Ola Sars Transcript

Clint Betts

Thank you so much for coming on. You are a legend in the music tech industry. It's an honor to have you on this show to talk about the future of music, the future of tech, how AI is going to affect the music business. But I think maybe let's start with your background, the previous four companies and startups that you founded, and what led you into the music business.

Ola Sars

Thanks, Clint, for having me. Well, it's a bit of a romantic story. I've been able to make a living and build companies in the music industry, as a result of me making a leap of faith 15 years ago, deciding to try to make a life working in an industry around my passion, music.

So it was a decision I made actually on an island outside of Spain called Ibiza with good friends, where I realized that they were working in the music industry, making a good living, and having fun at the same time, and I was working in a more traditional industry, having a great career, but wasn't happy, and was just dreaming about being able to work with something that I love, music.

I obviously use both sides of my brain, both the rationale around the music industry, digitizing, and basically transforming itself right in front of us in terms of digitization or production, distribution and consumption at the same time.

So it was a rational opportunity, but also an emotional opportunity to jump into the music industry and start building companies. So that's what I've been doing the last 15 years, and basically focusing on building digital disruptors within the same thesis.

Which is in a market of abundance, meaning all the music in the world available at your fingertips, anywhere, anytime in the world, companies who can help find the right music for the right context, and deliver that music will be powerful players in the value chain.

And that's basically what I've been doing, both on the business-to-consumer side, through building digital service providers and technology platforms. And now the last two efforts with Spotify Business and Soundtrack is building in the B2B space.

So I've done anything from launching Pacemaker, the world's first pocket-sized DJ system, which was actually—

Clint Betts

No way, seriously?

Ola Sars

Yeah. It was before the app store, believe it or not. And we were building a hardware device to connect to all the DJs of the world to extract the metadata from their DJ sets, in order to build the first music recommendation engine. So that was kind of the first effort.

And then fast-forward, I was one of the co-founders of Beats Music, that obviously was the competitor at Spotify, got acquired by Apple, and became Apple Music. And now lately, together with Spotify, I founded Spotify Business, which I then pivoted away from Spotify to become 100% independent Soundtrack. And Soundtrack is now the global leader within music streaming for businesses Spotify. That's the super short story about me.

Clint Betts

No. Yeah, your journey is unbelievable. Tell me about Beats Music, had Spotify come out yet?

Ola Sars

Oh, yeah, Spotify was in the market as the major disruptor, I would say, within the global transition of music consumption to streaming. I mean, they weren't first, you guys in the U.S—I'm in Sweden, by the way, I'm in Stockholm, on the other side of the Atlantic—but as you can hear, I've had a couple of tours in your beautiful country throughout my life.

So Spotify wasn't first, but I would say, they did it the right way, so they were able to really scale music streaming into the consumer space, and now they obviously lead the market ahead of Apple, ahead of Amazon, ahead of Google.

I'll do the short story, there's a whole book around this as well that one day I'll write, but Jimmy and Dre who were the founders of Beats Electronics, and were doing the Beats by Dre headphones, you remember back in the days when they launched that product?

Clint Betts

Oh, yeah.

Ola Sars

Yeah, they had a bigger ambition than doing headphones, both of them came out of obviously very successful music careers, both on the business side and the artist side. And they realized that the market was changing, and just like I realized when I was sitting there with my friends in Ibiza, and they said, "Something massive is going to change in the industry and we've got to be part of it." So they were trying to figure that out.

And then the ambition with Beats was always to become the leading mainstream music lifestyle brand for The U.S. market. That was always their ambition. They started with headphones, which was a very natural place to be when you want to put a brand into The U.S. market. And obviously those headphones were hanging around the necks of every superstar, sports star, and anything from Gwen Stefani to Will.i.am.

But they had a bigger ambition, which was obviously to dominate the music industry from a consumer standpoint, and hence they needed someone that could help them build the epicenter of that vision, which was a music streaming platform.

And we had done some business before, they tried to acquire one of my companies before, and now I had a company that was a music streaming platform for DJ mixes, but it was a very sophisticated platform, and they ended up buying that platform, which was called Let's Mix, and we changed the name to Beats Music.

I told them, "Let's just call it Beats Music." They were making up all kinds of funny names, but I said, "Let's just be pragmatic and call it..." They were going to call it the same name as one of the guys at Beats Dog, it was called Daisy. I was like, "Everyone just stop. Let's just call it Beats Music. It makes all the sense in the world."

