
fair Play digital rights management system used. The format restricted
the devices that could play the associated audio file and
limited to authorized devices only, So if an device was
authorized to play the file, it could otherwise it could not.
Spotify just to sidestep any problems, said we can't handle
(17:44):
any of those types of files. However, if you did
happen to have songs in that format, Spotify would look
to see if it had a license for those tracks
on its service. So if you happen to have a
track of an artist that was on Spotify, and that
song was on Spotify, it would match the track with
what was in your library and just go ahead and
(18:06):
put that in your playlist. It's just you wouldn't be
listening to the version that was on your computer. You
would actually be listening to one that was on the
Spotify service itself, and it would be a a non
uh M four P DRM version. All other songs, whether
in Spotify's licensing agreements or not, would appear in your library,
assuming you have DRM free versions on your computer. So
(18:29):
even if you had a whole mess of songs in
your computer's memory, if it was in its hard drive
that were not on Spotify. Let's say that you had
all the Beatles albums, and Beatles was one of those
groups that wasn't being carried by Spotify, it would show
up in your library because you had them on your
hard drive, but no one else would be able to
(18:51):
listen to those using Spotify, you know, pulling it over
the network. The format Spotify uses when streaming music is
the Vorbis method of audio compression. Vorbis is an open
source software project, and it uses the file extension dot
o g g or og for compressed audio files. So
(19:12):
you often hear people talk about as Aga Vorbis, which
sounds like a character from Game of Thrones. Now, actually
it does trace its name to a fantasy series, but
one that's a little more lighthearted than George R. R.
Martin's epic Saga because the name Vorbius comes from Terry
Pratchett's fantasy comedy series Discworld, a fantastic comedy fantasy series.
(19:34):
If you've never read any of the Discworld books, I
highly recommend checking them out. But this name was specifically
from the book Small Gods. Aug is also a name
that shows up in Terry Pratchett's works, but that was
just a coincidence. The uh the Age extension was not
named after the Terry Pratchett character uh Nanny Ogg in
the Discworld books. I've talked about audio compression before, but
(19:59):
here's a quick reminder. The purpose for compression is that
audio files tend to be pretty large, and the larger
the file size, the more time it takes to send
over a network, and that time is experienced by the
user as a lag between hitting the play button and
hearing any sound, or in the form of having a
song stop part way through while the data transfer continues
(20:20):
in the background, or having the quality of the sound
drop in the middle of play through. So compression means
you take these files and you make the file size
is smaller and thus easier to transfer across a network.
And there are two broadways to do this. There's lossless
and lossy. Now, lossless compression means that you take a file,
(20:42):
you squish it down, you compress it, and when you
un squash it when you when you expand it back,
you have the bit for bit identical file as the
pre compressed version. So you have song file A, you
compress it into compressed format B, and when you take
it back out of compression is back to song file A. Again,
(21:05):
this is not easy to do, and typically you only
reduce the file size by a relatively small amount. Some
files can only be compressed down maybe five cent, which
does not save you a whole lot of space, and
you might be able to get down as much as
fifty with certain types of lossless compression. But if you're
really looking at a high quality audio file and it's
(21:27):
a large audio file, even the reduction is still still
means you're dealing with a big file. It still might
be too big for you to easily stream. Lossy compression
can squish files down much smaller than lossless, but they
do so at drumroll please a loss. Lossy compression ditches
(21:48):
some of the data in the audio file during the
compression process. Now, ideally, the information the compression format ditches
represents stuff that you wouldn't be able to notice anyway,
because human hearing can only pick up a range of frequencies,
and typically we describe it as the average human can
hear between twenty hurts to twenty kill a hurts. Anything
(22:11):
that is above or below that range is outside what
we could directly perceive. So if the audio file has
any information about sounds beyond human hearing, then it might
just sweep that stuff under the digital rug before compressing
the rest. It might say, well, no one could hear
this anyway, so there's no point in keeping it, and
I'm just gonna not include that information. There are a
(22:34):
lot of different rules for compression and different codex to
follow different philosophies, but they're all based on the psychoacoustic
model of how we perceive sound. So if it determines
that we would not have perceived that sound, it can
go out out the door at the end of the day.
If it's important, it's supposed to go into the compressed file,
and if it's not, it doesn't. The question is who
(22:56):
determines what exactly is important. That's what the different codex do.
