Ever heard of Napster? A little more than 10 years ago, Napster was the hot topic of every user of internet back then. Co-founders Shawn Fanning and Sean Parker created a peer-to-peer software program that streamlined the sharing of files. What Napster ended up as was a place to share audio files through downloading and uploading into a network that could be indexed and searched.   Although Napster as it was back then was eventually taken down through a barrage of lawsuits from the music industry, it marked the beginning of a decade of conflict between online music sharers and record companies that still goes on today.   The idea of peer-to-peer file sharing was extraordinarily innovative, harnessing one of the greatest strengths of the interconnected network that is the internet.

Spotify was developed and co-founded by Swedish serial entrepreneur Daniel Ek.   One of his more recent high-profile posts has been CEO of uTorrent, the world’s foremost P2P (peer to peer) sharing software program.   Ek is no stranger to the music scene on the internet; he capitalized on his unique knowledge of the music streaming industry to start and run Spotify.   For those who have never heard of Spotify, it is an online music streaming website that offers DRM (Digital Rights Management) protected music rented from major record labels to both free and paid customers.   Over 20 million users and 5 million paying members have joined since the company’s launch, seating Spotify firmly on top of the online music streaming industry.

Daniel Ek has been an entrepreneur from birth.  After starting his first business at age 14, he went on to found Advertigo and hold leadership positions at Tradera and TradeDoubler.  A technology enthusiast, Ek has been deeply involved in the dot-com business world from day one (his first company pioneered unique technology back in 1997), eventually leading him to cofound Spotify with Martin Lorenzton in 2006.

Spotify has transformed the music industry in a number of ways.   For one, it has granted access to streaming music to anyone with an internet connection (streaming is limited weekly in all countries except the United States, Malaysia, and Singapore).   In doing so, it has really cut down on the amount of music piracy that has plagued the music industry for years.    However, many artists claim that Spotify does not adequately compensate them for their music.   Spotify operates on a freemium model, where users can stream a certain amount of music with ads per month, with the option to pay for a subscription service that allows one to access the Spotify app and stream unlimited music without advertisements.   Spotify pays the artists of the streamed music a royalty for every time the song is streamed.    Several artists such as Nigel Godrich and Thom Yorke have pulled their music from Spotify in protest of what they call “extremely low royalty rates,”  calling out Spotify for exploitation of their intellectual property.   Ek responded to the criticisms with some advice of his own: “I’m not surprised, but I’m saddened by it,” Ek said, when asked about artists’ frustrations. “[The move from physical music to digital] is the single-biggest shift in the industry since the invention of the recording. We’re selling access, not ownership; that’s something very, very different. And, you know, the focus of the artist ought to be how you maximize the number of streams, because that, in turn, will be better long-term for you.”

Spotify has heavily relied on Facebook for its growth.   It has generally required a Facebook account to register, and its utilization of Facebook promotion through its app which users signup to have skyrocketed its membership.   The app publishes the music streamed and seeks to connect Facebook friends with like-minded music tastes.   A company that owes a primary portion of its growth to social media is an example that is quickly becoming commonplace in the current internet-based market, and Spotify has really leveraged Facebook integration to spread their listening membership.