Notes by Nero Okwa
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Notes by Nero Okwa

Issue 13.Spotify: A Product Story ‘Review’

01: How do you steal from a pirate?

Listening to 🎵 Monalisa by Lojay, Sarz

This is the 2nd review of the 9-part series — Spotify: A Product Story.

In this series, you would learn about how to build a great product, transform an industry, and grow a business from scratch to 300m users. You would also learn about making strategic decisions, choosing the right business model, and partnerships.

Spotify has successfully transformed how we experience music. As at Q1 2021, Spotify has 365m monthly active users (MAU), of which 165m are paying subscribers.

In the last article The most epic battle in music history, we learned about Napster and the change it had wrought in the music industry. But this was only the beginning.

In this episode, we’ll cover the story behind Spotify’s first product — the desktop app — and the 4 biggest lessons learnt by Spotify.

Lessons that could be vital to your business, product, and career.

SETTING THE SCENE

Napster had come along with a better consumer experience for users, but their model was piracy. So, the record labels who owned the music and were losing revenue from cd sales, sued Napster, and won. But piracy is now widespread, no one want to go back to paying for music.

Internet speed is also very slow. You could spend 20 minutes downloading a single track, only to find out it had very poor quality, was wrongfully named, or wa a computer virus.

So, the idea that Daniel Ek and his co-founder Martin had was — what if you could provide a better experience to users than piracy, for free, and still compensate the music owners.

In other words, how do you steal from a pirate?

THE HOW

Lesson 1: Convenience trumps everything.

Daniel and Martin made a bet that people would keep pirating songs until something even easier came along. And once it did, they would make the switch.

The idea was that users would search for any song ever recorded, press play, and it played instantly. But they knew uses weren’t going to pay for music, but they may be willing to listen to ads. This ad revenue could be then used to pay the record companies, and the musicians.

To achieve this, they would need:

A superior Product (Technology) + Music (Content) + The right Business Model (Ad-supported)

Listening to 🎵 Bloody Samaritan by Ayra Starr

TECHNOLOGY

They began assembling a team of engineers to build the first product.

To make the experience work would involve moving around a large amount of data. This was in the era of dial up internet which was extremely slow. This made their proposed solution unfeasible.

Till they met Ludde Strigeus.

Ludde built μTorrent. The 2nd most popular BitTorrent client ever, with 150m users around the world.

But what are torrents?

Note: I’ll use this symbol anytime I am explaining a technical concept — [tech]…[/tech]

[tech] — Torrents

Napster’s model involved peer to peer networking — sharing large mp3 files between two people(peers). Torrent was better because the large files were broken up into smaller files and distributed across different users.

So instead of downloading one large file from one user, you are downloading tiny chunks from many users, making it faster.

[/tech]

Ludde was the only programmer in the world who knew how to make this solution work for Spotify.

This brings us to:

Lesson #2: If you want to fundamentally improve something, you have to break existing standards and think full stack about your problem.

To play music instantly, Spotify had to ignore existing standards, and develop its own end-end streaming infrastructure.

So Ludde, along with a team of world-class programmers got to work.

Building a proprietary full stack media distribution solution allowed the Spotify team to seamlessly combine scalability with speed.

This was the opposite of what the rest of technology industry was doing via the web browser — but that would have limited Spotify’s speed and ability to deliver a better experience than piracy.

Lesson #3: What attracts great talent is the level of ambition.

“Ludde never would have joined Spotify if it weren’t for the challenge it presented, and Daniel wouldn’t have pursued hiring Ludde if he hadn’t been open to breaking the rules and doing something completely new and unproven — whatever it took to make this vision a reality”.

I think this is a very valuable lesson for all businesses, you need a big vision of where you are trying to get to. This vision would keep you and your team always motivated. It would also attract people that align with this vision.

So, dream big, work backwards, and START SMALL!!

By 2008, Spotify had solved the tech side of the equation, and had a potential (ad-supported) business

model. All that was left was content (music).

CONTENT

Before it could launch, Spotify had to make deals with the record companies and artists — an industry that was deeply suspicious of tech companies, after their Napster experience.

That was the mood when Daniel made his pitch to Universal.

For his pitch, he opened his computer and pressed play, and instantly the music played.

“So he started playing a song on the software. And the song played so quick. So instant. Like never seen or heard before. I mean, I don’t know if people remember, but I mean, playback was slow back then. Even if you had an mp3 on your computer and you played it via, you know, whatever Winamp, iTunes. And this was faster. And we were like, you have the files on your computer, right? And he was like, no, it’s in the cloud” — Michelle Kadir.

This brings us to the most important lesson.

Lesson #4: Every product needs a magic trick. It needs to do something that nobody thought was possible. It needs to pull off an illusion.

“For Spotify, that illusion was the illusion of having downloaded all of Napster to your hard drive, instantly accessible, for free. And it was totally captivating”.

This magic trick convinced users, future employees, and the record industry to take a chance on Spotify.

This magic trick and the straightforward, ad supported business model led the Swedish record labels to sign the first deals with Spotify.

After two years in development, Spotify launched in Sweden, and it was an instant success — a huge percentage of Swedes were using it in a few months — because it offered an easier, faster, and better experience than piracy.

SUMMARY

Lesson #1: Convenience trumps everything.

Lesson #2: Don’t be afraid to break the rules. Sometimes to be able to improve on the status quo, you have to go full stack.

Lesson #3: Great ambition is what attracts great talent.

Lesson #4: All truly great products have to pull off some sort of magic trick.

I hope you found this informative and relevant.

You can catch up with past articles in this series: Part 0, Part 1

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A collection of Notes, Articles and Musings by Nero Okwa

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Nero Okwa

Entrepreneur, Product Manager and StoryTeller. In love with Business, Technology, Travel and Africa.