Rakesh Patel says promoting diversity and a sense of belonging have "always been at the top of the agenda" at Spotify. In other words, long before some media companies woke up to the issue in the past couple of months in the wake of the Black Lives Matter movement.
"It’s important to me and it’s important to the business that we create a very belonging-led environment," Patel, head of sales for the UK and pan-EMEA at Spotify, says in an interview with Campaign over Zoom. "We want to have all different types of thinking and experiences and backgrounds and so on."
Patel, a house music fan (whose current favourite Spotify playlist is "Tropical House 2020 Hits"), joined the Swedish music and podcast streaming giant in 2017 from Auto Trader, after previous sales roles at Microsoft, the Financial Times and Emap.
Marco Bertozzi, vice-president of EMEA sales and multi-market global sales, recruited Patel with a brief to rebuild Spotify’s UK ad sales operation virtually from scratch after a period of drift.
Spotify, which was founded in 2006, already had a "very strong" brand, Patel recalls, but he and Bertozzi needed to reshape the UK offer "in terms of how we work with marketers and advertisers". They set about recruiting a team that was "very digitally savvy" and "hungry" and would "add to the culture of Spotify – that was a really key bit", Patel says.
"Spotify is all about a product that is incredibly diverse in terms of the music and the podcasts that we have. We need to cater for every type of need that’s out there."
That has allowed Patel to put diversity and inclusion "at the top of the list" when he talks with his "talent acquisition team" and to potential recruits. "We talk a lot about belonging," he says.
Patel credits Daniel Ek, Spotify’s founder and chief executive, Katerina Berg, the long-serving chief human resources officer, and Bertozzi for their inclusive mindset. He describes Spotify as "inherently Swedish". It is "a company that really does believe – and I’m not just saying this – in diversity and belonging", Patel says, adding he felt "I’d come to a business where the values align" with his own.
"I am a Mancunian, I’m an only child and that’s why the whole inclusion thing is a big thing for me," he explains. "The Indian community in Manchester was tiny when I grew up there, so we were constantly on the motorway going to all the various family everywhere, which meant I didn’t feel included [in his local neighbourhood]."
Spotify, which gets about 10% of its global revenue from ad sales, has warned of a financial hit from the coronavirus downturn since March but the focus on inclusion "has not dropped off", according to Patel.
"In fact, this is a time where belonging is even more important," he says, referring to the pressures of the coronavirus lockdown and "ensuring our people feel more and more included".
He continues: "That sense of belonging runs through our business – almost it’s the air that we breathe. It really is. I feel very lucky to be in an organisation like this, at a time like this."
This is not, however, a reference to the rise of Black Lives Matter. Patel first spoke to Campaign in the middle of May – before the killing of George Floyd, an African-American man, at the hands of the Minneapolis police, which triggered demonstrations around the world. Since then, Spotify has used its streaming platform to speak out against racism. The company took part in Black Out Tuesday in June to promote black voices and it has matched employee donations up to $10m (£8m) globally in support of social justice organisations.
Spotify UK has also signed up to the Equality In Audio Pact, a music industry initiative that has made five pledges to tackle inequality. They include a commitment to "hire LBGTQIA+, black people, people of colour and other minorities on projects not only related to their identity" and release ethnicity pay data.
Patel, who is a member of Media For All, a mentoring organisation for people from BAME backgrounds in UK media, says Black Lives Matter has underlined the importance of diversity, inclusion and belonging and how the media industry must be "more in tune with the communities we serve".
The UK ad industry has a poor record. Fewer than 5% of senior agency leaders come from a BAME background, according to the IPA Census published in April.
Patel, speaking for a second time for this interview, is cautious about whether Black Lives Matter might now be a catalyst for meaningful change in adland, although he credits organisations such as Nabs and the Advertising Association for making efforts.
"These are hard problems to solve and, while there are no easy answers or quick fixes, there is no doubt that things need to change – not just for one day, but every day until all black lives matter," he says.
From linear to on-demand
Spotify has had a good run in recent years and maintained its position as the world’s top audio-streaming platform, despite formidable pressure from Apple, Amazon and commercial radio.
Annual revenues in the UK, the company’s biggest market after the US, have more than doubled in three years to €727m (£657m) last year, making the business a rival in terms of revenue to the entire British commercial radio sector – albeit Spotify gets only a fraction of its sales from advertising.
Global revenues have leapt from €2.6bn in 2016 to €6.8bn in 2019, and growth was solid in the first quarter of 2020, up 22% despite the onset of coronavirus.
The number of monthly, premium paying subscribers rose 31% to 130m and users of the free, ad-funded service climbed 32% to 163m in the first three months of this year.
Spotify’s "freemium" model has appeared resilient, despite the company warning of "a slowdown in advertising" that is expected to last until the end of the year. Indeed, its stock market valuation hit a record €50bn at the start of July.
Patel says several factors are driving Spotify’s growth as it stays focused on its ambition to be "the world’s leading audio platform". He cites audio-streaming having gone "mainstream", a "hunger out there from marketers to reach those audiences" and a bigger, structural shift "from linear to on-demand" consumption.
"All of these things have meant marketers and, particularly, strategists and planners within agencies have really leaned into hearing what we are doing and getting insights from us about how the platform is behaving," Patel says.
