Spotify Differentiation Through Platformization & Collaboration
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This document analyzes the online music streaming industry and provides recommendations for Spotify. It finds that the industry has moderately high rivalry among competitors, moderate threat of new entry, and high supplier and buyer power. Spotify's current business model is economically unsustainable. The document recommends that Spotify modify its subscription model, pursue platformization by expanding music integration, and collaborate with music and entertainment companies to differentiate itself and increase revenues.
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Spotify Differentiation Through Platformization & Collaboration
- 1. Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng BUAD 497
- 2. Goal: Find out how Spotify needs to differentiate Five Forces Sustainability Recommendations
- 3. What is an Online Streaming Music Platform? Access to millions of songs Subscription & Ad-based model Social Networking & Playlists Introduction Listen to tracks online Search & Discover No downloads 5 Forces Sustainability Recommend Conclusion
- 4. Online Music Streaming Platforms Introduction 5 Forces Sustainability Recommend Conclusion
- 7. Rivalry- Moderately High • Slightly differentiated functions • Many competitors but not purely competing on price Introduction 5 Forces Sustainability Recommend Conclusion
- 8. Threat of Entry - Moderate • Easy to replicate • Structural Barriers • Licensure agreements • High MES required for profit • High switching costs Introduction 5 Forces Sustainability Recommend Conclusion
- 9. Supplier Power - High • “Big Four” Record Label Oligopoly • Copyright law, statutory licensing • Unified negotiating front Introduction 5 Forces Sustainability Recommend Conclusion
- 10. Buyer Power - High • Listeners and advertisers • Low willingness to pay • Low switching cost • The effect of increased customization Introduction 5 Forces Sustainability Recommend Conclusion
- 11. Many Substitutes • YouTube, iTunes, CDs, radios, music piracy • Low switching costs between streaming platforms Introduction 5 Forces Sustainability Recommend Conclusion
- 12. Few Complements • Increased exposure through live music • Computers and mobile devices • But, not affordable for all Introduction 5 Forces Sustainability Recommend Conclusion
- 13. Unattractive Industry Moderate Threat of Entry Many Substitutes Online Music Streaming Industry Moderately High Rivalry Introduction 5 Forces Sustainability High Supplier Power High Buyer Power Recommend Conclusion
- 14. Economically Unsustainable Current revenue gains Consequences of freemium model Weak payout structures Micropayments significant revenue loss Introduction 5 Forces Sustainability Recommend Conclusion
- 15. Potential to Thrive • Well differentiated from Internet radio and on-demand music services • Further performance improvements • Tiered subscription system • Platinum service level users Introduction 5 Forces Sustainability Recommend Conclusion
- 17. Goal & Impediment for Spotify’s Future • Ultimate goal: - Increase subscription revenues • Impediment: - Current business model growth of user base big losses Introduction 5 Forces Sustainability Recommend Conclusion
- 18. Spotify Increasing Revenues & Costs Introduction 5 Forces Sustainability Recommend Conclusion
- 19. Modifying the current business model • • • • • More song plays allowed = More you pay A new tiered subscription system Spotify Platinum $25/month Family subscription plans Share music in a household simultaneously and economically Introduction 5 Forces Sustainability Recommend Conclusion
- 20. Exploring New Opportunities Platformization Collaboration Introduction 5 Forces Sustainability Recommend Conclusion
- 21. Platformization: Music as Water What is “platformization”? – Existing integration in cars, TVs, and smart media products Introduction 5 Forces Sustainability Recommend Conclusion
- 22. Recommended Platformization • Secure & expand integration - existing platforms • Explore new platforms - Gym media systems - Game consoles - More intelligent systems Introduction 5 Forces Sustainability Recommend Conclusion
- 23. Why Platformization? • Ever-expanding range of end points • Value added by “access everywhere” • Scale and find more paid subscribers Introduction 5 Forces Sustainability Recommend Conclusion
- 24. Collaborate with Players in the Music Scene • The idea • Existing collaboration Facebook Urban Outfitters Coca-Cola Soundrop Introduction 5 Forces Sustainability Recommend Conclusion
- 25. Recommended Collaboration Clubs, party planners venues DJ interface online streaming songs to mix Introduction 5 Forces Sustainability Recommend Conclusion
- 26. Continuing Need to Differentiate Introduction 5 Forces Sustainability Recommend Conclusion
- 27. Key Obstacle: Advantages that Spotify has can be replicated by competitors Key Strategies: Modifying the current model, Platformization, and Collaboration Introduction 5 Forces Sustainability Recommend Conclusion
- 28. Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng BUAD 497
- 29. Q&A What is an Online Music Streaming Platform? Online Music Streaming Platforms Spotify UI Spotify by the Numbers Subscriber Growth Graph Streaming Music Future Graph Summary Five Forces (Summary) Rivalry Threat of Entry Supplier Power Buyer Power Substitutes Complements Recommendations Goal & Impediment for Spotify’s Future Spotify Increasing Revenues & Costs Modifying the Current Business Model Exploring New Opportunities Platformization: Music as Water Recommended Platformization Why Platformization Collaborate with Players in the Music Space Recommended Collaboration Sustainability Economically Unsustainable Potential to Thrive