Numerous online music platforms exist today, with Apple Music, Google Play Music, Pandora, Spotify, SoundCloud, and YouTube as perhaps the most common ways people listen to music online around the world. What’s popular, of course, can change rapidly. Numerous other music platforms exist or have existed (e.g., 8tracks, AccuRadio, Dash Radio, Deezer, Grooveshark, iHeartRadio, Incus Tunes, Jango, last.fm, Mixloud, MusixHub, MySpace, RDIO, Slacker Radio, TuneIn Radio, The Sixty One, Xbox Music), and some of these will overtake the top platforms of today, some will be gone soon, and some already have very few users remaining. In this fierce competitive technology environment, Swedish entrepreneurs have made an incredible mark on the music industry.
It all begins, really, with the countless start-ups that Sweden has produced. The focus of this case is Spotify and SoundCloud. However, to better understand the creation of companies and brands such as these, it’s important to know how a tiny country like Sweden with a population of 10 million people and pretty high government spending can be so innovative and entrepreneurial. Given its size, it should come as no surprise that companies from Sweden rely on exports for much of their sales. And the start-ups have become a cultural phenomenon in Sweden that have helped the economy grow in unimaginable ways from just a couple of decades ago.
Stockholm, the capital city of Sweden, produces the second-highest number of billion-dollar tech companies per capita, after Silicon Valley. The change happened in the 1990s when Sweden needed a boost to its economy. The country used to be heavily regulated and public monopolies dominated the market, but regulations have been eased since that time. Interestingly, while Sweden was making it harder for monopolies to dominate the market, the regulatory landscape in the U.S. was changed to favor big companies and established firms. Despite the global fascination with start-ups, only 8 percent of all firms in the U.S. meet that definition today, a remarkable drop from a few decades ago.
In Sweden, the trend has been reversed. The pace of new-business creation start-ups has been accelerating.
Countries like Brazil, India, Romania, Germany, and Singapore have also seen an increasing trend of start-ups in recent years. These start-ups are critical to a country’s economy. They create jobs, spur innovation, and foster the entrepreneurial spirit that drives economic growth. For example, in the United States, small- and medium-sized enterprises account for 98 percent of the country’s exporters, and start-ups fall into this SME category (often as so-called “born globals”—companies that start selling internationally early on after inception). Spotify and SoundCloud fit all of these categories as start-ups—they were initially small, went international early on, and helped drive exporting numbers.
Spotify is a Swedish entertainment company founded in 2008 by Daniel Ek and Martin Lorentzon that specializes in music, podcast, and video streaming. Spotify Technology SA is headquartered in Stockholm and listed on the New York Stock Exchange as SPOT. The company has more than 3,000 employees, 200 million users, and revenue of about $5 billion. Spotify is available in most of Europe, the Americas, Oceania, and parts of Asia. Spotify gives users access to more than 30 million songs and has some 140 million active monthly users, with more than 70 million paying subscribers.

SoundCloud was founded in 2007 in Stockholm, Sweden, by Alexander Ljung and Eric Wahlforss, who almost immediately developed a headquarters for the company in Berlin, Germany. In effect, Alexander Ljung and Eric Wahlforss used the great infrastructure for start-ups in both Sweden and Germany to launch SoundCloud and build it into what it has now become—a company with 300 employees, 40 million registered users, and 175 million monthly listeners. With a different focus than Spotify, SoundCloud positioned itself as an online audio distribution platform that enables users to upload, record, promote, and share their originally created sounds.

Questions

1. Numerous online music platforms exist today, with Apple Music, Google Play Music, Pandora, Spotify, SoundCloud, and YouTube as perhaps the most common ways people listen to music online around the world. Which one(s) do you use and why? Which one(s) do you think will no longer be in operation in 10 years and why?

2. Based on what you can read in this case and what you are able to glean from researching Sweden, why do you think Stockholm, the capital city of Sweden, produces the second-highest number of billion-dollar tech companies per capita, after Silicon Valley?
3. What are the strengths and weaknesses of Spotify and SoundCloud, respectively? Do you think their business models will last, or will other innovative ideas overtake the market power that Spotify and SoundCloud have in the international marketplace?