Ad sales come from a mix of sources, including direct buys, programmatic audio and video and self-serve. Ad Studio, the self-serve platform, has "accelerated", even during the virus crisis, because it suits businesses of different sizes all around the UK, and Spotify’s in-house team is able to offer creative support, Patel says.
Podcasts have also been "aggressively growing over the Covid period" – with streaming ad insertion that allows advertisers to reach not only free users but also paying subscribers (ads are allowed in podcasts, even though music is ad-free on Spotify’s premium tier).
Still, Spotify has admitted overall ad sales took a hit because of the pandemic and were "more than 20%" below forecasts in the final three weeks of March – the most recent financial results that the company has disclosed.
Listening habits changed as users stopped commuting and sought relaxation and escapism at home. During the most severe months of lockdown between March and May, every day was "like Sunday", as Bertozzi put it.
"Clearly the car dropped massively [in terms of consumption] but in-home increased hugely," Patel says, noting listening via TV sets and connected speakers rose by more than 50% year on year.
Spotify reckons some of these trends could continue "post-Covid" as people seek more "screen-less moments", according to Patel.
Analysts and agencies like the rich audience data that is available on the platform. Enders Analysis says Spotify’s "logged-in users, with email addresses and device IDs available" – with "real-time delivery and accurate measurement" – are "the holy grail from an advertising point of view".
Or as Mike Florence, chief strategy officer of PHD UK, puts it: "The data system that powers the functionality of Spotify is brilliant for insight, especially for media planning. For example, you can tell what is happening in people’s lives – such as break-ups, barbecues, relaxing – through changes in their listening habits by time of day and day of the week."
'Infectious passion for the business'
Spotify is primarily a subscription business yet, under Bertozzi’s leadership, the European ad sales operation has shrewdly positioned itself as a champion of advertising with a social-media-friendly mantra, #loveAds.
Patel and his UK team, who moved to the grand Adelphi building overlooking the Thames last year, are gaining recognition and are shortlisted for media owner commercial team of the year at the Campaign Media Awards 2020.
Patel has also expanded his role beyond the UK to include EMEA, adding responsibility for international campaigns and some reseller markets, such as Eastern Europe and the Middle East, where the company does not have offices.
Despite Brexit, London still matters as a European hub not only for ad sales but also R&D and the "artist community", because the UK capital has "always been right at the forefront" of musical trends, he says.
Patel has brought his positive attitude to the wider industry as chair of the judges for the Campaign Publishing Awards, which took place in a virtual ceremony in June. He recalls how "every judge left there feeling really inspired" – with "a big smile on their face" and a belief that "we work in an industry where brilliant, great, innovative, diverse work is going on all the time".
Florence says: "Rak has an infectious passion for the business and has found his spiritual home at Spotify. This combined with a pro-active approach and a creative mind makes him a joy to work with."
Patel has also made time to mentor others, particularly those from BAME backgrounds. "Rak was one of the founding members of Media for All and, despite his busy role, he is always willing to take on mentees and is constantly adding more BAME role models to our community," Naren Patel, founder of Media For All, says. "You will always find Rak networking at industry events and the fact that he is super-comfortable being teetotal in our industry shows that you do not need to conform to a stereotype to be successful."
Some observers believe advertising will always be secondary to Spotify’s subscription business because ad sales are so much smaller in relative terms and the strategy is to "upsell" users to the premium service.
"Spotify’s ad tier has been a disappointment, revenue-wise, for years," Tim Ingham, founder of Music Business Worldwide and a long-time analyst, claims. "The music industry basically sees free as a funnel to obtain subscribers. Spotify is many miles behind YouTube as a contributor of ad revenues to the music industry."
However, Spotify is wooing record labels by encouraging them to buy advertising to promote their artists, with the promise of much higher click-through rates than Google or Facebook, Ingham suggests.
Patel shrugs off the debate about ad sales versus subscription, pointing out it is "above my pay grade", but he is adamant that the future looks good.
What Ek has described as a "20-year" shift from linear to on-demand will continue because it suits consumers who, in Patel’s words, "have an ability to get what they want, when they want it, how they
And, unlike ad-free Netflix, Spotify believes advertising can play an important role in helping more users to get access to streaming.
"The ambitions that we have, centred around large-scale audience and known audience that marketers can get to, fill me with a huge amount of excitement about where we take the ad business going forward," Patel enthuses.
Cosmetics brand NARS ran a voice-activated campaign that allowed Spotify users listening via Alexa or Google Assistant smart speakers in the UK to order blusher, lipstick or mascara samples during lockdown.
NARS teamed up with Send Me A Sample, a voice-activated sampling company, and two Dentsu Aegis Network agencies, The Story Lab and Vizeum, on the ad, which was designed for smart speakers. An audio message encouraged listeners to ask their device: "Send me a sample for NARS." Products were then sent by post, helping to engage beauty enthusiasts.
Elsewhere, the UK government partnered Spotify to build a microsite on the platform to communicate key NHS messaging about Covid-19 to the public, alongside relevant music playlists about staying "at home". The paid-for campaign, bought by Manning Gottlieb OMD’s OmniGov and designed to educate, inform and entertain, has included at least 18 audio ads.
Other pro bono efforts created by Spotify included playing the sound of applause on Thursdays at 7.45pm to encourage people to participate in the weekly "Clap for carers" at 8pm.