Spotify case

Question 1

what type of industry

Answer 1

music streaming industry
they have the largest market share

Question 2

How to measure the size of an industry

Answer 2

Annual revenue
Can derive the industry size by 67% of the total revenue → multibillion dollar industry

Question 3

Is there growth

Answer 3

9% growth from 2021 to 2022
Growing more in countries like asia, africa
Growth is slower in mature markets
Faster in emerging regions

Question 4

how popular is streaming?

Answer 4

Much easier to use and more accessible, 32% of people use audio streaming so its popular, Streaming is much more popular than downloading→ more access to internet , storage space to download music is a lot of storage, internet got faster

Question 5

which factors have an affect on streaming?

Answer 5

Technological factors have an impact on streaming and sociocultural impacts such as the pandemic made people listen to music more

Question 6

is streaming a good industry to be in?

Answer 6

yes

Question 7

threat of substitutes

Answer 7

Other forms of entertainment
All things that are not streaming (vinyl, downloading, concerts, etc)
Downloading
Radio
Do we have a strong threat of substitutes? no its low. Streaming is the king of the music industry

Question 8

bargaining power of suppliers

Answer 8

its high. Record labels
Independent artists
Artists make deals with labels who use spotify to distribute content
Taylor swift is an example of how an artist can use their power and pull their music from platforms, but smaller artists dont have the same power. However Taylor swift ended up coming back to spotify
can also charge higher licensing fees
Suppliers are concentrated bc there is less of them compared to the industry
Suppliers goods are critical to spotifys success (need to have good content)

Question 9

bargaining power of buyers

Answer 9

Low switching costs
The buyers in this industry are the consumers B2C
Undifferentiated product (same songs available and many platforms)
There was a price increase buyers accepted it due to inflation but cannot over charge because buyers can easily change platforms
Advertisers are customers of spotify→ they pay to advertise on spotify
Spotify needs to provide advertising tools so paid advertisements are successful so advertisers are happy and come back
Bargaining power of buyers is high to moderate
Can spotify create switching costs? Maybe put them in a year long contract

Question 10

threat of new entrants

Answer 10

High
Apple was a new entrant
Samsung
Big names entering

Question 11

Spotifys rivalry

Answer 11

The rivalries in this industry include: Apple Music, Amazon Music, YouTube Music, SoundCloud, TikTok Music, Title, TenCent, Deezer and piracy platforms.
Tencent is more of a partner to spotify. Spotoify cant provide its service directly to china
Amazon and apple can do bundles because they have other services and spotify cant really do this
Spotify is more focused it has some podcasts and audiobooks
Intense rivalry and have to keep prices low and competitive
Spotify has to keep investing in IT, have new features, have a lot of content and keep improving → could shrink profits bc they have to keep investing
Spotify is not profitable → the forces are eating away at the profits

Question 12

to succeed in this industry

Answer 12

Need content
Differentiating factors and features
Investment in technology

Question 13

threats

Answer 13

competition from other giants in the industry like amazon and apple, other forms of entertainment, other substitutes, threat of new entrants, AI business models, lawsuits, a moderate threat of artists leaving

Question 14

opportunities for Spotify

Answer 14

AI, expanding in developing markets, could enter other industries, encourage self publishing, personalized services.

Question 15

1990s

Answer 15

MP3 was becoming popular, cd but not anymore
blamed piracy but convenience wins (easy to stream bc you dont have to download)
apple tunes was the first success

Question 16

in the 2010s, why did streaming music become popular again

Answer 16

bc of the internet and growth of smartphones

Question 17

music industry in 2024

Answer 17

recording industry is growing and North America is the biggest contributor
growth was slower in more mature markets
growth of the industry has been due to streaming which was 67% bc of emerging markets

Question 18

where did streaming revenue come from

Answer 18

subscription fees and advertising

Question 19

the labels

Answer 19

record labels entered into contracts with artists –> then would snend the music to spotify
recording industry was very concentrated and dominated by 3 labels (Sony, Warner, universal)–> part of conglomerates
outside those labels were fragmented
the three had power bc they could afford the cost to breaking new artists

Question 20

consumers

Answer 20

average consumer time of lustebing to music is growing . 32% audio streaming

Question 21

Spotify

Answer 21

founded in Sweden and was then launched in the USA where it grew quickly
peaked during covid
piracy was a big factor in emerging countries
engaged in an equity swap with tencet bc spotify was banned in china

Question 22

Spotifys business model

Answer 22

freemium business model: had twi services which was paid and free
if you use the free, you had to listen ti ads
can be downloaded on many platforms
looked at consumers habits and made for you tab
playlists become important for spotty spptofy introduced social features
very quick to innovate
public company
uses algorthisms based on consumers listening habits (good IT ssystem)
integration with social media apps and messaging apps (horizontal diversification)
have to move faster so that you can be the first to show your new features

Question 23

spotify for artosts

Answer 23

artists can engage w fans, get data abut their music and consumers, could promote their tours
artists can get data from spotify to engage with fans

Question 24

fincnail performance

Answer 24

staggering growth rates but yet to have annual profits
had to raise prices

Question 25

royalties issue

Answer 25

spotifys largest expensive was COGS (royalties and paying shareholders)
two types of royalties were recording and songwriting royalties.
spotify doesn’t pay a fixed amount per stream but a percent of its revenue is allocated to royalties
spotify also doesnt pay the artists but the labels

Question 26

artists and spotify

Answer 26

artists were paid a lot lower than how much their cpmeptutors paid their artists
they now said that artists at least have to have 1000 streams/ month–> bad for small artists
small artists can use spotify to promote

Question 27

non music content

Answer 27

recruited popular podcast, added new companies
entered a dea; with Warner bros
offered audiobooks
investing more into non music= more engagement
acquired podcast sudios

Question 28

spotofys competition

Answer 28

dominated the global streaming segment
attracted larger tech companies like apple. amazon
Apple Music: could be bundled with other apple products
amazon: also be bundled
both cometeted aggressively
google and youtube (strong comp in non music) coming in
tenet was very big but only in china
labels are happy to collaborate with any streaming service

Question 29

new industry trends

Answer 29

streaming apps becoming a commodity
web 3 applications
NFTS
AI–> could affect the value chain of the music industry
spotify looked at AI and NFTS

Question 30

spotifuys future

Answer 30

2023 was bad for Spotify –> had to restructure (downsizing) by laying off people
audio was most impacted by cuts but spotify didnt give up (Joe rogan)

Question 31

vertical vs horizontal integration

Answer 31

vertical: could be acquiring new podcasting companies
horizontal: going into social medias, expanding to podcasts and books

Question 32

why should Spotify acquire new companies

Answer 32

potify chose to acquire podcast companies instead of forming alliances to gain full control over the content creation and distribution process. By owning these companies outright, Spotify can produce exclusive content, manage monetization (e.g., ads and subscriptions), and differentiate itself from competitors. Acquisitions also allow Spotify to integrate new technologies, platforms, and talent seamlessly into its existing ecosystem