Read this: How Spotify reached No. 1

BBC sounds music Radio podcasts from BBC Radio 4 how are you listening to show right now? Maybe listening live in your car or in your kitchen on FM but I know many of you are TuneIn by smart speakers and some of you out running whilst others are catching the podcast that kind of technological innovation is disrupting radio and music habits that we've had for decades and its creating new ones the big ongoing plot line of this show disruption in global Media by technology companies.

We spent a lot of time looking at how the TV business has been appended by the likes of Netflix and we reported on her newspapers have seen their business model decimate by social media companies are we looking at audio and the Revolution in what we listen to and how and where we listen to it over the next half hour.

One particular company that's been responsible for much of that disrupt.

I got my laptop in front of me.

I've got the Spotify application which I've downloaded and I can in theory play music live in the studio that appears to be fair 2009 cellan-jones the BBC's technology correspondent is demonstrating a new way of listening to music or pause that for the whole idea with Spotify is that it's a huge online library you search.

It's got most of what you might expect on it.

I did just search for the concert Angels and didn't find them.

I'm afraid Rory in one sentence you think this is the beginning of a revolution will be a huge music business 5-years from now or will of forgotten all about it.

That's probably why it's nicely head.

Play on Spotify has got 300 million you know I want show that and Ed Sheeran shape of you has been streamed a mere 2.6 billion times.

We looking at West Spotify goes next will it overtake radio why the move into podcasts and how much power do the record labels still have over it to help us answer those questions.

I've been speaking to Spotify Managing Director in the UK Tom Norton CV in your career in music begins as an A&R assistant at Columbia records, just basically the department within a

Which is responsible for identifying finding and developing the next generation of Talent in the industry, would it look like back then? Who is in charge you control distribution who had the power back in those heady days of HMV and CDs the rest of it when I started was every morning.

I used to have to get the the clippings a press clippings which is coming on the fax machine any news on the fax machine exactly I mean until Lionel Messi says sent his facts the Barcelona last we heard about machine clippings of the fact every morning photocopy them and run around the building and remember that both first morning effects coming in and it was all about a thing called Napster and I've had a big try that was happening within the music industry that was too.

The peak of the music industry, but the very beginning of the disruption that was going to unfold over the next decade and I love my time at Sony music was fantastic.

I was there for 9 years, but it was challenging for a business perspective and what that meant wasn't there was a lot of mergers a lot of downsizing and and ultimately a lot of redundancies can tell your reaction to that facts about Napster and and about the whole idea is to me, what did you think of it when you first heard it? I was Fresh I was Fresh in today and Industry that respect that I didn't have too much respect Yvonne things that stage in my career.

I was just happy to be there.

Well.

I guess it is the best way of describing it, but what became quickly clear was that things were and and there was a lot of concern around the building.

Have they given starting a run back to my desk and write down the songs by come home? I have my little list right here of all the songs.

I need to be on after tonight.

Just sit back and Courtney founders.

Hope to keep them was running before that we couldn't survive before when we had 700000 members and we had 17 million members meanwhile Napster fans are going to keep downloading until the very end up your volume back in the music industry.

Had a massive problem instead of Woolworths and our price many music fans were heading for Napster and LimeWire generation and got used to not paying for music but a start-up from Sweden offered a solution we got the Spotify on from our Stockholm studio Daniel Daniel good afternoon.

Good afternoon to you as well.

So basically we can look at all the party is sites out there and we realise that there was free access to music and the music.

The history of trying to beat that by swimming the services or actually going after individual users but we realise that the answer is actually building a better service weekend look that's how we could do that.

So the first time I tried it.

I can have felt as though I was on an illegal site.

It's all wearing it appears to be free.

Yeah, but again we have a label the house with the almost 25000 labels in Reading tens of thousands to the library everyday as well.

How many people have signed up now? Just takes breakfast agency work your way up Sony then you leave to work some tech companies before joining at Spotify without running in the UK what sort of Base Spotify now has here in the UK are you actually developing you take care honey jobs here.

We have just having a preconfigured.

Obviously we just we just moved into a huge new space in in London which is going to be spotify's first R&D hob outside.

