Jobs of Tomorrow: Spotify’s Nick Holmstén on Why the Streaming Giant and Its Algorithm Are Good for Business

On the 64th floor of 4 World Trade Center, at Spotify’s Manhattan offices, Nick Holmstén is holding court in the Orchestra of Bubbles conference room. Seated on a comfy blue couch, Holmstén — the streaming service’s global head of music since October 2018 — introduces the company’s latest hire. “I can’t tell you how happy I am that we finally have this guy on our team,” he says to the seven staffers attending the company’s weekly direct reports meeting, three of them via video conference from Stockholm. Holmstén — who oversees 100-plus employees responsible for the operation of Spotify’s more than 5,000 owned and operated playlists, as well as label and artist relations — is referring to former Interscope CFO Jeremy Erlich, who is also in the room and earlier that June day was announced as Spotify’s new head of music strategy.

It’s Erlich’s first day on the job, and Holmstén, 52 — dressed in a black T-shirt and jeans, cream-colored Yeezys and a silver medallion inscribed with “Carpe Diem” on a chain around his neck — tells his team that he’s already getting good feedback for hiring an executive from a label. “It’s interesting to see how positive the reaction from the music industry has been, because you’re so respected on both sides,” says Holmstén in Swedish-inflected English. He is speaking about Erlich but clearly directing his comments at this reporter sitting in on the meeting. Erlich’s appointment, Holmstén continues, is a move toward “bridging the conversation” between the streaming platform and the music business, which has suffered in the 18 months since Spotify went public. “There’s a lot of paranoia, a lot of uncertainty, in the music industry, but at the same time there have never been more amazing opportunities,” he says. “When everybody comes together, it is going to grow even bigger.”

The upside is potentially massive. Streaming is driving growth in recorded music for the fourth consecutive year; and according to Goldman Sachs’ latest rosy forecast, Music in the Air, there’s at least another decade of good news to come. The investment bank’s June report predicts streaming will generate $27.5 billion in business for labels and artists and attract 1.15 billion paying subscribers globally by 2030. While Apple Music reportedly leads Spotify in paid U.S. subscribers — 28 million to 26 million — the company that Daniel Ek and Martin Lorentzon launched in 2008 is the global leader, with 217 million users, 100 million of which are premium-service subscribers (compared with Apple’s 60 million).

This should be reason for celebration. But after investing in Spotify, which went public in April 2018, the majors have grown uneasy with the company’s recent moves. Spotify began signing direct licensing deals with artists and, since last September, has been beta-testing a program that allows acts to directly upload their work to the platform (rapper Noname released her album Room 25 this way); announced and then abandoned a hateful-conduct policy after it drew the ire of Kendrick Lamar and other artists; and appealed the decision by the U.S. Copyright Royalty Board (CRB) to boost mechanical rights payments to songwriters and publishers. Then, in late June, it claimed that according to the new CRB regulations it had overpaid publishers and would claw back from them as-yet-undetermined amounts. In February, Spotify provoked a lawsuit from Warner Music Group when it forged ahead with plans to offer its service in India without reaching a licensing agreement with the major. That same month, the service announced it planned to spend $500 million on podcasting, which could potentially cut into music streaming revenue.

In a quieter but even more momentous move, Spotify announced on March 26 that it had begun to algorithmically personalize some of its editorial playlists. Until that point, playlists on the platform fell into two categories: editorial, such as RapCaviar, which are human-curated; or personalized, such as Discover Weekly, which are entirely algorithm-generated based on a user’s listening history. March brought the introduction of a third: personalized editorial playlists. The brainchild of Holmstén’s music team and Spotify’s consumer division, they begin with human curation, then are individualized algorithmically so that no two playlists are the same. (The workout soundtrack Beast Mode is an example.) The vast majority of Spotify’s playlists are still editorial, but it has not gone unnoticed in the industry that the expansion of algorithmic curation comes in the wake of the departures of a number of the service’s star human curators, including Tuma Basa, who is credited with making RapCaviar arguably the most influential playlist of the genre, and Rocío Guerrero, who had done the same with Spotify’s Latin equivalents.

