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Spotify has transformed into a public business from a start-up organisation founded in 2006. Under the leadership of its CEO Daniel Ek, it has considered to make better approach to become the market leader. The reason behind the growth of the music company is the introduction of the podcasting tool in the market. According to the CEO, the business was “initially misheard”. The business aims to make potential growth by integrating podcasts and advertisement models into its business.
Later they introduced a premium plan for the consumers to skip the advertisements that bring them into the competition in the US. The business developed in the international market. Payment to the music right holders, collection of data, less marketing resources, and development of the piracy are concluding as strategic gap for Spotify.
Findings from internal analysis
Spotify works on the subscription for the podcast-specific models that allowed them to take the competitive advantages. The extreme demand for digital music has created publicity for Spotify. The business started to generate revenue from podcasts and advertisements. The application of the RSS feed makes the journey of Spotify successful due to the implementation of a podcast streaming facility.
Strategic gap in development
Spotify refers to the leader in the music streaming industry with expanded in the 92 nations across the globe. This streaming platform has 35% market share in the global platforms. On an average Spotify, users spend 25 hours monthly to enjoy the service (moiglobal, 2022). Across the globe, Spotify users are facing connectivity issues due poor internet connections in different areas. The advertisement made by Spotify is making issues in the current time. Different times, the appearances of the payment issues and data collection problem can make more issues on the behalf of the legal actions against Spotify.
Payment issues, copyrights, and technological lacks
Payment issues due to server errors can make arguments with the uses in the present time. The strategic issues found in the present time with the developed technologies. The owner of the music creators works with the streaming platforms for the demand of the money. Due to the heavy competition, some of the music production houses and creators agreed to deal exclusively with some specific platforms. The payment system issued by other platforms to the right holders can make extra burden for Spotify. Additionally, facilities, management capabilities, marketing skills, financial resources, and the weak resources referred to weakness of Spotify (caserighted, 2022). Better payment systems and monetisation refers losing the chance of streaming popular music on the platforms [Referred to Appendix 2].
The process of collecting user’s specific data to make better insights in developing better suggestion that can additionally attract more consumers. Additionally, as a consequence the process of collecting data can lead to void of the data protection act reserved for the consumers varies on different countries. Competitors are making better approaches with the better integration of the “Dolby Atmos and AKG sound system” to deliver better user experience. These features are referred to better music integration in the present time. The business of the music industry, is ruling by the power of suppliers and the monopoly of the music creators [Referred to Appendix 2].
The business model of Spotify has been managed to accumulate users’ data about their favourite artists and help them to create playlists. The collected data assisted the users to personalize their playlist based on their preferences. According to the case study, the streaming business can be uplifted with the integration of podcasts. The business evolved from the physical selling of CDs to making users addicted to digital downloads. The collective information and feedback from the consumer assisted Spotify to make the business model sustainable around the globe. The collection of information made the business make sustainable approaches [Referred to Appendix 1].
Figure 1: Revenue generated by Spotify from the year 2012 to 2021
(Source: statista, 2022)
Spotify made its first step based on the available data from the radio industry. Based on the case study, they were able to develop a consumer base of 20% of all-time Spotify listeners. This platform builds opportunity for the creators that are engaged with the users more often to generate a consumer base (Carraro, 2022). The integration of ad revenue and podcasts helped Spotify to grow its business.
The geographic expansion of the business can be defined as the most robust decision to be made by the management of Spotify. It made expansion around 86 new countries in the first half of the year 2021. The market expansion has created an opportunity for them in the global market. The integration of advertising has made it a prime source of revenue for the business. The business has observed positive notes in the different four regional markets, such as the United States, Australia, the United Kingdom, and Canada. Due to the application of monetization, the business has made a 75% YoY increment (Forte, 2022). Revenue from the advertisement helped in growing the CAGR for Spotify [Referred to Appendix 2].
Findings from external analysis
According to the case study, the business made integration of the licensing and royalty model to increase revenue. Spotify allowed the users to download the music and podcast files using the RSS feed. The integration of the SAI technology made the users help the developing target advertise in the foreign market. Spotify made an improvement of 180% in the ad recall by revealing the advertisement from Puma on a podcast called “Jemele Hill is Unbothered” (case study). The podcast deals by Spotify managed to bring revenue to its business based on the advertisement.
Industry rivalry level
The leverage of a performing business can be examined in the market with the visualisation of the creative content creator market. According to Braga, (2021), Spotify took the advantage of the rivalry between Microsoft and Apple and pushed the app into Mircosoft’s products. The business expansion faced issues with the entrance of “Amazon Prime music”. The available economical insights at the international level can make the scaling in the 78 markets with 200 million end users and among these 20% of the users were attracted to the non-music segments (newsroom, 2022). Based on the case study, Apple was another prime rival of the business [Referred to Appendix 1].
Figure 2: Global music streaming application’s share in 2021
(Source: thehustle, 2022)
Spotify was able to beat the competition by offering an extended free trial period of 30 days for their users which was also offered by the rival business, “Apple Music” (forbes, 2022). The arrival of the podcast-only app Audible acquired the network. Spotify was able to generate 27.07% increment in revenue in 2020. The generated revenue of 2022 was accumulated in 2022 was about $3.048B (macrotrends, 2022). A radio application called SiriusXM constructed the competition to another level. The successful journey of Spotify started with the podcast “The Joe Rogan Experience” which made $100 million in revenue for Spotify (case study). According to the case study, with “The Daily”, Spotify made the record of downloading around 60 million and the shares in the industry jumped up by 10% [Referred to Appendix 2].
Business Level Strategy
Spotify needs to follow the lower pricing strategy for business development by taking a competitive advantage. In 2021, the business has faced some challenges due to the competition from other podcast companies. Spotify needs to target young and different audiences.
Spotify made its library for podcasts double in 2020. The integration of the podcast was the overall development strategy for Spotify. Management of Spotify needs to make decision on the prioritisation and control of the programs to make development as projected. The procedure of the “backward integration” for the suppliers can help in the extension of its role to make the fulfilment of the formerly managed business with the suppliers. Spotify can acquire other streaming and radio based company to enhance the consumer base.
The process of “forward vertical integration” happens when Spotify will get better control on the suppliers and distribution channel. “Forward Vertical Integration” involves in processing with value chain to enter the business of buyers. Spotify needs to grow its business at the same time for operational management to get competitive advantages to include integration horizontally. Additionally, including new products will be helpful in creating advancements for Spotify to manage diversification horizontally.
Braga, M. M. (2021). Spotify vs. Apple: a battle of titans (Doctoral dissertation). Retrieved from: https://repositorio.ucp.pt/bitstream/10400.14/35185/1/202750620.pdf
Carraro, R. (2022). From Artists to Creators, From Music to Audio. Retrieved from: https://www.lse.ac.uk/media-and-communications/assets/documents/research/msc-dissertations/2021/Carraro.pdf
Forte, D. D. S. (2022). Listening to the future: spotify´ s dominance through podcasts and emerging markets (Doctoral dissertation). Retrieved from: https://run.unl.pt/bitstream/10362/142230/1/2021-22_fall_32191_dinis-forte.pdf.