Jonathan Larsen

MGT 345

Born Global Strategy:

Spotify

Overview

Spotify Ltd is a privately held music streaming company that originates in Sweden and is

headquartered London, England and Stockholm, Sweden. Spotify Ltd is the parent company of

Spotify, a music streaming service that provides digital rights management-restricted content

from major record labels like EMI, Sony, Universal and Warner Music Group. It was launched on

October 7, 2008 by the startup Spotify AB. Within about two years of its release, Spotify gained

approximately ten million users and about 25% were paying for the service. In December of

2012 the total number of users doubled with the same percentage paying monthly subscription

fees that vary with location.

The company operates officially in 18 countries (Sweden, UK, U.S., France, Italy, Belgium,

People’s Republic of China, Mexico, Turkey, Singapore, Poland, Norway, Denmark, The

Netherlands, Spain, Germany, Finland, and Australia). Its service is available in about 57

countries and 53 territories. Being that Spotify is headquartered in two countries and operates

in 18, the enterprise can be considered a “born global”. The CEO and founder of Spotify Ltd is

Daniel Ek. The Chairman of the Board and co-founder is Martin Lorentzon. Other members of

the executive team are Kate Vale (Managing Director and Sales Director of Australia and New

Zealand), Chris Maples (Managing Director of UK operations) and Öjje Holt (Managing Director

of the Nordics). The Board consists of members Klaus Hommels, Fredrik Cassel, Pär-Jörgen

Pärson, Francis Meehan, and Sean Parker (founder and former CEO of Napster).

History

Development of the streaming service began in Stockholm, Sweden in 2006. At the time,

Spotify AB was the title of the company and it was founded by Daniel Ek and Martin Lorentzon.

Ek is the former Chief Technology Officer of Stardoll, and online dress-up gaming site for girls.

Lorentzon co-founded TradeDoubler, a Swedish internet marketing company in 1999. Although

the service was developed by Spotify AB, the parent company is Spotify Ltd (headquartered in

London) and Spotify AB (headquartered in Stockholm) is now the Research and Development

division.

After the official launch of Spotify in October 2008, free accounts were made available to the

public by invitation only in order to manage the growth rate of the service. Paid subscriptions

were, of course, made available to everyone. Spotify announced that it made licensing deals

with numerous major music labels. Spotify reported a loss of $4.4 million for its first official

year. After the loss, the company took its first step to offer free accounts to the public without

an invitation on February 10, 2009 in the United Kingdom. After the release of the Spotify

mobile service, the service had a surge in registrations causing it to close open registrations in

the United Kingdom on September 11, 2009.

On March 4, 2009, Spotify announced that there was a security flaw in its service which

potentially exposed the private account information (email addresses and passwords) of

members who had been registered prior to December 19, 2008. On January 28, 2010,

Symantec’s Antivirus program marked Spotify as a Trojan horse which disabled the service

across millions of computers.

Spotify announced 2 additional types of accounts for availability on May 18, 2010. Spotify

Unlimited was the same as Spotify Premium but unavailable for mobile. Spotify Open was a

reduced-feature version of Spotify Free that allows one to listen to up to 20 hours of music

monthly. Spotify Free remained, for the time, an invite-only service. On September 1, 2010, the

World Economic Forum announced Spotify as a Technology Pioneer for 2011.

On April 14, 2011, Spotify announced via a blog post that it would cut the amount of music that

free users could listen to starting May 1, 2011. All Spotify Open and Spotify Free members were

to be moved onto a new service that limited the amount of streaming to 10 hours monthly. A

single track could only be listened to five times per month. Spotify Unlimited and Premium

members were unaffected by the change new users were exempt for six months.