In the culture clash that has been waged since the advent of streaming — between the old-school, relationship-dependent ways in which the music industry has done business for ages and the cold calculations of artificial intelligence — the computers seem to be winning. According to Spotify, personalized editorial playlists increased the number of artists featured by 30%, the number of songs discovered by 35% and the average number of times a listener saves a track by 66% when tested against the strictly human-curated kind. Those are metrics that, if they hold up in the long run, will only heighten Holmstén’s status as one of the industry’s most influential players.

With great power come great headaches, however, and since landing in the United States, Holmstén has had to reeducate those used to the old favor-trading. (He lives in Scarsdale, N.Y., with his wife and teenage son and daughter.) “At the beginning, there was a lot of ‘Hey, if you’re coming [to Los Angeles], maybe I could take your family to Disneyland,’?” he says. “There were these built-in mechanics in the music industry, and I think the beauty of it now is that it doesn’t matter.”

Holmstén’s role as the face of Spotify in the United States has also put him in the position of being a lightning rod for the industry whenever the streaming giant throws its sharp elbows. In reality, although he is close to CEO Ek — when we meet, he has just returned from his boss’ Brilliant Minds summit, which this year drew former President Barack Obama, Netflix chief content officer Ted Sarandos and Goop founder Gwyneth Paltrow — Holmstén is not part of Spotify’s senior management team. He also did not play a leading role in the decisions that resulted in the company’s CRB appeal, its rush into India, its direct deals with artists or its move into podcasts (although, a Spotify source says, he may have given input on those matters). Holmstén reports to chief content officer Dawn Ostroff, who is spearheading the podcast push (see sidebar).

His response to the criticism sounds, not surprisingly, like a man who has put his trust in algorithms to get the job done. “We are moving in the right direction. Let’s focus on that,” he says. It’s as if he has done the math and knows the outcome.

 

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When the direct reports meeting ends, Holmstén, his brown hair flopped stylishly over his right brow, and Erlich head to their desks, which are next to each other in an open office. Holmstén’s only observable office perk is the ability to spin his chair around and gaze at the looming Freedom Tower through floor-to-ceiling windows. Spotify’s corporate culture has the luxe yet egalitarian vibe of many tech companies. There are matcha tea and coffee bars and a full-service cafe, and staff supervisors are instructed not to send out emails on weekends.

Yet the chill atmosphere belies urgent business. Spotify’s licensing agreements with the majors expire this year, and in light of the corporate frictions that have developed between the two sides, Holmstén, who oversees seven teams in the company’s music division, is under more pressure than ever to maintain good relations with the artistic community — and they with him, given the power of Spotify’s playlists.

As a result of that power, one industry source says label executives are apt to profess “a fairly insincere closeness” with Holmstén, but he does get high marks for his ability to hear a hit and openness to innovation. Camila Cabello’s manager, Roger Gold, says that after playing an early version of “Havana” for Holmstén while in an Uber (the executive’s office at Spotify’s Los Angeles headquarters did not have a stereo), “he stopped me and said, ‘That one’s special.’ ”

Interscope Records chairman/CEO John Janick says that after Holmstén shared his idea for vertical videos — eight-second loops that play in tandem with songs — Janick convinced Selena Gomez to film herself at home with her iPhone so that she could be the first to use the feature for her single “Bad Liar.”

Justin Lubliner, the founder/owner of Billie Eilish‘s label Darkroom Records, says it took less than a minute for Holmstén to get behind the 17-year-old breakout star’s vision for a fan-listening experience for her debut album, When We All Fall Asleep, Where Do We Go?: an immersive interactive journey through a series of rooms, each inspired by one of the LP’s 14 songs. “I sat down, shook Nick’s hand and started to explain the idea,” says Lubliner. “And Nick said, ‘Let’s do it.’ ” The concept, he adds, was executed “flawlessly — I felt like they took a picture of the inside of my brain.”