And I registered the domain, and there we were, and we took off, and we built out as a stealth product, out of Stockholm, in a basement, in my part of the town here, and recruited from Spotify, and my whole old team was there. We moved fast, and it was crazy, and then we acquired a company in The U.S., and moved the whole operation over to The U.S., because we were going to launch in The U.S. market.

And then we launched, and did a deal with AT&T, and later got acquired by Apple, and my team became the Apple Music team.

Clint Betts

Yeah, what was that like going from Beats Music? It's already an incredible brand obviously. Beats eventually gets acquired by headphones, was it part of the same deal? Was the electronics and the music—

Ola Sars

Yeah, Apple acquired the whole Beats Electronics family, including the music service and the hardware business.

Clint Betts

How long did you stay on at Apple Music?

Ola Sars

Oh, I wasn't even there when the whole thing was done—

Clint Betts

Oh, really?

Ola Sars

I'd already gotten on a plane back to Sweden. So I never moved my family, they were still in Stockholm during the years I was doing this, because it was going to be a global company obviously, so I was basically living the worst years of my life on a plane, more or less every second week flying over the whole world.

So it wasn't optimal for me from a private perspective, and when this was going to happen, I was like, "No, it's time to go back home." So I went home.

They did good with me financially, and my team stayed on for Apple, and I sat down with Daniel, who's a friend here from Stockholm, and Martin, founders of Spotify said, "Look, I think there's an opportunity to do what we've done at Spotify and at Beats, but in the business-to-business market, basically business subscription."

So music in store, when you walk into a Starbucks, there's music, or when you walk into a cool shop in Santa Monica or New York, there's music playing. 96% of all U.S. businesses play music in order to improve the customer experience, and streaming had not been made available for the business market, and I thought I'd build that service. Here I am.

Clint Betts

Yeah, so co-founded a Spotify Business, and how long did that take to grow within the overall Spotify brand?

Ola Sars

So I always wanted to build something independent, but I needed a music backend, the infrastructure to build the business-to-business SaaS product on top of 100 million track infrastructure. So I told Daniel, "Let's do it as a joint venture, but I want to make it an independent company down the line."

And so we set it up as Spotify with my co-founder, I invested the money I made, and Spotify AB, here, the Swedish entity, the mother entity invested, and we started building, but I was building it on top of the Spotify Music backend, hence the product needed to be called Spotify Business, and then later Spotify Enterprise for the enterprise market, and Spotify was an investor.

But that was 2014, in 2016, I decided it is time to move away from home, so to speak, and kind of pivot into becoming an independent player and go for it myself. And 2018 we launched Soundtrack as an independent service brand, rolled out 74 markets during two years. So then Spotify is merely a shareholder on the cap table today and a good partner, but Soundtrack is an independent B2B streaming service—

Clint Betts

That's incredible.

Clint Betts

So how is Soundtrack doing? I mean, it's the global brand for this, right?

Ola Sars

Yeah, we are the first. Believe it or not, the streaming had not occurred in what you guys in The U.S. referred to as the background music market. And they were shipping CDs, I didn't believe it.

I was talking to retailers, and it was like, "Okay, we ship 5,000 CDs every four weeks." And I was like, "Okay, this is a market ripe for disruption."

And answering your question, we're doing really well. We are a typical Swedish tech product-first company, we're only 100 employees, so we're super small, but we're scaling into the global markets through selling software, self- service to businesses.

So if you're running 10 steakhouses in Chicago, you go online, and you sign up for Soundtrack, and we can take care of the whole licensing issue with background music for your venues.

Also, we give you a very powerful software, very powerful SaaS platform to help the entrepreneurs deliver the right music, to the right place, at the right time, so that the customers stay longer for a drink, or really experience the brand.

But we're still very small, we were just passing $25 million in annual recurring revenue, ARR, and growing at around 60% last year. So it's a nice, really scalable SaaS business, with a very, very deep moat right now, because we have spent $70 million building it, and have 16,200 deals with labels and publishers that no one else in the world has.

So I think we're just about to move into a scale up stage, and I think... I'm a constant opportunist by nature, and so the sky's the limit, as always.

Clint Betts

I love that. Hey, what are the copyright issues with the whole thing? I mean, I imagine that's where the opportunity is. You can officially license this music, officially license it with the artist, or their producers or whatever they're called. And I imagine it's different in every country, and maybe even in every state in the United States.

Ola Sars

Yes.

Clint Betts

I mean, is that the challenge?

Ola Sars

Yeah, so without becoming too long of a story, so think of it like this, no one's opening cinemas with Netflix accounts.

