Book Excerpt: Inside Spotify’s Ill-Fated Flirtation With TV and Hardware (EXCLUSIVE)

"Spotify Untold" details the Swedish company's failed attempts to topple big guns Netflix, Hulu and most of all, Apple TV.

Spotify Untold book

Spotify has made no secret of wanting to be the world’s biggest audio platform, but it wasn’t all that long ago that the Swedish streamer was eyeing video. From 2011 to 2015, CEO Daniel Ek was engaging in ambitious, top-secret plans to challenge Netflix, Hulu and Apple TV in one fell swoop, the new book “Spotify Untold” reveals. Swedish journalists Sven Carlsson and Jonas Leijonhufvud, tech reporters for Stockholm-based Di Digital, uncover the internal vision for Spotify TV in one of many illuminating chapters from their self-described corporate biography.

Among the book’s revelations: Spotify came close to buying Tidal, and even closer to acquiring SoundCloud; Microsoft, Google and Tencent all offered to buy Spotify at various points; Ek scored a valuable partnership with Facebook’s Mark Zuckerberg just ahead of Spotify’s U.S. launch; and Ek and Apple founder Steve Jobs had strained — and strange — relations.

The authors culled material from more than 70 interviews conducted with subjects including former top Spotify executives and investors, record company heads and competitors “on and off record,” says Leijonhufvud, who adds that at the core of the book is “a character-driven story of Spotify’s rise from a tiny start-up to the biggest music streaming company in the world.”

As for what lies ahead? “Spotify needs to find new unique selling points,” says Leijonhufvud. “Competitors like Apple, Amazon, Google are all investing in TV and film, but Spotify knows it can’t win that race. Ek is instead spending hundreds of millions of dollars on podcasting content and says 20% of the consumption on Spotify will be non-music in the future. … Daniel Ek would like to be a kind of Netflix for audio, with music as the backbone and exclusive content in other areas.”

Below is an abbreviated excerpt from “Spotify Inifrån” (“Spotify Untold”), which was released in Swedish in May and translated for Variety exclusively.

Chapter 12: Spotify TV

Spotify is a highly secretive company; licensing deals with the record labels are strictly confidential, and staff are often asked to sign nondisclosure agreements. However, they generally remain loyal, and leaks are rare. Anything that happens with the rapidly growing streaming company is covered in the press anyway.

In mid-2011, following the launch of Spotify in the United States after years of delays, CEO Daniel Ek embarks on a secret pet project. He forms a new unit within the company, kept separate from all other departments. Details of this project will remain unknown to the outside world for years; the full picture will not emerge until the publication of this book.

In the autumn of 2011, Ek assembles a new team to work on a project he and his colleagues refer to as Magneto. It takes its name from the figure in Marvel’s X-Men who, by controlling magnetic fields, can steer target-bound bullets, missiles and trucks in any direction he chooses. Ek wants his new unit to steer millions of music listeners toward a new media format: video.

“It was a stealth organization,” says a source familiar with the project.

Do It Again

Daniel Ek’s first foray into the billion-dollar industry is within the area of proprietary technology. The 29-year-old visionary founder handpicks two exceptional software developers, known as Ludde and Andoma due to their social media handles in the company’s chat rooms, to jump-start the effort. Ludvig “Ludde” Strigeus is the creator of the peer-to-peer file sharing service µTorrent, Spotify’s first acquisition. He’s a self-taught whiz kid who is also known for single-handedly writing the front-end code for Spotify’s first music player and is the only programmer at the company who reports directly to Ek. Andreas “Andoma” Smas, meanwhile, is a coder who joined the company in 2008 and has previously worked on video streaming technology.

Their goal is to reinvent video streaming. In keeping with Spotify’s business etiquette, the coders are not going to tolerate any kind of buffering; the stream must never pause to load. To assure a seamless experience, Strigeus and Smas create an entirely new file format called Spotify Video. Abbreviated as .spv, the files carry a lighter load than the usual formats. Strigeus is meticulous and is obsessed with saving computer memory wherever he can.

“Every time you waste a byte, God kills a kitten,” he tells his co-workers.

Despite their best efforts, the Magneto team eventually abandon the Spotify Video format for HLS, or HTTP Live Streaming, as HLS is the only format that is compatible with Apple’s mobile operating system iOS.

With his engineers hard at work, Ek and his chief product officer, Gustav Söderström, begin the hunt for someone to lead them in their new foray into video. To keep the project secret, the Swedes say virtually nothing about it while interviewing candidates. Eventually, they recruit the Comcast veteran Mike Berkley for the role, and in the spring of 2012, he moves with his family from Silicon Valley to New York. Once settled in, he starts commuting to Spotify’s Chelsea offices in the former Port Authority building on Eighth Avenue. Within these walls and only a few floors below Google’s New York headquarters, Ek and Berkley draw up a vision for their project over the course of several months.

”We are about to enter the Golden Age of Video,” reads a project pitch from February 2012, just before Berkley formally joins Spotify.