Moving on, so, Spotify chose the ag vorbis format because
it represented a great return on investments. Plus, being open
source and in the public domain meant that the company
could use the format without worrying about licensing issues, so
there was no fear that one day they would turn
(23:17):
around and encounter resistance from some vendor that had them
over a barrel by holding onto a compression license in
return for more money. That no one's gonna say to them, oh, well,
I see that you're doing really well now, so we
want a bigger cut of the profits. Also, according to
Kevin Goldsmith, who was the vice president of engineering at
Spotify for several years. The ag vorbis format provided good
(23:41):
audio quality relative to the bandwidth needed to stream the audio,
so they just felt like they were getting the best
results with it. The standard audio quality for Spotify's desktop
app is one sixty kilobits per second. Now, technically that
refers to the audio files bit rate, or the number
of bits used per unit of playback time to represent audio.
(24:02):
Generally speaking, the higher that number, the better quality of
audio you get. Essentially, you're saying you're using more information
to to present that sound per unit of time. One
sixty kill a bits per second is kind of in
the middle of audio quality for streaming. If you were
to upgrade to premium Spotify UH and more on that later,
(24:23):
the bit rate would be increased to three killabits per second,
so you would have higher quality audio files. The actual
quality of the audio you would experience would be dependent
not just on bit rate, but other stuff, sample rate
and all that good stuff, plus the quality of the
speakers you're using, So in some cases you might not
really be able to tell the difference between hundred sixty
(24:46):
killabits per second and three killabits per second. If you
had really low quality headphones, for example, you might listen
to the exact same track and not be able to
tell the difference between the good version and the bad
version quote unquote, or the good version and the better
version if you prefer, uh, if your headphones are are crappy.
So it's dependent on lots of different things. Plus it's
(25:06):
dependent upon our perception, which is not reliable all the time.
All right. While Spotify relied on DRM free Music to
pull into the music library, the format Spotify uses to
stream includes DRM, so that's also something to remember. In
addition to the songs that you've already got stored on
your device, you can search the Spotify service for specific tracks.
(25:30):
So these would be things that you don't own that
are on your hard drive, and Spotify has an agreement
with whatever entity holds the right for that music, the
track should pop right up. So let's say you play
on a track that you want to hear. You you
have decided you want to hear S O B by
Nathaniel Rateliff in the Night Sweats, which is a phenomenal song.
(25:51):
You don't have that song in your hard drive, though,
so you open up Spotify and you type it in
and you see that it's available there, Spotify serves up
a streaming version of the song to you, and rather
than serve it to you from a central server, it
consults the network of Spotify users and it finds copies
of the song on those peers, those users whose devices
(26:15):
are currently connected to the network, and it sends the
file to you streaming. By relying on this network, this
helps ensure that you get an uninterrupted experience played at
a decent sound quality. And while you're listening to the music,
Spotify is actually storing the song in a memory cash
on your computer, and that serves two purposes. First, because
Spotify is staying a little ahead of you in your
(26:37):
listening experience, you're listening to music that's stored on your
device's memory, not pouring directly in from the Spotify feed.
So as long as the data going into your memory
is outpacing the playback speed, you won't have any interruptions. So,
in other words, they're filling up the bucket faster than
you can empty the bucket. But more importantly for Spotify operations,
(27:00):
those songs that are stored in the cash memory of
your device stay there so they can be used in
the peer to peer sharing. I was talking about So
the next time someone else in the network wants to
listen to S O B, Spotify might be in part
relying on your computer because you happen to have listened
to that song earlier, and it happens to be stored
(27:20):
in your cash, so your device helps keep Spotify's service going.
Sometimes the cash material might cause some other issues on
your device. If you've got an awful lot of stuff
on there, maybe you don't have a lot of space
on your device, and you might notice that things aren't
running as smoothly as they normally do. So Spotify allows
users to go into their settings and see where offline
(27:41):
songs are stored. This would be the cash that they
rely upon. You can then go to that folder and
delete the files in that folder to clear out the cash.