Clint Betts

Right.

Ola Sars

And if you think about sports, if you walk into a sports bar in The U.S. for Sunday Night Football, that's a business subscription, and that costs the bar owner 100 times more than the private account. There's a whole B2B side of media, and rights, and IP.

So the same thing goes for music, if you're going to use music to improve the customer experience in your restaurant, or your retail, anything from The Gap to the small mom-and-pop store, they need to cover a business grade license service, and I'm the first business grade license service for streaming.

And it's a very complex exercise to get deals with, obviously Warner Music, Sony Music, Universal Music, I could keep going on until tomorrow morning. So it took us, obviously, a couple of hundred sleepless nights, and me being on a plane again, and three years later, we launched our first markets, and now we're live with 98 million tracks, and 74 markets for business use.

Clint Betts

That's incredible. So how do you close those deals with Warner Music, or Sony, or whatever it is? I mean, what's the pitch?

Ola Sars

You need to know how to do it, obviously, and I've done it a couple of times, and my team—I obviously haven't done it myself—I have a very, very experienced team on all levels, on product, and licensing and everything.

But I think your real question is, "Why would they be interested in talking to you about something as unsexy as background music?" Right?

Clint Betts

Yeah.

Ola Sars

Because, really, it's an incremental market opportunity for music rights holders, meaning it's more money for them from a market that they were not monetizing correctly before.

So it's a very easy logic to say, "Hey, I'm selling subscriptions for $50, Daniel at Spotify is selling for $10, that means that you're making five times more by just allowing me to create the concept, and market the concept of business subscriptions.

You don't really have to do anything, you've just got to help me regulate the market, and protect your IP, and make more money."

Clint Betts

Yeah. Yeah.

Ola Sars

And if you're an IP holder, you're out to maximize the return on your IP holding, hence, it's pretty easy. Once you get them to understand, and then you've got to do that 16,200 times, and keep everyone happy, and hold hands, and sing Kumbaya while you're doing it. But it's obviously not trivial, but the business logic of it is quite trivial.

Clint Betts

And now how does AI affect all of this? And we're already seeing copyright issues in the media. I mean, there's a song that went viral that's based off of other things. What is this going to do? What is this going to do to the entire industry?

Ola Sars

What's it going to do to the entire world?

Clint Betts

Yeah, that's a much bigger question.

Ola Sars

Yeah, I guess you're old enough to have seen more games when you were younger, so I wouldn't know. Once again, I'm an opportunist, I tend to see technology as potential positive drivers. And look, by no means is this a new concept, of using artificial intelligence in the music industry, we were very early in pioneering it from a perspective of actually just building very good recommendations engines, and that was really what I set out to do, training machines when I was building my first companies, and training data from DJs, that's really what I was doing 13, 14 years ago.

Clint Betts

Right.

Ola Sars

So I've been very accustomed to machine learning as a tool, and artificial intelligence, which is basically just trying to replicate human behavior with training data, and through data powering. So for me, it's nothing new. I mean, the whole Spotify recommendation engine is based on artificial intelligence, so it's nothing new.

When it comes to this stuff that's happening right now, these machines are becoming more and more intelligent, and they are being applied to music production. And the issue that rights holders have with that, or artists, or songwriters by the way, is that they're using their art to train the machines to produce music based on their music.

So that's happening right now, that's the Drake track that's out, and Weeknd track, which by the way, I've spoken to a lot of these companies, and met a lot of people in this space, and listened to a lot, but that was like, "Okay, I can't even tell."

So of course the labels and publishers are worried that there's going to be a whole robot army replicating their music, and consumers won't understand that it's produced by a machine, and they'll lose their revenue, and they'll be replaced by machines.

That's not going to happen in my opinion, but it could be a part of the market that's actually data produced. And you can imagine, these labels are like, "Okay..."

They're actually even trying to prevent the digital service providers, meaning Apple, Spotify, Amazon, from distributing the music produced by machines.

Clint Betts

How do musicians make money in today's world with music? I mean, we could listen to anything right now in a second, and it's relatively cheap, or it's free if you don't use the non-ad part of Spotify. How do they make money? I think I understand how Taylor Swift makes money, or that level, through concerts and stuff like that. Is it just live music where they make money, or how does it work?

Ola Sars

No, I mean, the actual monetization of music consumption has never been bigger. So—

Clint Betts

Oh, interesting.

Ola Sars

Yeah, it's beyond the eighties when the CD came out, when the music industry really took off. Now it's bigger, and monetized on a higher level. And even more efficiently, and more effectively redistributed the actual creators than before.

