Assessment – Report
INTRODUCTION:
This report analysis the entrepreneurial process of Spotify Technology S.A. through the founders, their motivation and their opportunities. Spotify Technology S.A is a public music streaming service founded in 2006 by Daniel Ek and Martin Lorentzon in Stockholm, Sweden. They launched their service two years later in October 2008 and in the past ten years have accumulated over 180 million users. The music streaming service can be accessed through their Spotify application available on multiple E-Markets such as the App Store, or Google Play but can also be downloaded through their website.
The reason I have chosen Spotify is because I am an everyday user of their service as I find it to be the best Music streaming app on the market, subsequently I am interested in this industry as music is a key element in many people’s lives.
DATA SOURCES:
For this report, I gathered information through Google to find general data on the company founders through various websites, articles and encyclopaedia. YouTube provided compelling videos and podcast on Spotify’s success through the years and lastly, I used the theories and knowledge I gained from our course’s lecture slides.
TOPIC:
Founding Team:
Spotify was created by two brilliant Swedish minds, Daniel Ek and Martin Lorentzon. As a teenager Daniel Ek would create websites for business, already earning 50 000 USD a month. He graduated in 2002 from the Royal Inst. Of Technology in Sundbyberg. He continued his studies in engineering at the KTH Royal Institute of Technology but dropped out to work for multiple Web companies before founding Advertigo that he sold in 2006 to the Swedish company Tradedoubler. “The Swedish-born serial entrepreneur” became a self-made millionaire by the age of 23, and now by the age of 35 has an estimated Net worth of 2.8 billion US$.
Martin Lorentzon went to Chalmers University of Technology in Gothenburg where he earned his master’s degree of Science in Civil Engineering. Later he studied economics at the Stockholm School Economics.
The two men first struck up their partnership when Tradedoubler, Europe’s largest affiliate sales network founded in 1999 by Lorentzon, bought Ek’s company, Advertigo. Mr. Lorentzon possesses an extensive amount of knowledge in creating business, having the skills to create and implement strategies, budget and goals, as well as overseeing legal documents and annual reports.
The two men complimented their skills, combining their to minds creating what is now a 180 million user music application with a revenue estimated at $4.6 billion in 2017.
Entrepreneurial Motivation:
The motivations behind Spotify were not financial; Ek’s idea was to fill a gap the world population had. Daniel envisioned a future where artists and fans could believe in each other, where physical limitations (CDs) would become oblivious, and both parties would profit of a win-win situation.
Ek was confident and ironically believed his product would become big, but not in the way he envisioned. The service has more than 180 million users, 83 million of whom are paying subscribers. Those numbers, though huge, seemed reasonable because of the size of the music Industry. What he realised later, was the meaning of those numbers and how they were the pull motivation he did not know he needed. Those millions of users were people who acknowledged his work, who cared and enjoyed his product, using it during hard times, good times, while driving, studying, cooking or commuting. Overall, through Schumpeter’s view, Ek’s work had creative destructive impact on the market, as an innovative product disrupting the previous equilibrium. We can link entrepreneurship with innovation as he was and still is a central factor in economic development.
Entrepreneurial Opportunities:
Daniel Ek started Spotify by the age of 23, he states his motivations “then and now stayed relatively consistent”. His first revelation was his discovery of the three music-focused online services, Napster. The company, founded in 1999, acts as pioneering peer-to-peer file sharing Internet service that emphasize sharing digital audio files in Mp3 format. Napster ran into legal difficulties over copyright infringement. When Kazaa and Limewire came along, Daniel Ek declares it became clear to him what model, consumers had adopted for the music industry.
The model behind piracy was a field to explore, Ek knew he had to find a system better then piracy, taking into the account the benefits of streaming and downloadable content while eliminating all viruses and time-consuming steps of the illegal model. His goal was not to compete, but to exploit their positive aspects to render these fraudulent websites impractical. He created an opportunity and admits the idea of Spotify was a “natural solution” for him. He looked into that idea for 3 years expecting someone to fil the gap in the music market, when he realised no-one else was, with his passion in Tech and Music, it was obvious he had to launch his idea and add a new innovative system. Daniel Ek did not always set out for a global company, he wanted to “fix a problem”, he realised all countries faced, thus it was natural to look into it with a global approach.
He first launched Spotify in 2008, only accessible in Sweden. He started by approaching his new model as a local solution; at the time Sweden had lost 9/10 of all revenue in the music industry so companies had nothing to lose. The reaction of other entrepreneurs and possible investors were very sceptic. Launching Spotify in Stockholm was crazy, and people said the various music labels would never grant them any permissions.
He states the hardest part was raising money and trust from the investors. Martin Lorentzon and Daniel Ek took a huge blunder, putting in a lot of their own money they previously collected from past start-ups to invest into their company; the idea was to prove their confidence and get the licences.
In 2009, Spotify launched to the UK, in 2011 in the US, and as of today, the application is accessible in most of Europe, most of the Americas, Australia, New Zealand, South Africa, and parts of Asia.
Conclusion:
To conclude my report, it is clear that Schumpeter’s and Kirzner’s perspective on Entrepreneurship is reflected through Daniel Ek’s entrepreneurial development through the successive stages of the creation of Spotify. The alertness necessary to uncover the possibilities, and the destructive impact of his innovative product on the market are the skills he defines as the essence of entrepreneurship.
Pull factors and push factors will lead to a different outcome in opportunities.
By comparing Daniel Ek and Martin Lorentzon, I understood the different skills needed to be an entrepreneur, the different levels of motivation and consequently the opportunities that follow.