That's just for the desktop version. For iPhones, it's a
little bit more of a pain. Spotify advises iPhone users
to reinstall the Spotify app. You know, essentially you're taking
(28:02):
it off your phone and putting it back on again,
which will clear out the apps cash, but it will
also log you out of your account, so you have
to log back in. You have to re sink any
offline music you have stored on your phone with your account,
you have to reactivate any preferred settings you might want
on there, So that's kind of a hassle. On Android devices,
it's a little bit better. You can go into your library,
(28:22):
mean you choose settings, select other in the options, and
then delete cash and save data. It's not exactly straightforward,
but it's perhaps a little bit better than having to
reinstall the whole app. Now, I'm not surprised that it's
a bit of a headache to clear out the cash
because Spotify's operation depends upon this peer to peer infrastructure,
and the songs in your cash are what help ensure
(28:44):
a smooth experience for people in the network. So your
device is effectively working for Spotify, which is why they
probably don't make it super easy for you to clear
that cash. Your device is effectively working for Spotify. Now,
I've got a lot more to say about Spotify, but
before I get into that, let's take another quick break
to thank our sponsor. Okay, So Spotify launches in two
(29:15):
thousand eight in Europe and uses this peer to peer
technology to help deliver high speed streaming to users. The
company had managed to make some deals with enough record
labels to create a compelling but by no means universal
music service, and it rolled out operations gradually, originally relying
on an invitation only approach to adding listeners so as
(29:36):
to guarantee a good experience and not get overwhelmed. Riyal
the gate Plus they had two tiers of users. They
had free users and premium users. The free users were
the only ones that had to be invitation only if
you wanted to pay for the service. They as many
people could join as possible for that. They didn't want
to limit that at all. Understandably, that's not snark, that's
(29:59):
just I mean, that's just makes sense. Uh. The invitation
served another purpose because it also gave the service and
air of exclusivity. Nothing makes people want to try something
out more than being told there's a limit to the
number of users who will be accepted. And we saw
the same thing when Google Plus launched. Each user would
(30:20):
have five invites they could extend to other people, So
finding someone on the service who hadn't already dedicated all
five invites became a bit of a common pastime. You
would look for your friends and say, hey, do any
of you have an invite to Spotify? And like I said,
the service did have two tiers. The free tier was
(30:40):
supported by advertising still is supported by advertising. Um it
has had a limitation on the number of hours that
users could stream music per month, and the service also
placed limits on the number of times you could listen
to any particular track over a given amount of time,
and those were really Spotify is way of of bowing
to the music and the street to get these negotiations
(31:02):
to work out. So if you listen to Spotify on
the service, uh, you'd get a commercial between every few songs,
and if you try to mute the audio on commercials,
it would just pause the ad, so really you're just
putting off the inevitable. The desktop application would likewise display
ads over the user interface, so you could get both
audio and visual ads to generate revenue for Spotify, and
(31:24):
occasionally video ads playing as well. In addition, Spotify introduced
a premium tier, so for a monthly fee which has
changed a few times over the years, but for a
certain amount per month, you could get unlimited access to
the music that was available over Spotify. There were no
monthly restrictions on use. You weren't capped at a certain
(31:44):
number of hours and you also had no ads with premium.
Premium users could also listen to Spotify offline. Obviously, that
service would rely on the music stored on the device
you're using, and you would get an unlimited number of
skips of songs. If something was playing and you didn't
care to listen to it, you could skip it, and
then if you didn't like the next six songs, you
(32:06):
could skip those as well, and you'd never run out
of the skips. Oh and you would also get that
higher bit rate for your audio files that kill abits
per second. That was another benefit for the premium use.
Still is another benefit I keep saying was, but this
is still a thing. The company posted a four point
four million dollar loss in two thousand and eight, But
(32:28):
then it's kind of hard to imagine a scenario where
that wouldn't have happened. The company had to deal with
startup costs, all those music licensing fees, had to pay
for operations, and had to pay out royalties. Spotify says
they pay out seventy of their revenue and royalties to
different music companies music labels, and it had only just
(32:49):
gotten started. And it's also the sort of business that
really generates serious revenue after its scales up. It actually
is kind of a money losing venture on till it
gets to a certain size, but turns out that the
loss was just the first in a long series of
annual losses. Spotify was starting to get investors, but it
(33:10):
wasn't turning a profit. In fact, it wouldn't officially turn
a profitable quarter until February two thousand nineteen, so for
more than a decade Spotify lost money, though in one
quarter in two thousand eighteen, it appeared profitable, but that
was because of a one time tax benefit that Spotify
(33:30):
received due to its stake in another music streaming service
called ten Cent Music Entertainment Group out of China. Now
that story gets a bit weird and complex, but it
boils down to this. Ten Cent was going to hold
an I p O in the United States. It was
going to go public in the US, which meant as
part of that process, it had to declare the company's
(33:52):
value in an effort of going public. That also meant
that Spotify had to re evaluate the value of its
in sment Intencent. Because Spotify owned a percentage of stocks
in the company, they had to reevaluate how much those
stocks were actually worth instead of what was believed to
be worth. That then led to Spotify being eligible for
(34:15):
a big tax benefit, and that technically put them in
the black in two thousand and eighteen for one quarter.
