Whenever a big company enters a startup’s turf, the founder is quick to say the move “validates the category.” The phrase induces some eye-rolling. But if there was ever a time to hear it, it would be now with Spotify.
The Stockholm-based streaming music company has been on a mission to get people to pay $10 a month to access a library of music instead of buying it song by song. It has amassed 20 million paying subscribers, half of those in the last year alone, and has 75 million monthly active users across its free and paid service. Then this week, Apple, long the biggest proponent of the song-by-song ownership model, fired back with a head-on competitor. Apple Music will launch later this month at the same price with plenty of star power.
In his first solo interview since Apple’s announcement, Spotify CEO Daniel Ek was unfazed (and used the “validating the category” line quite a few times). For the 32-year-old, who has faced heat from everyone from Taylor Swift to Universal Music, one of Spotify’s own investors, it’s about the numbers.
He musters a couple of key facts to make the point: Music is just a $15 billion industry, a tiny fraction of TV which in the U.S. alone is $150 billion.
The global radio industry is $80 billion. “If we just moved online in a way where labels could participate, [music] is going to be many, many times larger,” says Mr. Ek.
Another key number Spotify revealed Wednesday: half a billion dollars in new funding, from a smorgasbord of investors including mobile operator TeliaSonera, valuing the company at around $8.5 billion.
The funding will help plug a gap as Spotify takes on bigger rivals. The company’s revenues have been growing quickly, topping $1 billion in 2014. But with payouts to labels and the need to invest in new markets and technologies, it posted an operating loss of more than $100 million last year.
Mr. Ek discussed new areas like video and competition from Apple, along with his opinion on where regulators should cast their attention. Edited excerpts below.