Spotify CEO Daniel Ek admitted his company fumbled the deployment of a new content policy that sparked considerable controversy within the music industry.
Spotify reportedly rethought its controversial decision to ban certain artists from playlists based on their “hateful conduct” and moved to reinstate rapper XXXTentacion, but not another artist, R. Kelly. The initial announcement met with immediate backlash.
“We rolled this out wrong and could have done a much better job,” said Ek on Wednesday night on stage at the Code Conference in a keynote Q&A.
Ek, who took personal responsibility for the botched rollout, deemed the policy too ambiguous and open to interpretation. But asked by Variety whether the policy was no longer in effect, he made it clear it was still up on the company’s website, though subject to future iterations.
He also made clear that Spotify never had any intention of targeting any one particular artist. “The whole goal with this was to make sure that we didn’t have hate speech,” said Ek. “It was never about punishing one individual artist or even naming one individual artist.”
While there have been reports that the decision was so controversial internally at Spotify that global head of creator services Troy Carter nearly exited, Ek gave no hint of dissension within the ranks. “It was a debate we had internally at the company,” he said. “It’s something we keep on discussing.”
Spotify lost $49 million in the first quarter of 2018 as the company toils under the overhang of escalating royalty payouts to record labels. But Ek pointed to the positive cash flow he’s maintained in recent quarters as the primary metric to which he’s focused. “As long as that’s the case we don’t have to go the markets and ask them to keep funding the company,” he said.
Ek also shed light on Spotify’s video programming strategy, which has had a few false starts in recent years outside of some success with video-filled playlists like Rap Caviar. While he made clear he will always see Spotify as an audio-first platform, he sees a growing place for video content in his plans. “I do think over time video will be a more important part of our platform than what it is today,” he said.
As for Spotify’s early struggles with video, he acknowledged, “In video, we went way too fast and way too early.” But he also said that with little regret, citing the company’s habit of charging aggressively into a space and then dialing it back in future iterations.
Returning to the centrality of growing Spotify’s audio audience, Ek compared the relative size of the global video market–$1 trillion–to the $100 billion he estimated the music and radio industries comprise together. “Are your eyes worth 10 times more than your ears? I don’t think so. That’s what the market is right now.”
Spotify is facing increasing competition from Pandora, which announced a new $15 family plan earlier this week, and YouTube, which recently relaunched its own streaming music offering. Last month, Apple Music disclosed more than 50 million users via paid subscriptions and free trials.
The Spotify IPO valued the company at $26 billion in April via a rarely-used process called a direct listing that comes without underwriters. Ek opened up to interviewers Kara Swisher and Peter Kafka of Recode about his rationale for going to market in that manner, including eliminating a double standard that often attends traditional IPOs: “What happens is investors get to sell early on and the employees do not. I wanted everyone to have the same opportunity to sell and buy.”
On its first earnings report, Spotify disclosed 75 million paying subscribers, and revenue of €1.139 billion (around $1.36 billion). The company had 170 million monthly active users in March. The company forecasts to have 92-96 million paying subscribers by the end of the year, as well as 198-208 million monthly active users.