So it's healthier than it's ever been, and growing, and now we're kind of moving from developed economies like The U.S., Sweden and Netherlands, Germany, and stuff like that, into the next developing economies like India, China, Indonesia, Africa.

And so it's going to keep on growing, and it's going to keep on being increasingly monetized. But having said that, there's more artists, you and I could basically create a band right now, produce a song, upload it, and publish it on Spotify within an hour. So there's 100,000 tracks being released every day, I think.

Clint Betts

That's great.

Ola Sars

And the market includes much, much more creators that have to share a bigger pie, but then obviously there's more pieces in that pie, hence a lower percentage of the artists who make it to being distributed can make a living from it.

Clint Betts

Are name brand, record labels still important, or is that becoming—

Ola Sars

Oh yeah, they are. Yeah, sure. So there's obviously a trend which is called do it yourself, which was kind of the use case I just referred to, where you and I can start a band, and upload to some distributor, for example, DistroKid, which is The U.S. based one, and then that's live on Spotify within a couple of hours.

But if you're an artist, you get picked up by label, you obviously get the whole production machine, marketing machine, touring, everything that comes with being a contracted artist.

So yes, they still play a very important role in spotting and developing talent, and they always will.

Clint Betts

Yeah, it seems like if you're an artist or a musician, you've got to be really good, and you want to do it by yourself. You've got to be really good at all those things you just mentioned, and be a great musician. You've got to be good at the logistics of touring, you've got to be good at marketing. That seems really difficult.

Ola Sars

Yeah, I know, of course, it's fun, because there's this prosumer market now, or if you may, kind of a consumer creator market, the creator economy, if you may, and then obviously, then you move up to the MBA, and you get a contract with Universal, and you're kind of playing the MBA, and you're monetizing it on professional high level.

Clint Betts

What do you think the future of the music industry is?

Ola Sars

Wow, that's a philosophical question. I mean, obviously, I'm here, and I'm loving it, and it's constantly changing, and evolving, and it's super challenging, but it's super fun. At the end of the day, when I feel tired, and, "Whew, this is such a dysfunctional industry, I'll just go back to investment banking or management consulting or something."

I come back to the data point of 96% of all businesses in The U.S. play music, 90% of all consumers say that they like or love music. So it's such a huge cultural phenomena in the human race way of living.

Clint Betts

There's really nothing like that. Maybe sports could be like that.

Ola Sars

It always evolves, and it moves our emotions, and it makes us cry, and it makes us laugh, and it makes us dance, and it's always there. It's just one of those things that it's always going to be realm, and it's always going to be an important part of human nature. So it's going to be there, in what form? Pass.

Clint Betts

Yeah, it's interesting. I can't think of anything that's more culturally significant than music, maybe sports get close, but it still seems like music is even bigger than that.

As an entrepreneur, and having done this so many times, what advice would you have to people who are founding companies on what it takes to get to where you are? Because it's not easy, and it's very difficult actually, but sometimes, I think we get to where you are now, and be like, "Yeah, I could do that, just give me a year” or something.

Ola Sars

The general advice for starting companies, and this is based on my approach, and by no means is that the right approach or the only approach, for me, it was all about finding this market opportunity that appealed to me both in my heart, and in my brains, and in my stomach, meaning, I did a very rational analysis of the music industry, it's like, "Okay, there's massive disruption going to happen in this industry, which will provide multiple opportunities to build business and technology."

So that analysis I did, combining it with a personal drive to be privileged enough to choose to work in an industry, and be enabled to build a company in an industry where I love the actual product, music. So that gives you a pretty strong starting point, and the prerequisites of maybe staying up another hour, or surviving another failure, which is more or less every day, you wrestle your way through failures, that's basically what you do and challenges.

So that's the first kind of reflection/recommendation. If you're able to find that, and I was lucky enough to find it, then you've created a platform. And then on top of that, I obviously had a thesis, and that thesis is still the thesis that I'm holding onto, and that is, once again, in a market of abundance, all the music in the world, available anywhere, anytime, at your fingertips.

Companies that can help deliver the right music, at the right place, at the right time will be very valuable assets. So I've reiterated businesses from different angles and in different kinds of forms, and business models around that thesis, based on that macro of the transformation of the music industry.

Both in touching upon production, touching upon distribution, touching upon consumption. So that was my approach, and then obviously, just drilling down, and understanding the complexity of all parts of that business, which is a very complex business, because it's both an IP-driven business, in conjunction with a massive technology transformation.

