In the early 2000s, the music industry was in crisis. Record labels focused on capturing the small fraction of listeners who bought CDs or digital downloads, roughly the top 1% with purchase intent. Meanwhile, piracy surged, making it difficult to reach listeners who weren’t inclined to pay.
But Daniel Ek and Martin Lorentzon saw potential in this challenge. Instead of competing for the small segment willing to purchase music, they set their sights on the other 99% who weren’t paying customers. Spotify’s solution? A freemium model, offering free access to music with ads or an option to pay for an ad-free experience. This approach created a whole new market of listeners who wouldn’t buy music otherwise, turning piracy’s stronghold into an opportunity. Spotify didn’t just compete—they expanded the market by creating demand.
This shift—from capturing to creating demand—is vital in today’s economy. While many companies aim to capture existing demand, brands willing to create demand can reach the remaining 99% and establish a strong, trusted presence in new markets. By reaching untapped audiences and building relationships early, businesses can move from competing in crowded markets to creating their own.