But that sort of thing is obviously not replicable. It's
not sustainable. It's no way to run a business. You know,
you can't count on that happening every quarter or so.
The transition to profitability in early two thousand nineteen is
more of a good sign for the company, and it's
(34:38):
also interesting because it's a company that's valued at billions
of dollars despite having operated at a financial loss for
nearly all of its existence. It's another way of reminding
me that business is crazy. That you can run a
business that is losing money year after year after year,
and yet the value of your company that is not
(35:00):
making money is going up and up and up to
a point where you know, eventually one of two things
needs to happen. Either your company needs to start making
money so that all of that investment in that company
is justified, or everything falls apart and everybody loses their
shirt and a lot of people are out of jobs.
(35:21):
I obviously prefer option A to option B. But it
still blows my mind that companies like Spotify. Spotify is
not alone in this Twitter is another great example. But
companies like Spotify could operate for so long without making
money and uh and yet still see the value of
the company on the rise. It's crazy anyway. Jumping back
(35:43):
to two thousand nine for a second. In February two nine,
Spotify drop the requirement for invitations and launched registrations in
the UK, so if you wanted a free Spotify account,
you could sign up. If you were in Europe and
no specifically in the UK, you could sign up for
a free account right off the bat. It also launched
the Spotify Mobile service. It was pretty primitive in the
(36:05):
early incarnation, but it did expand its offerings to mobile
phone users. I think this is a good time to
mention it was sort of a serendipitous issue of timing
for Spotify to launch in two thousand and eight because
Apple had introduced the iPhone in two thousand seven, and
Apple had effectively opened up the gates for an era
of consumer smartphones, because up to that point, smartphones had
(36:27):
largely been reserved for executives and for bleeding edge early
adopters and no one else. The smartphone revolution really created
a market for services like Spotify. People like having a
portable music source. But Spotify executives would even admit later on.
Daniel Eck admitted later on that the company was a
(36:47):
little late to create a truly robust mobile app, that
they were a little late to the game on that one.
They still managed to capitalize on it, but they probably
should have moved earlier than they did. However, even that
early limited mobile service was a big hit, so much
so that Spotify would actually close down those open registrations
(37:10):
in the UK went back to the invitation only model
back in September of two thousand nine, so users could
opt for the premium service without the need for an invitation.
Yet again and again, it makes sense Spotify wasn't going
to say no, we're gonna limit the number of people
who want to give us money. Meanwhile, Spotify was dealing
with some of the other issues that tech companies have
(37:31):
had to face throughout their own histories, like data security
being a big one. In March two thousand nine, Spotify
representatives announced that the security team at the company had
detected a security flaw in the Spotify service, which could
have meant that someone had gained unauthorized access to private
account information for people who had registered before December nineteen,
(37:53):
two thousand eight. Whether anyone had actually done that was unknown,
but it was technically possible. Spotify patched that vulnerability. Also
in two thousand nine, a guy named Mark Zuckerberg you've
heard of it um, posted on a little platform that
he had co founded called Facebook that he thought Spotify
was quote so good end quote kind of like sweet Caroline,
(38:18):
and that was an early hint of things to come
in the United States. Would take a couple of years
to come to fruition, but Facebook and Spotify would be
BFFs at that point. Spotify also introduced a music purchase
option in some markets in two thousand nine, which meant
users in those markets could buy music tracks right off
Spotify and use Spotify like an online music store similar
(38:41):
to iTunes. That feature would stick around until early two
thousand thirteen, and Spotify then discontinued it, but for a
while that was another revenue source was acting as a
servant online retailer. In January, Spotify had another headache to
deal with the anti virus software Semantic identified Spotify as
(39:02):
a trojan horse form of malware, which seems pretty harsh
to me, but you can kind of understand it because
since it used this peer to peer relationship, it meant
that there was a lot of stuff going on in
the background and that could look suspicious to an anti
virus software if they thought, oh, it looks like some
program is trying to gain administrative access or some sort
(39:26):
of backdoor access to a computer. So it was proactively
blocking Spotify from working. So users with semantic antivirus software
found their Spotify programs were being nullified. So that was
a big pain for a lot of people for at
least a short while until it was all patched out.
