“The Playlist,” a captivating Netflix series, unfolds the remarkable story of Spotify. One of the episodes focuses on the pivotal role played by the lawyer Petra Hansson during Spotify’s early years. As a lawyer, Petra’s tenacity and determination were instrumental in negotiating digital rights with music record companies, a feat that was no easy task.
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In the nascent stages of Spotify’s journey, a critical challenge emerged. On one side, the company’s co-founder, Daniel, staunchly resisted making any concessions to music giants like Sony and others, and he was determined to offer free music to all users. Negotiations often proved to be strenuous, with Daniel’s fiery temperament causing more than a few heated exits from the bargaining table. In contrast, Petra recognized the need for compromise, understanding that it was in the best interest of both parties — the record companies and Spotify.
While Daniel and his team remained resolute about maintaining Spotify as a free platform, the record companies were equally adamant about safeguarding the welfare of musicians, singers, and their own businesses. Petra’s efforts seemed in vain, and concerns loomed that Spotify might face a fate similar to that of Pirate Bay, with legal battles potentially burying the company. The question of monetization divided the company; Daniel’s team strongly opposed charging users, motivated by a passion for keeping music accessible to all. They firmly believed that music was as essential as food and water, and just as basic rights governed access to sustenance, music should be freely available. Their plan was to generate revenue through advertisements and share profits with musicians and singers.
In their eyes, Spotify was a technology company, and they took pride in having created the world’s fastest streaming music service at the time, one that played songs instantly — a feat achieved through painstaking efforts and innovation. They argued that music companies were already suffering from pirated sites, and Spotify could be a boon to them. Furthermore, they foresaw the digital future, where Spotify’s user experience would greatly benefit these companies.
The negotiations surrounding Spotify had grown increasingly taxing, and Petra found herself trapped in the crossfire of opposing ideologies. The company’s future was in jeopardy, and a solution appeared elusive, frustrating Petra. She realised that perhaps the answer lay beyond the realm of law.
One fateful day, after yet another heated disagreement with Daniel and his team, Petra walked out of Spotify, announcing her resignation. Surprisingly, Daniel and his team made no effort to stop her. The following day, during a meeting in her former office, Petra’s pearl necklace inadvertently broke as she tried to lift her bag. In the midst of collecting the scattered pearls, a brilliant idea struck her.
Petra immediately rushed out of the room, went to a nearby store, purchased an assortment of colourful pearl beads and swiftly made her way back to the Spotify office. Gathering everyone, including Daniel and his team, she distributed the vibrant beads onto the table and asked them to fashion a necklace from the beads, each person designing it according to their preference. Although the Spotify team was initially taken aback by this unexpected task, Petra insisted.
Once the colourful bead necklaces had been crafted to each individual’s taste, Petra attempted to cut the thread and separate the pearls again. To her surprise, a flurry of hands reached out to stop her, preventing the destruction of the necklaces. Perplexed, Petra questioned their actions. In response, one person spoke up, explaining that each necklace was a unique and personal creation. They felt a strong sense of ownership because they had invested significant time and effort in making them.
Recognizing their attachment to the necklaces, Petra seized the opportunity to draw a poignant analogy: “Imagine that each bead represents a song, just as users create playlists on our platform. Each necklace is a personal playlist created by the user who put several hours of effort into crafting it. Just as you wouldn’t want to part with these necklaces now, users also develop an attachment to their playlists — a psychological principle known as the ‘endowment effect.’ This effect is driven by a psychological aversion to loss, causing people to value what they possess more highly. Users cherish their playlists like you’ve grown attached to these necklaces. Don’t you think the user will pay to keep this playlist and create new ones?”
With this idea firmly established, Petra proposed a game-changing solution: “How about we introduce a premium service, like Spotify Premium, where users can enjoy additional features such as custom playlists and song recommendations for a fee?” The head of marketing, who had actively participated in the necklace-making exercise, enthusiastically supported the idea, expressing her intent to subscribe to Premium.
However, not everyone was on board. One of Daniel’s teammates resisted the idea of charging users. In response, Petra provided a persuasive counterargument, stating, “Our commitment to providing free access to music for all users remains unwavering. Our core goal remains unchanged. What we propose is to charge individuals who wish to access the enhanced features of our advanced technology and algorithms.”
