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  A few months later, just as Spotify was about to submit its IPO filing, Daniel made a move to get closer to independent artists. He announced the acquisition of Soundtrap, a startup that had spent the last six years moving from one run-down office to another in Stockholm.

  Soundtrap’s software let musicians create and record music collaboratively, in real time, without being in the room together. The service targeted amateur musicians and schools, which used it as a teaching tool.

  At first, Daniel had sought a partnership with Soundtrap, but by the summer of 2017, his team was looking to buy the whole company. Soundtrap’s users generally weren’t fully-fledged artists but, Daniel figured, the better they got, the deeper their relationship to Spotify would become.

  In the long run, the service could evolve into a new source of music for Spotify, helping the company become less dependent on the established record companies.

  While it was low on revenue, Soundtrap had received nearly $8 million in venture capital. Among the owners were the local VC firm Industrifonden, and Spotify’s former CFO, Peter Sterky. Daniel’s executives had to make several bids, but Soundtrap relented when it became clear that Spotify would give them free rein once the deal was done.

  “We share Spotify’s vision of democratizing music,” Soundtrap’s CEO, Per Emanuelsson, said after signing the deal in November 2017.

  The price tag was secret, but ended up being around $60 million, largely paid in Spotify shares.

  Some of Soundtrap’s shareholders would later brag about the price tag in private. They found it remarkable, given that the company had virtually no revenue.

  We Will Rock You

  In March 2018, Daniel Ek and some of his top executives faced a gathering of Wall Street analysts for Spotify’s Investor Day. It was a cool affair, held at Spring Studios in the trendy neighborhood of Tribeca, home to many celebrities in lower Manhattan.

  “Please welcome to the stage: founder and CEO Daniel Ek,” a voice thundered through the speakers.

  Daniel stepped out in black jeans, a black suit jacket, white t-shirt, and a fresh pair of white Nike Air Force One sneakers.

  “All right! Good afternoon, everyone,” he said, welcoming the audience to Spotify’s version of a capital markets day.

  He spoke with the same conviction as when he pitched investors during Spotify’s early years. But the balding, twenty-four-year-old founder in a bunchy pullover was gone. He now looked lean and fit, almost completely transformed from the Daniel Ek the US public had seen glimpses of over the years. He was now a handsome thirty-five-year-old whose boyhood dream had become worth $25 billion.

  “For us, going public has never really been about the pomp and circumstance of it all. So you won’t see us ringing any bells or throwing any parties,” Daniel said, bashfully.

  A few weeks earlier, Spotify had made its IPO filing public. Besides giving an exhaustive picture of the operations, the cap table revealed that several old timers—such as Martin Lorentzon’s old partner Felix Hagnö and the coding genius Ludvig Strigeus—still owned shares worth hundreds of millions of dollars. It also showed that Sony Music was Spotify’s fifth-largest owner, with almost 6 percent of the company.

  Tencent had climbed past Daniel Ek and was now Spotify’s second-largest shareholder, with just over 9 percent of the shares; but the CEO’s influence had increased. Through stock bonus incentives and a certificate program, he and Martin—the largest owner, with 12 percent of the company—could control 80 percent of the votes. The setup resembled the dual-class voting structures that the founders of Google and Facebook had popularized.

  On stage, Daniel addressed Spotify’s reputation for secrecy by stating that the company had always acted transparently—just not toward the outside world.

  “Transparency is really a key pillar of our culture. It’s always been. It’s just who we are and how we do things. We just haven’t done it externally to the same extent as internally,” he explained.

  Then he laid out Spotify’s new strategy for the first time: the company aimed to become a technology-driven layer between the fans and artists. This “two-sided marketplace” would allow the company to gain revenue from both listeners and creators alike. Spotify’s constant stream of data revealed which tracks deserved a place in the programmed playlists, which now comprised almost a third of what people were listening to. This system could thus be used to control demand in the music industry.

  The Spotify CEO underscored his point by mentioning Dermot Kennedy, who as recently as 2015 was still strumming his guitar on the streets of Dublin. The Irish singer-songwriter had uploaded a handful of songs to Spotify and, without the backing of any large label, gotten picked up by the algorithmic playlist Discover Weekly, reaching millions of listeners. Now he was touring all over the world and living off of his art.

  In its IPO filing, Spotify also mentioned Lauv, an artist who was relatively anonymous until one of his songs ended up on the playlist Today’s Top Hits. Millions of streams followed, and 70 percent of them came from playlists managed by Spotify.

  “I think this is such an important part of the Spotify opportunity, because this is the part that nobody else is doing,” Daniel said.

  Then he proceeded to use a word with magical properties in the world of tech and finance.

  “Some people say Spotify is disrupting the music industry. But I think we’re really just part of the evolution of the music industry,” he said.

  Though neither he nor his audience knew it at the time, the buzz around the new marketplace strategy would soon fade. Its most aggressive feature—a service that let artists upload their music directly to Spotify, bypassing the traditional structure—only went live for a short time in 2019. Spotify may have ended the experiment as a concession to the record labels.