Two thousand eleven was when Spotify was finally able to
(39:47):
enter the US market, So it launched in two thousand
and eight. People over here in the U S had
heard about it, but no one was able to actually
access it without using you know, VPNs or some other
method to get around the that their computers were. In
the US. It taken more time for the company to
negotiate with music labels. Um they had to you know,
(40:09):
every time they want to move into a new market,
they have to renegotiate with music labels because the music
labels want to be able to dictate how their music
is sold in any given market, and the US is
a particularly big market, so it took a lot of negotiations.
Spotify said it has paid billions of dollars in royalty
(40:30):
fees over the years that there have been some other
stories that kind of raise questions about this. So, for example,
one famous story that tends to get quoted all over
the place, and I think it dates all the way
back to two thousand nine, is that Lady Gaga's track
poker Face had hit a few million streams early in
Spotify's history, and yet generated only one hundred sixty seven
(40:54):
dollars in revenues, hundred sixty seven thousand, just one sixty
seven and a hundred bucks plus sixty seven more bucks,
and that's it. Spotify doesn't have a stock per play
royalty rate, but I've seen estimates of per play a
track earning point zero zero six dollars, so point six
(41:16):
cents to point zero zero eight four dollars or point
zero eight four or point eight four cents, I should say,
so not even a full penny per play, So you
got to rack up a lot of plays to earn
a dollar, let alone a hundred sixty seven. Now, that
has led some artists to complain about Spotify, saying that
this company is benefiting unfairly from the artist's work. And
(41:39):
you can see where they're coming from. If they're saying,
millions of people are listening to my music and I
got a hundred bucks for it, that does seem to
be pretty unfair. But then Spotify kept operating at a loss.
The company itself wasn't making an enormous amount of money,
and according to Spotify again, they were giving the vast
majority of their revenues back as royalty payments to record labels.
(42:04):
So maybe you could argue the record labels had some
responsibility for this, since they were so vehement in their
negotiations with Spotify, But I think overall, it really just
points out what a complicated industry, the entertainment industry is
in general. So Spotify partnered with Facebook for the United
(42:25):
States rollout, and US users could download Spotify on their
computers and uh they could create an account using their
Facebook login information and automatically connect Spotify to Facebook. That
helped drive adoption in the US. It also lead to
some controversy. There was a two thousand eighteen piece in
The New York Times, a report that found Facebook had
(42:48):
some pretty liberal data sharing agreements with various partners, including Spotify,
and that those agreements gave companies extensive access to user
data and that included thing Spotify, Netflix, and the Royal
Bank of Canada the ability to read private messages between users. Yikes,
(43:09):
So why would they do that? Why would they give
these companies the ability? Well, the thought was, at least
for Spotify, that users could send updates on what they
were listening to to their friends on Facebook. Through this
messaging service, you could essentially say, Oh, I'm listening to
Lady Gaga and my buddy Shay really loves Lady Gaga,
so I'm going to remind Shay. Hey, hey, listen, I'm
(43:31):
listening to Lady Gaga right now. Check it out and
send her a message. Uh. This, by the way, was
a messaging service that predated Facebook Messenger, the current version
of Messenger that Facebook uses. But in order to do this,
in order to activate this ability, Facebook had to grant
some access to the messaging service to Spotify, so it
(43:52):
wasn't necessarily intentionally awful, but it doesn't take a lot
of imagination to conjure up how a system could be
really badly abused in this way. But the idea was
sort of similar to giving up the rights to a
work so that it can be displayed on a on
a cloud service. Right if you if you create a
(44:14):
document on Google Docs, you give up some of the
rights of that document. But it's not meant to transfer
the intellectual property over to Google. Rather, it's to give
Google their permission to show you that document no matter
what computer you're using, because otherwise Google would effectively be
(44:34):
circumventing those rules for intellectual property. That was the same
idea with this, but you can see how it was
not particularly well thought out. In two thousand eighteen, Spotify
became the world's most valuable music company after its public
listing on the New York Stock Exchange, which pushed the
company to a valuation of twenty five billion dollars. And
(44:57):
keep in mind that at that point the company had