Holmstén attributes his ability to grasp artists’ needs to his own past as a singer and songwriter. Growing up in Karlstad, a town 200 miles from Stockholm, he dabbled in catering after high school; at age 30 he formed a Brit-pop band called Apple Brown Betty — “like the dessert,” he says — in which he was the frontman. The group scored a recording contract and a tour of Japan, but both fell apart along with the band, At the time, Stockholm was a hit-making mecca for American artists such as Britney Spears, Backstreet Boys and *NSYNC, who were venturing to “The Hit Factory,” aka Cheiron Studios, to write and record albums with pop gurus like Max Martin, so Holmstén focused on songwriting and at one point worked with Simon Cowell.

When Spotify launched in Sweden in 2008 — it eventually signed up almost 90% of the population — Holmstén says he noticed right away that navigating the abundance of music choices was overwhelming. He knew from his catering days, curating dining experiences and shopping at specialty food stores, that customers were interested in sampling things they hadn’t tried before. He decided the same principles could be applied to music and created Tunigo, an app that allowed people to choose music based on moods and activities. Tunigo — which for a time ranked higher than Spotify at Apple’s App Store — caught Ek’s eye. Holmstén first partnered with Spotify, then in 2013 let the company buy him out. He joined its ranks, and Tunigo became the foundation of Spotify’s playlist strategy.

“It’s crazy to think about it, but in 2013 Spotify didn’t have any of its own playlists,” says Holmstén today. “I told Daniel, ‘I promise you: In the future, some of these playlists are going be bigger than the biggest radio station.’ He sort of looked at me like, ‘Let’s see about that.’ And that is what happened. It changed the music industry.”

Despite Holmstén’s artistic beginnings, some in the business regard him as more aligned with what one high-ranking executive describes as Spotify’s “heartless” tech culture. “Spotify doesn’t seem to be able to hold on to people that are genuinely artist-friendly,” says the source, and it’s true that over the last 18 months the company has seen the departures of at least six executives with strong ties to the creative community, including Troy Carter, global head of creator services. Point out the addition of Erlich, and the response is that while he is respected, he’s more of a numbers guy.

Although Holmstén was based out of Stockholm (in other roles) until May 2018, two industry sources say he was, as one put it, “a contributing factor” in the departures of some of those executives. One source familiar with the situation says Holmstén “was obsessed with nobody on the music team speaking at conferences or to the press” but would post his own media mentions on Instagram. The insider says Holmstén also sowed anxiety by openly discussing the salary negotiations of exiting staffers.

Questioned about the turnover, Holmstén’s blue eyes do not blink. He responds that the company attrition rate is actually very low. “It was expected post-IPO that talent would leave,” he says, as would “some of the curators that became celebrities.”

Asked if he played a role in any of the departures, Holmstén replies flatly, “I don’t know about that,” then says: “I hope that they are not lying to me, but a lot of people think I’m really easy to work with.” He does admit to an extreme candor that sources say can be jarring to those who deal with him. “I don’t know how many Swedes you know, but Swedes are very straightforward,” says Holmstén. “And what I learned over the years is that when people [here] start to realize how Swedes work, a lot of them come to me and say, ‘Pretty refreshing.’ ”

“Nick is one of the most direct communicators that you’ll meet,” says Carter, who left Spotify in September 2018 and is now CEO of his own music technology company, Q&A. He denies Holmstén had anything to do with his leaving but says they frequently butted heads over what each thought was best for a particular situation. “We didn’t take our disagreements personally. It was all in the name of doing the best work possible for the company.” Carter adds that he and Holmstén both opposed Spotify’s hateful-conduct initiative.

“Nick tells you the truth and you know where you stand,” says Scooter Braun, who manages Ariana Grande and Justin Bieber and was an early investor in Spotify. “When someone looks me in the eye and says something, I want to feel like it means something and I get that with Nick.” Although Braun adds, ”That might come as a shock to some people in the music industry.”