So understanding technology, in combination with IP, and then connecting that to building product, recruiting team, and solving problems within an industry, where obviously what I learned how to do, and failed, and was somewhat successful, and failed, and was somewhat successful, but on the same thesis.

So that was my approach, and that's probably what I'm going to do until I retire, because I can't think of anything more fun than being able to wake up in the morning and work in this industry. So that's what kept me rolling, and then obviously, I've developed some skills along the way, with understanding how to build a team, how to prioritize and so forth.

Clint Betts

Yeah, I wanted to ask you about that, about what you've learned about leadership, because they're starting the company in the early days, and you're kind of in the basement, and you're kind of all in a foxhole. And then as it grows, the leadership that you provide changes, right?

Ola Sars

Yeah, right. Of course. Hopefully for the better. Hopefully I've become a better manager and CEO over the iterations. I've always built companies even before in the music industry, so I've always kind of built stuff myself, and led people.

So I have a couple of principles as an individual around leadership that I've tried to apply and improve over time, which I think I've proven work, somewhat. They're very simple, and there's nothing magic about it, but it's the classical full transparency.

I mean, absolutely no compromise transparency with the team I'm working with, meaning that I don't have secrets. I tell them good and bad news all the time with high frequency, communicate proactively. That's one thing that I think works. And that obviously filters the people around me who can deal with that, hearing bad stuff all the time.

But some people thrive in that environment, and they kind of are up for the challenge, and it creates a very productive environment. The other one is obviously cliche, recruit people that are much better than yourself, and I really try. I mean, you can't be better than my CFO in finance. I can't be better than my chief product officer. I'm always going to be the generalist in a group of specialists.

And that's also not trying to be better than them, just embracing the fact that you have great specialists around you, and trying to keep those specialty skills in a structure, and with the right prerequisites, and with the right resources, and the right sequencing, around the right strategy. So that's what leadership is to me.

And then one thing that I really want to underline that I've become better through the years, that's ruthless focus, basically. Absolute laser-focus, no compromise from if you found an idea, execute on that, nothing else. It's the biggest mistake in startups and high velocity company building, is, you're doing too many things at the same time, and you build a brand, and people become interested, and they come to you with great opportunities, and you try to do a bunch of stuff on a reactive basis.

If you find a business idea that works, all the people in your team need to go into that, and nothing else.

Clint Betts

That's actually really interesting. That's an interesting way to look at it. Finally, I could talk to you forever, but I've got to respect your time. We ask everybody, this is the last question I ask everybody, which is, we believe that chances are just as important when we give them as when we take them. And I wonder if there's anyone in your life or in your career who has given you a chance that has led you to where you are today?

Ola Sars

Oh, many times, many times. I'm raised by the principle of trying to give at least two times as much back as you ever receive. But it's always the people that give you something at some time that becomes the sliding doors of your life, or that unlocks.

So I have so many people that have given me chances through the years, and friends around the world. And I really think that I am a good friend, even in business. It's not that I'm naive, and over romantic about business relationships, it's business, of course, but really, respecting people, and trying to give as much back as possible, and of course, you're going to get stuff back, and that's not really the point], but it comes to you when you meet those people.

So, many people in my life have been extremely important to me. There's one of my best friends, Jonas, who took me into the music industry by opening my eyes to the opportunity. He was one of the main creators at Universal Publishing, and he's the guy behind the Swedish House Mafia and things like that, he's just like, "You can also apply a business mindset."

And another buddy who's also called Jonas Tempel, for example, he was the founder of Beatport, which was U.S. based, first DJ download store, and he's with me in multiple startups. He's always been, by nature, an extremely generous person, just giving advice, or giving opportunity.

And I owe those people, like all the other people, everything, because without them, you're nothing. But hopefully somebody feels the same way about me somewhere, that I've given them an opportunity, and hopefully I've given more opportunities than I've taken.

Clint Betts

Oh, I'm sure they do. By the way, circling back to something you said a little bit earlier, that Netflix doesn't have any theaters. What a great idea, Netflix should open theaters.

Ola Sars

Well, go for it, Clint. Just don't bring me in on the licensing stuff, because I can't take it again. I don't have one more in me.

Clint Betts

Oh, I love it. Hey, thanks so much for coming on. We'll have to regroup as you progress, and maybe have you back on again, that'd be incredible. Seriously, what an honor to have you. Your career's been incredible, and thanks for everything you've done for music over the years.

Ola Sars

Thanks for having me. It was a pure pleasure.

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