Sweden America so that's so there's going to be a huge amount of jobs created with they'll be about 6 or 700 jobs within London primarily focus on R&D the UK and Ireland has got a rich history and audios that make sense rather be here countries and counting it launched in Russia just a couple of months ago, but the UK remains one spotify's most important markets in fact British record labels now makeover third their revenue from Spotify according to Alice Enders director of research at Enders analysis key to Spotify success has been its strategy of presenting itself as a local service in every operates one of the things to bed Spotify that's very very important is the way in which it Showcases British talent British music and so on unlike app.

For more sort of globalised music approach to its playlists and Discovery Spotify brand values associated with giving local Tower visibility you think about Spotify having almost 300 million monthly active users essentially that's 300 million different versions on Spotify and it's very personalising really listen to what the audience and what the listener wants so we have teams locally in every market whose role and responsibility is to Crystallize and localizer service you know the truth.

Is that we have a fantastic music teams and marketing teams and Studios teams in each market a really embedded and in touch with what's happening locally in any given the market and can therefore in response to the needs of the audience and make sure that we are reflecting what's happening culturally.

It's interesting it sent to which that knowledge.

The audience is saying is actually in the modern age is actually comes from data.

You know it's not certain where you're putting you looking fingerprint it to the window actually have the very strong data as to what your audience and what your individual users one is true.

We do have a huge amount of data available to us and that's something I was looking at continuously in terms of what's reacting on the platform.

What do you what? What's the people searching for and what do listeners one? I'll give you some examples of David speaking to one of our editorial team recently and I say star program start when you when you going to start pushing out a summer playlist and they said quotes when you wouldn't start asking for them when someone types in the search for search for barbecue playlist.

That's what we know summer started in the UK right and we've noticed as well through cover with a huge shift in the overall vibe of music that's been listen to you could almost track that wave of kovid through markets in terms of listening behaviour and habits and also the type of playlist that might be generated and that's the old.

What they do we saw a huge rise in an increase in the creation of road trip playlists from June to July which will be no surprise to see somebody who spent two weeks in Cornwall battle in the Great British weather this summer so we could see through through what people are creating a type of playlist of people creating what people are up to and what and what they are and what they do in culturally so you're is used to describe your company Love huge amounts of that data on your users.

Just give us a sense of how you actually on a daily basis, so you actually go about using that data to as you might put enhance the user experience.

Yeah.

I mean I'm not sure I can take exactly how it works myself.

We know our team of editors and I'll programming teams take you for it for it for instance would be listening date your habits what you like what you don't like what you're listening to what what you listen to Next and I think through the network of users we have we could very quickly identify songs that you may or may not have heard that we think.

And serve you the right songs with a date of you've got is the choice of song you don't have for instance you can't find out so I say it's cos obviously lots of listen is concerned about her other tech companies in a very different space or Google Facebook social network Google search engine primarily they can find out and reduce an awful.

Lot about you through the digital trail that you leave on the web, how much does Spotify know about me but you about all the people listening this from the digital trail they leave on the web, we don't know about the digital trail you may be leaking on the web what we knows about what you're what you're consuming and what on Spotify and what we found is that listeners really enjoy us helping them discover new things for a moment.

Just while we crunch the numbers.

How many users have you got in the UK numbers by market? But why not come on? I'll give you a little a little tease.

You got 300 million around the world give us a sense of having a market is the UK in that context the UK is a very.

Bolton market for Spotify globally with one of the top 3 markets for Spotify global e&c, number one audio streaming platform in the UK and what's the more attractive the obvious answer here and it's a cop out and I don't need to give it.

Is it all sorts of customers are attracted, but what's a split of your user base? Do you want in terms of the split between the percentage you you get paid for version and the percentage getting the free version without ads has been very important to have both offers.

We have the free tier for people who want access it that way and I have the page here for people who wanted a slightly different will premium experience and what we've seen historic be over the history of spotify's evolution is that that's final that free father is key to the success of the business and that we see huge amount of people who come into the free tier then going on to become fully paid.

Play bus down the lights and then you get the free version with ads how much of their data.

Do you share with advertisers in terms of when it comes to advertisers we are offering an innovative offer to our advertisers and what we what we can enable Advertiser to do is to tap into Alina into cultural moments that happened on Spotify and Wrekin retail Jordan's extreme across different platforms and that through recommending playlists brands can advertise around and messaging is conscious of the cultural climate.

I wonder I knew you were gonna be able to answer questions numbers.

