Spotify CEO Daniel Ek says company’s freemium service is here to stay

TORONTO – The free tier of Spotify’s streaming service has come under occasional attack — most prominently from Taylor Swift — for supposedly devaluing music, but CEO Daniel Ek insisted Monday that it’s “essential” to the company and the overall music industry.

“Spotify today is the second-biggest revenue generator for the entire global music industry, and we’re the fastest growing one, and the reason why we are in those two positions is because of our freemium strategy,” Ek said during a question-and-answer session with a small gathering of reporters.

He argued that many younger listeners were raised believing music should be free, and that Spotify’s freemium service — an ad-supported platform that allows listeners to shuffle artists or playlists, but excludes on-demand song selection — generates revenue for record labels and musicians.

“Then gradually what we’re trying to do is move people up the value stream to pay even more for music, which obviously will make Spotify more money but more importantly, will make the music industry more money,” said Ek, joined by Rogers (TSX:RCI.A) president and CEO Guy Laurence at the company’s headquarters in Toronto.

“Of course, if you could have everyone in the world just paying for music instead of getting it for free, then the music industry would be in a much better position.

“But that’s not how music has ever (worked) throughout history. Music was on radio, music was on YouTube, there’s Soundcloud, there’s all these sources, there’s piracy still rampant. And that’s what we’re competing with, and that’s why we have a free tier.”

As part of Spotify’s goal to nudge listeners up to its $9.99 monthly plan — which allows ad-free, on-demand and offline listening — the streaming service announced a partnership with Rogers to include premium subscriptions in the telecommunications company’s family bundles.

Spotify launched in Canada in September 2014 and Ek touted the company’s rapid growth here.

He said Spotify is the country’s No. 1 music app and that Canada is the streaming service’s fastest-growing market.

“We’re off on a running start,” he said.

“We’re very early on in the journey. We’re probably where we were in some countries three to four years ago.”