  At Investor Day, the next speaker was Spotify’s product guru Gustav Söderström. He stepped onto the stage in a dark-blue collared shirt, tight blue jeans, and brown leather shoes and explained that Spotify was sitting on 200 petabytes of data detailing its listeners’ behavior.

  Gustav described Spotify as a data-driven, scalable company to the room full of Wall Street analysts.

  “Spotify is software. It’s what we do. And we’re good at it,” he said.

  Later, Barry McCarthy would spell out that Spotify was still putting growth before profits. As long as the company’s total projected revenue per new user exceeded the cost of acquiring a new user, it made sense to expand.

  Nine directors appeared on the stage that afternoon. All of them—except Danielle Lee, global head of partner solutions—were men.

  When the lights went down, Spotify had done its best to put on a grand show for Wall Street. It was the company’s last concerted performance before going public a few weeks later.

  Morning Has Broken

  On the Tuesday morning after Easter weekend, the sun stood low over the water in central Stockholm.

  At eight thirty, Sophia Bendz was on her way to her office at the Alma members’ club. Since leaving her role at Spotify’s marketing department in late 2014, she had become an investor. Soon, she would become a partner at Atomico, the venture-capital firm founded by the Skype co-founder Niklas Zennström.

  Walking across the Nybroviken dock, she took a picture of the sunrise over the Östermalm neighborhood. She was standing just a few blocks from Spotify’s early offices. The temperature hovered around freezing and the sky was clear blue.

  “Looks like a great day to list a company,” she wrote, uploading the photo to Twitter.

  Plenty of people shared her nostalgia. Magnus Hult, who sorted through Spotify’s entangled metadata at the office on Riddargatan, liked the tweet. So did the former product developer Michelle Kadir and Pär-Jörgen Pärson, whose firm Northzone had been a shareholder in Spotify for nearly ten years.

  Throughout the day, Spotify veterans would write to each other in an alumni group on Facebook. All of them waited
anxiously for the trading to open in New York. April 3, 2018, was a big day, even if Daniel Ek would do his utmost to tone it down.

  Harder, Better, Faster, Stronger

  A few hours later, it was morning in New York. Just before eight a.m., a security guard stepped into a small booth just inside the entrance at 11 Wall Street. Just over ninety minutes remained until the stock exchange would open, but the traders had already been taking orders for Spotify shares for an hour-plus.

  The listing followed the stock exchange’s usual routine. Journalists passed through the security checkpoint well ahead of time. Staff at the business channel CNBC prepared their studio for a live broadcast just below the podium with the bell that would open the trading. But neither Daniel Ek nor Martin Lorentzon would be standing on that podium. The night before, Spotify’s CEO had explained why in an open letter.

  “Of course, I am proud of what we’ve built over the last decade. But what’s even more important to me is that tomorrow does not become the most important day for Spotify,” he wrote as his company prepared for its big day.

  In his signature, he once again quoted Daft Punk: “Harder, better, faster, stronger.”

  Unlike a conventional IPO, there was no predetermined price range for Spotify’s shares. Instead, the intense secondary-market trading guided the stock traders setting the price. One of us, on assignment for the Swedish financial newspaper Dagens industri, was present that day. The traders on the floor said they had never seen anything like this process. This was the first ever direct listing on the New York Stock Exchange.

  Outside, the cold morning wind swept over the southern tip of Manhattan. The front of the stock exchange was covered in a large black banner with the green Spotify logo in the middle. Underneath were three American flags, one of which was about to be replaced.

  On the ground floor of the building, the security guard stood by a wall full of shelves with flags in cardboard boxes. He found the countries starting with “S,” pulled a box off the shelf, and made his way to the second floor of the building.

  Livin’ in the Future

  About seventy blocks north, the man of the hour sat in a white leather chair. Daniel Ek had made his way to the western end of 57th Street, near the Hudson River, with his head of global communications, Dustee Jenkins. From here, CBS This Morning went live on air every weekday, drawing a full three million viewers.

  Daniel, nursing a paper cup from Starbucks, made small talk with the host Gayle King. He was wearing a green polo shirt and an Apple Watch on his left wrist. On the air, he talked about how streaming was “not even a thing” before Apple Music launched. Now, his model was poised to take over.

  “When you have all the world’s music in your pocket, you start listening to a lot more music than you ever did before,” Daniel said.

  The last time the thirty-five-year-old was in this studio, Spotify had just introduced Moments, the unsuccessful music and video update that was supposed to follow users throughout their day. That was around the time of Taylor Swift’s boycott of the company. Now, three years later, Spotify had just enjoyed a payback moment. Taylor Swift had recently sent out a greeting to her followers.

  “There is a brand new video for ‘Delicate’ coming out, only on Spotify, tonight. So check it out,” she wrote.

  In the CBS studio, Daniel told the hosts how he had traveled “many, many” times to Nashville, Tennessee, to convince Taylor Swift to return to his service. A few days before Spotify’s IPO, the service premiered her latest video.

  The conversation turned to reports that Apple Music was about to surpass Spotify in the US in terms of paying users.

  “Are you scared?” Gayle King asked.

  Calm and prepared, Daniel said that Apple’s presence only makes the streaming market grow further.