I had to ask but you're being couriers supposed partly because I was looking earlier at the manual that you give the advertisers and you something you call real-time and real-time context targeting.

So not only do you know the gender of the age the location but and a quote real-time context targeting allows you.

To reach people who are listening to music tailored to specific activities moments and moods and of course knowing what mood someone is in Tom what they did was literally the only gravitas isn't it is very important for advertisers and that's why I ever tysers are coming to and really responding to the offer that Spotify can deliver to them.

I think what Spotify can offer is that in married with all of them the best parts of digital in terms of measurement and efficacy Spotify is often compared with Netflix for business model appears to be the same charge customers a relatively small monthly fee and in return.

They get all-you-can-eat access to highly desirable content, but there's a

the mental difference between the two companies Netflix leverage, its early success off the back of licensing other people's content to start making its own all those big budget series and films Netflix is famous for Spotify on the other hand doesn't instead it continues to send millions of dollars a day in royalty payments to the major record labels one of the issues that Spotify has to address in a longer-term perspective is that it is not currently positive profits one of the important reasons for that is because of the agreements with the major labels, which involve between the master recording rights music publishing rights in approximately search news about 75% of their after tax revenues so

Latest score Spotify reported lost 167 million it has yet to really turn a profit in a sustainable way and therefore comes down to the terms of the agreements with the majors the content providing is not only new content new orders content of course very huge catalogue of historical importance music which continues to have a very very significant missing base still it just just have to get that content in as a result of that.

They're burning Berkeley has not been as strong as Spotify would like it to be the understanding between Spotify

The record companies has always been that if Spotify ever attempted to turn itself into a record company and build up its own catalogue of music then the record companies would make life impossible so 2019 Spotify announce a new strategy to make money if it couldn't own music it would diversify into something it could drama smart wine when I go on there wasn't telling the truth podcast that he believed he was telling the truth in the last year Spotify it's been investing huge sums in podcasting for example 200 place to buy at gimlet Media a New York podcast house with a Slate of Hit shows mobile season 2 podcast about big bass 808 it signed a deal with Barack and Michelle Obama Michelle Obama interview is the Michelle Obama podcast Joe Rogan podcast has become a Spotify exclusive after a reported 100 million deal.

The show was actually gonna let plays very related to overtime the first find the 10th attracting new kinds of consumers to choose but also attracting artists at podcast artists directly to Spotify it's the platform play podcasting is very fragmented and like the concentrate around recorded music and music publishing rights so I see this basically as sort of an important diversificare play, the only has upset really for Spotify so when Daniel EK the Foundry Spotify announce this big move into podcasting.

He said that people still spend over 2 hours a day listening to Radio and we want to bring that radio listening.

No, you got huge amounts of money to spend huge ambition you can understand why people who run radio stations in the UK on sleeping too easy what we are trying to do is to give the audience is the best content in the way they want it wherever and whenever they want it but we must also say that you know many radio producers are our Partners and you're using a using Spotify to connect with hundreds of millions around the world and why we're increasing original content it will always remain in a quite small portion of a when you can pay that to a partner created contact on the platform, so the great example of this is in Germany where recently collaborated with public radio station NDR to create a podcast that now top ranked in German in Germany consistently in the top 20 globally with bringing in many instances were bringing radio content to hold you generation of consumers On Demand whenever and however they want it and we believe it is in everyone's interest to get more people listening so great.

Content and pick the content strategy because there's an awful lot of people listening to this as you know with audience to a desperate to get into making podcast a desperate to get a slice of the Spotify pie.

Is it work you're desperate to hear from their guy runs in the UK what sort of stuff is Spotify commissioning in the UK commissioning a lot of stuff locally I mean the first thing to this year the UK was the fastest growing market globally for Spotify in terms of podcast and along with that Ireland have the remaining we continue to be one of the highest performing markets globally you not be really are tapping into a rich heritage.

We having audio contact locally may be mentioned a few titles or two things that working for you.

Can you podcast luxury recently one of the one of the One Podcast it's really starting to cut through is a podcast called who we be talks which is really making waves out within the UK market.

This is a spin-off of

Who we be playlist who we be is the UK's biggest hip hop afrobeat rap grime dancehall and RnB playlist and yes, we do have some great podcast through to the music with smiley great offerings in the UK and great things coming up from podcast like Rosie Rosie Rosie which is a new original podcast about same-sex say you know I just started dating and you fell pregnant accidentally.