Algorithms are straightforward, too. When a track doesn’t connect with Spotify’s listeners, it disappears from playlists, and “we tell the label it’s not working,” says Holmstén. “I think they like to hear that sometimes, instead of continuing to spend money on [promoting] it.” Holmstén contends that this frank approach has helped bring about a positive change in how labels provide A&R. “They’re learning not to be so precious around a release,” he says. “Now the labels know it’s more about artist development.”

Spotify won’t quantify how many personalized editorial playlists are currently on the platform. The total is “dynamic and evolving,” according to a spokesman — the implication being they’re here to stay.

 

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Because of Spotify’s recent actions — including its CRB appeal, direct deals with artists and increasing emphasis on podcasts — there is suspicion within the industry that the streaming giant’s master plan is to, as the high-ranking source puts it, “get rid of the gatekeepers, disaggregate the negotiating power of artists and dilute the impact of music on the platform with alternative forms of content.” That, and Spotify’s declining average revenue per paying user (ARPU) — according to its financial filings, its premium-tier ARPU has fallen from $7.09 in 2016 to $5.50 in 2018 — could mean that renewing its licensing agreements with the majors will prove thornier this time around.

It also means Holmstén must spend a lot of time attempting to allay the industry’s fears about his superiors’ actions. No, he does not expect Spotify’s podcast efforts to cannibalize music listening. Rather, they will “increase listener engagement.” And he puts a positive spin on the decision to appeal the CRB’s decision to increase mechanical royalty rates, paid to songwriters whenever a song is sold or streamed, from 10.5% to 15.1%.

“I totally understand the frustration because these people have been pushed down for such a long period of time,” says Holmstén, but he insists that “no one wants to pay songwriters more than Spotify.”

“There is always going to be a conversation about how the money is going to be split,” he continues. “But I believe that a lot of people aren’t looking at it from the perspective of where we were a few years ago and where we are. The opportunity is much larger than anyone sees right now.”

Additional reporting by Micah Singleton.

 

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The Dawn of Spotify’s Podcast Era

The platform’s chief content officer has been combing Hollywood for inspiration. Here’s what to expect.

Ask Spotify chief content officer Dawn Ostroff why the streaming giant is confident enough in podcasts to invest $500 million in them, and she’ll say that “like music, podcasts can go very deep and very broad.” The former president of Condé Nast Entertainment, president of entertainment for broadcast network The CW (which she helped launch in 2006) and president of UPN, Ostroff has been using her deep connections in the media and entertainment worlds to develop projects and partnerships, including with Barack and Michelle Obama’s production company, Higher Ground. She spoke to Billboard during a break in Spotify’s presentations and activations at Cannes Lions earlier in June.

Why is Spotify so bullish on podcasts?

Storytelling is really striking chords with young people. From Gen Z to millennials, one in three Americans have listened to a podcast in the past month.

Where are you in terms of your rollout strategy?

We have been working on fulfilling our strategy in the next 18 months. We are really just getting started in a more meaningful, significant way in the past six months, especially with the acquisition of Gimlet, Parcast and Anchor. Our goal is to become the No. 1 audio platform, and we feel that the podcast is a big piece of that puzzle.

How will production be funded?

Advertising.

You have been meeting with executives and writers in Hollywood. What kinds of pitches are you getting?

We have deals that are going to be announced over the next few weeks, [but] it is everybody from big movie and TV actors [to] great writers and even directors; talk shows, scripted shows, sports pitches, comedy pitches and even cooking shows. Obviously we will do a lot of music.

What kinds of scripted series work best?

We have seen crime and mystery emerge as the strongest genres. Some sci-fi works well, too.

Can you address the concern in the music industry that Spotify’s podcast push will diminish its reliance on music?

Music is and always will be front and center for the platform. The podcast business makes a lot of sense because there are a lot of other platforms out there that are in video, but we feel that audio is where we want to focus.    — C.R.

A version of this article originally appeared in the June 29 issue of Billboard.