Spotify feeling sound as Beat goes on

APPLE has gatecrashed the music-streaming space with the acquisition of Beats Electronics.

APPLE has gatecrashed the music-streaming space with the $US3 billion ($3.2bn) acquisition of Beats Electronics, but the Spotify executive responsible for keeping the wolf at bay is unfazed by the cash-rich upstart.

Speaking exclusively to The Australian at the Cannes Lions International Festival of Creativity, Jeff Levick says of the threat posed by Beats: “We don’t run our business looking in the rear-view mirror.”

As Spotify’s chief sales, marketing and international growth officer, Levick has been a key arch­itect of Spotify’s phenomenal growth in the past 12 months.

“We’ve got seven years of history doing this,” he says.

“This business is a science. It’s a very difficult business and we think we’ve got the best insights around how to build the world’s best music products.”

Consumers seem to agree. In May, the Swedish company announced it had 10 million paying subscribers and more than 40 million active users across 56 markets, enticed by the world’s largest catalogue of free music.

The rise of music-streaming services such as Spotify, Rdio, Pandora and iHeart was one of the reasons Apple dropped a cool $US3bn on the Dr Dre-backed Beats Electronics last month.

Beats manufactures large, brightly coloured headphones, sold at Apple stores, such as the pair often seen clamped to the ears of Brazilian footballer Neymar at the World Cup tournament.

But Beats is not just about cool headphones, celebrity endorsements and marketing clout.

The brand could also provide the found­ation for what could eventually be a powerful and serious music-streaming service to rival market leader Spotify.

Beats might have all the advantages that come with being owned by a tech giant with a $US567bn ($603.4bn) capitalisation, but ­Levick believes Spotify’s start-up mentality enables it to innovate and continually evolve the product in a way less-nimble competitors are unable to replicate.

Spotify was founded by the ­­31-year-old Swedish entrepreneur Daniel Ek.

He has been labelled the most important man in music, and is still intimately involved in the business, much like his Facebook counterpart Mark Zuckerberg. “I believe in founder-led businesses and I certainly believe in product-led businesses,” Levick says. “Daniel is both a product guru and founder of the company and he could not be more actively engaged in the business, whether it’s coding at 3 o’clock in the morning or leading a product-development session.”

Spotify’s growth has become super-charged in the past year after the freemium service made its mobile and tablet services free to users. “People come and use the product for free and we know with a great degree of certainty a large proportion of those users will then convert to pay,” Levick says.

In just one year, Spotify has added four million paying subscribers, a milestone not just for the company, but for the music ­industry and anyone selling digital subscriptions on the back of a ­sustainable revenue model.

In much the same way that newspapers are making progress enticing consumers to fork out for digital content, the Facebook-enable­d platform is also proving consumers do have a propensity to pay for digital content.

Spotify could also save the ­recording industry from piracy if the company’s experience in ­Sweden is anything to go by.

“There were no greater illegal downloaders in the world than the Swedes before Spotify,” Levick says. “Ninety per cent of music consumption in Sweden before Spotify was illegal downloads.

“Now fast-forward today to seven years later: 67 per cent of the entire population uses Spotify. It’s the only market where we have more paying subscribers than free.

“What we set out to do was build a better platform than piracy and I think we’re doing the same thing in Australia.”

Also key to strong subscriber growth is a growing geographical footprint, which includes a two-year-old presence in Australia.

“We’re very excited by the growth we’ve had with Australia, and New Zealand is doing incredibly well.”