What do you think we would have done honestly? I think that baby and I think can I be honest and we got later this year.

We've got something coming up with Dani and Danny Dyer sorted with the Dyer's which is in partnership with BBC Studios and puddle might come onto your relationship with the BBC because that's an interesting you give to me there, Lena

Two people to live under 50 and maybe those are the people who are most in need of the the product that is Spotify now.

I know you won't tell me how much you got to spend on UK Focus podcast but just give me a rough sense and we talked often on this show an auditor Pretty Clear indication have for instance Netflix budgets for a drama 5 series 11 our drummer very as against BBC budget.

Is it fair to say that an hour Spotify podcast generally speaking will have a bigger budget than the typical BBC podcast I can't speak to budget software Spotify but obviously we are investing significantly to grow the business.

We want to work with some of the biggest Talent in the UK and beyond and I think you'll see from our acquisitions and they both globally and locally does the source face replying and announced that deals with the obamas.

Daily wake up wind out it's so they suggested the implication that mean look at these deals at the 200 million spent $4 on on giving Media whatever it was reported to be suggesting Spotify obviously got it's about the company is 50 billion dollars.

It's got money to spend on On podcast That need to deliver, but it's interesting you mention that the relationship with them the BBC Joe Rogan is now a Spotify exclusive would understand if the BBC turn around to you and said hey Desert Island Discs our Crown Jewels it's now and exclusive to BBC sounds with taking it off Spotify Partners and we're focused on millions of users around the world that listen to the new radio we believe that the on-demand audio offers a fantastic experience that isn't available on linear, but the fact is you could manage.

Can you can you know times are you could completely managing the UK you can manage globally if you don't have BBC podcasts it wouldn't be it would be a breaker for you want to get a sense of what from your point if you want the BBC

We want to believe we feel is really really important off her huge breath and range of content and Whitby that through the BBC or the other radio Partners and that something is very important to us ok, it's got left.

I'll have to get your thoughts on the future.

How is the pandemic and in particular that big change in how many of us now work? How is that going to change your strategy because there's millions of people who are no longer commuting chances.

Are there either spend that time sleeping till I keep watching breakfast TV which is probably bad news from Spotify that lack of a commute is potentially a big hit to use it.

We've seen me the first thing to say is we saw a shift in people's working habits.

Obviously is reflected on the platform and what we haven't seen is any shift and using Spotify so didn't go down or up during lockdown with a consistent 30%

Guidance Range and what we did see is a shifting its shifting behaviour and yeah, you're absolutely right.

I'm off to the morning commute Saigon for everybody and that was that was a time listening to a lot of a audio, but we seen is that as people get get set up at home get the speakers setup getting to the new rhythm getting to the new way of working that consumption has a rebound when when you think about there is a world.

I'd spend a lot of reporting if there is a word with smart speakers at home and driverless cars where there is a huge warfare attention and years is something that a lot of money is going to see the amount of potential time that people are going to give to Listening if potentially going to go up.

Isn't it? That is a businessperson those smart speakers as drivers card that increases the opportunity for you to grab people's attention and get the Spotify content and we believe as a huge opportunity close to 300 million people today, but we believe there's a

Billions of people out there for Spotify and audio services and he said it before the video is often valued at 10 times the value of an audio listen here.

We simply do not agree.

You know about 10 times.

That is who you going to sign up next you got Michelle Obama got Joe Rogan you are looking at it.

So stay tuned.

There's a lot of exciting things exciting things in the pipeline boring answer for an interesting question and you do these deals yourself how much how much of your time do you spend going to these people that top Talent and you go and see them you say the boss of the boss in the UK Spotify and I want to play an awful lot of money for you.

Podcast is that your job Michael James keto who leads the studios team in the UK and he's really Leeds or the majority by discussions locally and boss on Spotify in the UK many.

Thanks for joining this edition of the media show time.

Will be available in the BBC sounds up, I do look forward to seeing you promote this property on Spotify is that right absolutely absolutely but thanks I migrate to talk to you today and let me also add my thanks to our sound Giles Aspen who looks after that recording.

Hope you enjoyed it.

Do let me know what audio companies radio companies or whatever companies you like me to cover next.

I'm very keen for us to aldeby players in radio and music and work out what plans they have for our is my thanks to you for listening will be back at the same time next week.