still yet to turn a profit. Unbelievable. Now these days,
Spotify has around nineties six million paid subscribers, many more
use the free option, and in early two thousand nineteen,
Spotify made another big move by acquiring Gimlet Media and
(45:17):
a company called Anchor, both of which are big players
in the podcast world. Anchor is a company that creates
tools for podcasters to build, monetize, and publish podcasts, and
gimblet Media is a startup podcast network. Spotify plans to
use those acquisitions to build out original programming on their platform,
and the company estimates that in the future, non music
(45:39):
media will account for twenty of all streaming on Spotify,
and the company wouldn't have to dole out royalties to
the music industry for podcast streams, so that reduces costs
for that particular part of its business. As of this recording,
Spotify plans to spend another half billion dollars on podcasting
(46:00):
in twenty nineteen. Serious business. It remains to be seen
how this will impact the podcasting industry as a whole,
which obviously I am very interested in since I'm in
that industry, But there's potential for some pretty big shake
ups coming down the line. There are a lot of
questions about how Spotify will handle its in house podcasts
(46:20):
versus those from outside the company, as well as how
it will handle ads that will play within podcasts. Any
show that Spotify produces, they can probably monetize it any
which way. For shows that they carry that are produced
from outside Spotify, that's a little more tricky. Right, Like
(46:41):
the shows I produce, we have ad breaks. I'm sure
you've noticed them. Obviously, we would want those ad breaks
preserved if we were to have our shows on other
platforms like Spotify, which we do, and that's important because
if they were stripped out, then we wouldn't be able
to monetize those episodes, and somebody else will be making
(47:02):
money off of our content, and it wouldn't be It
wouldn't make our advertisers happy, it wouldn't make us happy.
So it's it's a delicate thing. Presumably Spotify will preserve
that they are currently preserving the ads from out of
network podcasts, and then there are the Spotify exclusives that
listeners will only be able to listen to if they
(47:22):
happen to use Spotify service, and all of this, I'm
sure is going to get hashed out over time. On
one last thing, just before I finished the notes for
this particular episode, some more news broke that Spotify is
bringing an antitrust lawsuit against Apple in the European Union.
The main charge that they are bringing is that Apple's
(47:44):
policy is to take a thirty cut of app revenue
and that this is specifically harmful to streaming services that
compete against Apple, saying, well, if you take that cut
for us to operate on your platform, then and considering
how much revenue we have to spend for our our
(48:04):
royalties and everything, Uh, it actually costs us money to
work on your on your system. So what you're doing
is you are discouraging other companies to compete with you
on that space. So this is anti competitive and thus
uh indicative of a monopoly. So that's where the charge is. Obviously,
that's going to take some time to to suss out
(48:25):
over in the EU, So I'm sure I'm gonna have
to do a follow up at some point. There's a
lot more to talk about, but I'm going to save
that for another show. I also plan on doing an
episode that's sort of more philosophical, touching on some of
the ideas I've talked about here about how our consumption
of media has changed in my lifetime, how that has
(48:46):
changed significantly, and what that has meant over the different
eras of of media consumption. That I have seen, because
it is a really interesting journey and it had as
shape not just the technology we use, but the way
we use it. So look for that episode in the
(49:06):
near future. It'll probably be me being a contankerous old
man saying in my day when we listen to podcasts,
we had to do it uphill both ways, four ft
deep in snow, or something along those lines. In the meantime,
if you have any suggestions for future episodes of tech Stuff,
why not write me. The address is tech Stuff at
how stuff works dot com, or you can pop on
(49:28):
over to our website that's tech Stuff podcast dot com.
You will find links to our social media presence where
you can go and bug me there or not bug
maybe just say hi and maybe say hey, could you
do an episode about blah blah blah, And I might
say I would love to do an episode about blah
blah blah and that big fantastic or you know, pop
on over to our merchandise store that's over at t
(49:49):
public dot com slash tech stuff. Every item you purchase
over there goes to help the show, and we greatly
appreciate it. And I will talk to you again really
soon for more on this, and thousands of other topics.
Is it how stuff works? Dot com, m
TechStuff News
Hosts And Creators
Oz Woloshyn
Karah Preiss
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