This reframing was the turning point. Petra didn’t suggest charging for the music itself but highlighted the added technology features. It was a brilliant and insightful strategy that resonated with the team, offering a valuable lesson in creative problem-solving and negotiation.
Subsequently, Daniel, who had been unwavering in his commitment to keeping music free, underwent a change of heart, acknowledging the merit of Petra’s proposal. Petra had successfully unearthed a solution that bridged the gap between Spotify and record companies, a pivotal turning point in the company’s trajectory.
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Target the Feeling in Convincing People
There’s another lesson from Petra’s ingenious approach during the Spotify negotiation. It revolves around the concept of emotional engagement, which can be more impactful in decision-making than a purely rational approach.
Negotiation is not merely a rational, logical exchange of ideas and proposals. It is a deeply human interaction, heavily influenced by emotions and perceptions. Petra’s approach to the Spotify negotiation beautifully illustrates the significance of emotional engagement in getting buy-in for a proposed solution.
- Creating Emotional Investment: Petra didn’t just present her idea verbally and explain the benefits of charging for Spotify Premium; she went a step further. She created a tangible, emotional investment in her proposal by involving the stakeholders in a creative exercise: making a necklace. This physical engagement brought the negotiation to life, making it more personal and relatable.
- The Endowment Effect: By having the team invest time and effort in crafting their individual necklaces, Petra cleverly triggered the “endowment effect.” This psychological principle suggests that people tend to place higher value on something they own or have contributed to creating. In this case, the team felt a connection to the necklaces they had fashioned.
- Making the Problem Tangible: Instead of explaining the idea theoretically, Petra made the problem tangible and relatable. She helped the team empathise with the concept of attachment and loss aversion by drawing a parallel between the necklaces and the playlists created by Spotify users. This approach made the problem feel real and immediate to the team.
- Decision-Making and Emotions: Research in psychology has consistently shown that emotions play a significant role in decision-making. While rational arguments are essential, the emotional aspect can often be the driving force behind accepting a proposal or idea. In this case, the team members, who had invested their emotions in creating the necklaces, were more open to considering a different approach.
- Engaging the Creative Mind: Engaging people in a creative or hands-on task can shift their thinking from the analytical, problem-solving mind to the emotional and creative mind. This change in mindset can make them more receptive to alternative ideas and solutions.
In essence, Petra’s approach exemplifies the golden rule of negotiation: making people feel the problem or feel the solution. By engaging the team emotionally, she managed to bridge the gap between opposing viewpoints and make the proposal for Spotify Premium more compelling and relatable. It’s a lesson that highlights the power of emotional engagement in negotiation, decision-making, and problem-solving, emphasising that the most effective negotiators understand the human element in the process.
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In the story, Petra didn’t just verbally present her idea to charge for Spotify Premium; she took a more hands-on approach by involving the team in creating necklaces. This physical activity effectively served as a prototype, albeit an unconventional one, to illustrate her point.
The necklace-making exercise essentially represented the premium service proposal in a tangible form. It allowed the team to see, touch, and feel the concept of attachment and endowment, which Petra then connected to the parallel situation with Spotify users’ playlists.
The lesson here is that sometimes, creating a physical or experiential prototype can significantly enhance your ability to convince others of your ideas. It makes abstract concepts more concrete and relatable. While not all ideas can be prototyped in the same way, this approach underscores the value of finding creative ways to make your ideas more tangible, whether through hands-on activities, visual aids, or other interactive methods.
In essence, Petra’s approach highlights the power of prototyping in conveying abstract or complex ideas, making them more accessible and compelling to others during negotiations or discussions. It’s a practical technique that can be applied in various professional contexts to help convey your vision and secure buy-in from stakeholders.
In conclusion, the story of Petra’s negotiation with Spotify unveils a trove of valuable lessons in negotiation, creative problem-solving, and the art of influence. By delving into the intricacies of emotional engagement, the power of prototyping, and the significance of making stakeholders feel a problem or solution, we uncover a deeper understanding of the human element in decision-making and negotiations.
It is a testament to the notion that, in the world of negotiation, connecting with people on an emotional level and making ideas tangible can be the keys to reaching mutually beneficial agreements and driving innovation.