King of Audio

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Spotify’s CFO wants to put the music and podcast streaming giant on a billion smartphones.

On April 3, 2018, Paul Vogel C’95 waited anxiously on the trading floor of Morgan Stanley. The music streaming company Spotify was making its debut on the New York Stock Exchange, and as the company’s head of treasury and investor relations (he’s since been promoted to chief financial officer), he was in charge.

An IPO would be a big deal for any company, but Spotify was the first to attempt a direct listing on the NYSE—bypassing investment bankers to sell shares directly to the public. It was a way to disrupt Wall Street—and also avoid the intense scrutiny brought on by a traditional IPO. Investors, including employees who owned shares, could cash out as much as they wanted.

The day was a success, and other companies have since gone public in a similar manner. Riding a rising stock price, Spotify has continued to experiment and expand. In July, the company entered 13 new markets across Europe, bringing the total to 92. And it has broadened to offer exclusive podcasts and vodcasts (video podcasts) from figures ranging from Michelle Obama to Joe Rogan. When Vogel joined Spotify in 2016, there were 1,500 employees. Now there are more than 6,000. “I imagine in five to 10 years we will have 10,000-plus employees,” he says.

Vogel had no idea where Spotify was headed that day it went public, but he hoped it was somewhere exciting. The IPO, he says, “was one of the coolest days of my life.” (It helped that in the evening he took his twin daughters, who were turning 16, to see Hamilton on Broadway.)

Growing up outside Philadelphia, Vogel was always interested in music and its technology, spending his bar mitzvah money on a CD player that could play five discs, a novelty at the time. But his life mostly revolved around ice hockey. He played for the Philadelphia Junior Flyers, an amateur team that has produced professional players, and had opportunities to play collegiately at the Division III level. Instead, he chose to attend Penn, following his older brother Neil Vogel W’92 [“Dotdash Rising,” May|Jun 2020]. “I was pretty undecided on what I wanted to do,” he says. “I wanted to go to a school that had the opportunity to pursue anything, where I could figure it out once I got there.”

At Penn, he majored in economics, met his future wife Amy Cohen Vogel C’95, and joined Pi Kappa Alpha fraternity and the club hockey team. (He didn’t play against Princeton, which is fortunate since he now lives there and coaches his son’s hockey team, a Princeton youth hockey affiliate. “I’m wearing a Princeton jacket while I coach, and I’ve never felt comfortable,” he says. “Penn friends see it on Facebook and say that it doesn’t look right at all.”)

After graduating, he joined Morgan Stanley’s equity research team, where he focused on the internet and media. There he worked under Mary Meeker, who was dubbed the Queen of the Internet for overseeing the IPO of Netscape and publishing The Internet Report, an investor bible during the dot-com boom. Foreshadowing his later path, one of his first projects was to understand how people downloaded music online.

In the early 2000s, Vogel switched to the investment side, where he worked for investment fund SVPGlobal. Because he had worked for Meeker and his fund had enormous assets, he gained access to some of the top media CEOs, including Walt Disney chief and former head of ABC, Bob Iger. “Part of my job was to get to know the people running the businesses and how they were thinking about the future,” he says.

By 2013, Vogel realized he wanted to be on the inside of one of these companies as an operator, rather than an investor. After a stint at OpenSky, a retail startup where celebrities advised followers on what to buy, and a short relapse on Wall Street, he landed at Spotify in 2016.

At that time, he had already been using the music streaming service for years because his brother-in-law, who lives outside the United States, introduced him to the Swedish company that launched in 2008. And he had thought about Spotify’s potential to expand to different forms of audio. “You can use it to get all this good content in one place for a pretty good deal,” he says. “It was something that made complete sense to me.” (He also loved getting to work for a hip company. “My kids think I’m really cool,” he says. “As a 47-year-old, it’s a pretty big accomplishment.”)

During his first few years at Spotify, Vogel focused on the IPO and its aftermath. “When you’re a public company you have to do the reporting, have consistency, and make sure the organization understands there is way more scrutiny from investors, from the press, from competitors,” he says. But he also saw his job as minimizing financial stress so the rest of the company could innovate. “We are still going to take risks, and we will still make big bets.”

Innovation is necessary because Spotify is operating in a crowded space, notes David Hsu, a management professor at Wharton. “You have Pandora, you have the new upstarts, you have Apple, Amazon Music,” he says. “There are a lot of big competitors.”

Spotify isn’t just competing for users against deep-pocketed companies, Hsu adds. They are wrestling with the same competitors—and big-name artists—over music rights. Performers including Taylor Swift have been putting up tough, public fights against the platform for years. “Getting access to the catalog of latest hits, it’s very expensive from the content providers,” Hsu says.

Barry Collins, who writes about consumer tech for Forbes and PC Pro magazine in the UK, said it’s hard for Spotify to win that fight. “I think Apple and Google could both easily afford to double royalty payments to artists and cause Spotify a massive problem,” he says.

Spotify is trying to overcome these challenges by building its own content. “It’s the Netflix strategy,” Hsu says. “They were having trouble getting the rights to movies, so they made a big bet—one that seems to be paying off—by generating their own content and label.” Spotify has been paying hundreds of millions of dollars to gobble up podcast studios such as Gimlet and Anchor, while developing exclusive licensing deals with creative artists carrying huge audiences.

“A whole load of long-form content that you don’t have to pay royalties on?” Collins says. “That’s smart business.” In addition to its catalog of 60 million songs, Spotify also boasts more than 1.5 million podcast titles as it looks to corner that growing market.

As CFO, Vogel’s role is to figure out how to allocate assets across all of these initiatives. “How can we think about return on new products and innovation and investments in content and podcasting?” he says. “We have to look at which initiatives are working, and for some, it takes many, many years to play out. Which ones should we double down on and which ones should we reallocate our resources from?”

He has to keep the numbers straight as the company’s user base rapidly grows. When Vogel joined Spotify, the company had fewer than 100 million users and 30 million subscribers to its premium service. Four years later, there are roughly 300 million users and 140 million paid subscribers.

But for Vogel, the company is just getting started. “There are billions and billions of smartphones, and everyone has a streaming audio app,” he says. “It should be ours. We should have a billion-plus users.”

Alyson Krueger C’07

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