This document analyzes the music streaming service Spotify using Porter's Five Forces model. It discusses Spotify's business model, how it works, and key facts about the company. Porter's Five Forces analysis examines buyer power, supplier power, threat of substitutes, threat of new entrants, and rivalry among existing competitors in the industry. The document concludes by looking at the future of Spotify.
First Records were Invented in 1877
Thomas Edison
First Flat, Circular Record was Invented in:
1887
Emile Berliner
Philips invented the Compact Cassette Medium for Audio Storage
1962
James Russell – Most attributed inventor
1979 first prototype was invented
First successful MP3 was Tomislav Uzelac
1997
Steve Chen, Chad Hurley, Jawed Karim
Founded in February 2005
It is important to show how technology has progressed
Directs us to how we listen to music now
First understand what is an Online Music Streaming
Listening to music in ‘real time’, instead of downloading a file to your computer and listening to it later
Swedish commercial music streaming, podcast, and video service
provides digital rights management restricted content from record labels and media companies
Tries to combat piracy
Slogan: “Music for Everyone”
Who:
Daniel Ek and Martin Lorentzon
When:
Founded in 2006
Was first launched for public access on October 7, 2008
Where:
Stockholm, Sweden
Simply choose between Spotify’s free for $0/Month
or
Choose the Premium at a price of $9.99/Month
Number of Spotify Songs: 20 Million
Number of Songs added per day: 20,000
Paid $2 Billion for rights to songs
Number of Playlists: 1.5 Billion
Number of Playlist created/edited: 5 million
Next we are going to analyze Spotify through Porter’s Five Forces
Buyer Power is Relatively Low
They have the standard, free service provided to all users and offer the Premium service for those who wish to listen offline. The customer has the power to make their choice, but not necessarily the power to sway Spotify in any other way
No other free service let’s you do what Spotify does
Supplier’s Power is High
Without the artist, there would be nothing
Suppliers have the majority oft the power
However – it seems Spotify has it’s own bargaining power
Adele’s 21 album –refused to have her album out for free users and requested it only be for Premium users
BUT
Spotify said no because it wants to offer the same large catalogue of music to all of its users thus the album was not available to any user until later on
Moderately High
Spotify was created as a Substitute for other products
In a weird way, staying in the Free Spotify area could be a substitute risk in itself – although advertisements would still generate revenue— they would lose out on their ultimate goal of obtaining subscribers
Moderate
Elite technology is an entry barrier – theirs would be hard to compete with
Hard to Establish a firm grip
Apple’s acquisition of Beat’s music could deter further entrants from entering