  “As someone who grew up in a working-class suburb of Stockholm, I couldn’t afford all the music. So back in ’98–’99, I was really thinking about how I could get all that music, and do it in a legal way, while compensating all the artists,” he said.

  “So we’re now a decade into that journey, and I really just feel like we’re in the second inning,” Daniel said, borrowing a baseball term that made Gayle King chuckle.

  Daniel was repeating the lesson Martin Lorentzon once stressed: never let an IPO become the primary target of a company. Yet Daniel did admit that he would be glancing at the share price.

  “I’ll look at it when it opens. But my focus is really on the long term.”

  Red Flag

  During the tech boom of recent years, around a hundred companies had listed on the New York Stock Exchange every year. There were also about a hundred different flags stored in the lobby of the building. Around the time that Daniel Ek was being interviewed by CBS, the security guard stepped out onto the balcony and pulled down the American flag furthest to the right. He then hoisted a red one with a white cross in the middle.

  A Swiss flag appeared next to the two American ones, under the gigantic Spotify banner. From the street below, one of us took a photo and posted it to Twitter.

  News outlets from all over the world got in touch to publish the photo they had seen surface on social media. Reuters dubbed the story “the Swiss Miss,” and it quickly spread all over the world. After a few hours, the stock exchange’s press officers published a joke about Sweden and Switzerland in a tweet.

  “We hope everyone enjoyed our momentary ode to our neutral role in the process of price discovery this morning,” they wrote.

  On the day of Spotify’s IPO—April 3, 2018—a mishap on Wall Street saw the Swiss flag hoisted rather than that of Sweden. (Sven Carlsson)

  Money, Money, Money

  “Guys, the book is closing. 5.6 million, opens at 165.90!”

  Spotify’s IPO was almost four hours late. But at twelve thirty p.m., the order book closed. Sellers looking to offload 5.6 million shares had been matched with buyers.

  At Spotify’s offices in New York, the staff followed the initial trades on TV screens. The stock opened at a price that put Spotify’s total worth at $29.5 billion, far higher than it had ever been.

  Later that day, the stock price dropped. It closed at $149, which still made Spotify worth more than Snap, Twitter, and the Swedish clothing giant H&M. It also looked like Spotify had set a trend among tech companies preparing an IPO. Both Airbnb and Slack would reportedly explore the possibility of a direct listing.

  Martin Lorentzon wasn’t in New York for Spotify’s first day of trading, but he did write several posts about it on social media. He also shared an article about the stock exchange raising the wrong flag, which appeared to amuse him. Of everyone celebrating Spotify’s meteoric rise, the forty-nine-year-old had become the richest. He still owned 12 percent of the company, which came out to more than $3 billion. For his unwavering belief in Daniel Ek’s idea, he was awarded nearly five hundred times his original investment.

  Pär-Jörgen Pärson, the early investor, did not see as large a return. But Northzone’s profits from the Spotify deal were the highest for any European venture capital fund to date. The Spotify deal had put Pärson on the international map. The day following Spotify’s IPO, the Swedish investor visited the CNBC studio on the trading floor of the stock exchange.

  The hosts asked him about the threat from Apple Music in the US market. Pär-Jörgen waved it off, saying that Apple remained strong within its own ecosystem, but weak outside of the world of the iPhone.

  “It’s been part of the Spotify strategy from the outset to be pervasive and work on all kinds of devices. With Apple’s market share of about 20 percent, that naturally limits their reach,” he said.

  A few months later, both Northzone and another early Swedish venture investor, Creandum, had sold most of their shares in Spotify. In all, they had made more than $2.5 billion on the company.

  The former Stardoll CEO Mattias Miksche, who hired Daniel Ek when Spotify was nothing but an idea, was praised for his
part in the company’s success. Early on, he had identified several of the young talents who would later build one of Sweden’s biggest companies.

  “Big shout out to you Mattias,” the Swedish entrepreneur Alan Mamedi wrote on Twitter. Mattias Miksche answered him with a heart emoji.

  By the end of Spotify’s first day of trading, Daniel Ek’s net worth was more than $2 billion. He wasn’t the only shareholder with a reason to celebrate. The early investor Felix Hagnö, the ingenious coder Ludvig Strigeus, and hedge fund magnate Robert Citrone had all made hundreds of millions of dollars.

  Like A Rolling Stone

  One hot-button issue ahead of Spotify’s IPO had been how artists would be compensated if and when the labels sold their shares. The major labels owned more than 11 percent of the company, with Sony accounting for more than half of that portion. The generous stock option package Sony had been awarded ahead of Spotify’s US launch had paid off handsomely.

  When the first day of trading ended, the labels owned shares collectively worth around $3 billion. In a move some thought would distance the label from Spotify, Sony quickly sold around half of its stake. The label then promised to share the money with artists and partner labels regardless of what they owed in unrecouped advances. The largest label, Universal, appeared to keep their shares.

  Warner, meanwhile, would gradually sell all of its stock for around half a billion dollars. Of that, artists received nearly $300 million after taxes, having had only $12 million deducted to account for unrecouped advances. The major labels’ massive profits from Spotify shares were redistributed more fairly than many skeptics had feared.

  All the Stars