Spotify's chief executive delivers a riposte to Taylor Swift Taylor Swift clearly touched a nerve at Spotify last week when she pulled all of her music from the streaming service. Daniel Ek, Spotify's chief executive, has responded to her move by publishing a 1,800 word essay that defends the company's business model and reveals some fascinating numbers about its growth. First up, the numbers: Spotify has paid more than $2bn to music rights holders since it was founded in 2008. Half of the total came in the last year or so - making Spotify a significant source of growth in the $15bn recorded music industry. 50m monthly active users, an increase of 10m in the last six months. 12.5m subscribers paying $120 a year, an increase of 2.5m in six months. As for Ms Swift, Mr Ek says that top artists like her are on track to earn $6m each this year from Spotify. He predicts that number will double next year. Any way you cut it, one thing is clear - we're paying an enormous amount of money to labels and publishers for distribution to artists and songwriters, and significantly more than any other streaming service. Of course, Ms Swift's problem isn't with Spotify, per se. What she objects to is Spotify's free, advertising-supported tier. She wanted to keep her songs on Spotify's paid tier, which pays generous royalties, and remove them from the free tier, which is much less lucrative. But Spotify requires rights holders to be on both tiers or none at all, so she took down her whole catalogue. So why didn't Spotify allow her to do what she wanted? Mr Ek doesn't say exactly. But he does spell out why the free tier is so important to Spotify: Why link free and paid? Because the hardest thing about selling a music subscription is that most of our competition comes from the tons of free music available just about everywhere. Today, people listen to music in a wide variety of ways, but by far the three most popular ways are radio, YouTube, and piracy - all free. Here's the overwhelming, undeniable, inescapable bottom line: the vast majority of music listening is unpaid. If we want to drive people to pay for music, we have to compete with free to get their attention in the first place. He continues: Our theory was simple - offer a terrific free tier, supported by advertising, as a starting point to attract fans and get them in the door. ... We believed that as fans invested in Spotify with time, listening to their favorite music, discovering new music and sharing it with their friends, they would eventually want the full freedom offered by our premium tier, and they'd be willing to pay for it. That strategy seems to be working. As proof of the effectiveness of the freemium model, Mr Ek cites the fact that more than 80 per cent of Spotify's subscribers started as free users. If you take away only one thing, it should be this: No free, no paid, no two billion dollars. There's no faulting his argument: the free tier appears to be good for Spotify and good for rightsholders as a group. He could also have mentioned that Spotify has been consistently good at turning free users into paying ones: the company's conversion rate has stood at 25 per cent for several years now. But whether the free tier is good for Ms Swift right now, as she seeks to maximise CD and download sales during the blaze of publicity around her newly-released album, is another matter entirely.