Ek believes he has identified a potential gap in the TV market. He wants to build a digital, on-demand alternative to linear broadcasts via cable and satellite. He is not looking to compete directly with Netflix — whose catalog at this time consists mainly of old movies and past seasons of various TV series — but rather to enter the same space as Hulu. Viewers of Spotify are to be served live sports and news, current seasons of popular TV shows and a selection of movies. The Spotify founder instructs the Magneto team — which is asked to keep its mission top secret even inside Spotify itself — to tailor its content for each viewer.

“Your video service will be highly personalized. It will know your tastes and interests and your consumption patterns. It will anticipate what content you want and when you want it,” the early pitch states.

By the end of 2012 Berkley, the former Comcast executive, has a prototype to show his bosses.

Video Killed the Radio Star

Twice a year, Spotify’s top brass gather for the company’s Strategy Days. On these occasions, between 50 and 100 executives and key employees debate the future direction of the company. The meetings are held in spring and autumn every year, in either the U.S. or Sweden. Lower-ranking employees soon consider an invitation to be a status symbol.

In late November 2012, Spotify’s Strategy Days are held in an anonymous conference room in downtown Stockholm. It is below freezing in the Swedish capital, and many participants struggle to make it there on time.

“Nothing is impossible, except everyone being here at 8am,” a punctual attendee writes on Twitter.

Later in the day, Berkley, who has flown in from New York, takes the stage in front of roughly 60 of his peers and tells them that he sees video as an additional core business for Spotify. At this point, he and his team have spent around a year trying to create a new type of user experience.

Berkley — a musician turned businessman with bushy brown eyebrows and short-cropped graying hair — picks up an iPad connected to the internet via 3G. On it, he opens an app that even Ek hasn’t seen yet. Suddenly the black Apple tablet starts to broadcast live Swedish cable TV. Berkley flicks seamlessly between channels; the shows are being transmitted live, but as soon as he taps the screen, they restart from the beginning. The app, it turns out, comes with an instant playback mode. The interface is every bit as quick as Spotify’s music player.

“It was a magical experience,” says one person who attended the presentation.

By a feat of programming, the Magneto team has eliminated the loading time associated with digitally encoded TV. The app — eventually dubbed Spotify TV — can instantly flip between channels. For the second time in the company’s history, Swedish engineers have built a product far superior to anything available on the market. As was the case in the early days of the Spotify music player, the prototype is built on pirated content. Ek is impressed, but not convinced.

“I’m not worried about the product, but I am worried about the business case,” he tells his team early on.

Berkley and his team spend the next few years negotiating with a wide range of TV companies — from Swedish networks and cable companies to Time Warner, Fox and CBS — to secure licenses for their material. They also draw up plans to build a digital TV receiver, Spotify’s first-ever physical product.

Pictured below: Daniel Ek with Ciara at Spotify and Hulu’s Cannes Lion party in June. 

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Dave Benett/Getty Images for Spo

Living in a Box

During the autumn of 2013, several Spotify employees travel to Shenzhen, the epicenter of China’s tech and hardware industry, across the border from Hong Kong. Shenzhen is home to factories that manufacture the iPhone, Dell’s laptops and headphones for Sony.

The Spotify team is in town to find a supplier for a small receiver and remote control that can be used with the Spotify TV app. On the surface, the blueprints look much like the Apple TV system. The team tells its Chinese counterparts as little as it can about the hardware, so as not to alert competitors to its plans.

Back in Stockholm, Ek is mulling over questions of industrial design.

”We want to build our own hardware,” he tells Konrad Bergström, an energetic 42-year-old Swedish entrepreneur with curly gray hair.

Ek has chosen Bergström for the task because of his strong track record in hardware design. He is the founder and CEO of a Swedish start-up called Zound Industries, which has struck gold designing headphones and speakers under its own brand Urbanears, and by licensing the rights to the vintage audio brand Marshall. Bergström dreams of taking on Beats Electronics, the headphone behemoth founded by the rap star Dr. Dre and Jimmy Iovine, a record industry veteran. He also believes a fruitful partnership between Zound and Spotify could challenge Apple in the music industry.

Ek, the head of what is easily Stockholm’s hottest start-up, asks if Zound would be interested in designing a prototype for the streaming company’s first piece of hardware. Bergström immediately accepts.

”I’ll give you a good price,” he says.

Over the coming months, engineers at Zound’s Stockholm headquarters draw up designs for a black Spotify-branded remote and a receiver that plugs into the electrical outlet. From there, an HDMI cable runs straight into the user’s TV to power Spotify’s video offering.

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Sebastian Ramn

Pictured above: a sketch of the hardware intended to power Spotify TV 

The sleek remote control carries the Spotify logo, with three wavy lines intended to represent audio streaming. The remote lets the viewer navigate a grid of channels: up and down for sports, drama and news; right and left for various programs within each category. Like Spotify’s music player, the technology anticipates user behavior; as someone watches a certain program, the nearby channels are on standby, streaming at a low bandwidth. This makes switching channels as instant as on cable TV.

”It feels immediate,” as one source puts it.