Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng

BUAD 497

Five Forces

Sustainability

Recommendations

Goal: Find out how Spotify needs to differentiate

Introduction 5 Forces Sustainability

ConclusionRecommend

Access to millions of songs

Listen to tracks online

Subscription & Ad-based model

Social Networking & Playlists

Search & Discover No downloads

What is an Online Streaming Music Platform?

Introduction 5 Forces Sustainability

ConclusionRecommend

Online Music Streaming Platforms

Introduction 5 Forces Sustainability

ConclusionRecommend

Introduction 5 Forces Sustainability

ConclusionRecommend

Introduction 5 Forces Sustainability

ConclusionRecommend

• Slightly differentiated functions • Many competitors but not purely competing on price

Rivalry- Moderately High

Introduction 5 Forces Sustainability

ConclusionRecommend

• Easy to replicate • Structural Barriers • Licensure agreements• High MES required for profit• High switching costs

Threat of Entry - Moderate

Introduction 5 Forces Sustainability

ConclusionRecommend

• “Big Four” Record Label Oligopoly • Copyright law, statutory licensing

• Unified negotiating front

Supplier Power - High

Introduction 5 Forces Sustainability

ConclusionRecommend

• Listeners and advertisers

• Low willingness to pay

• Low switching cost

• The effect of increased customization

Buyer Power - High

Introduction 5 Forces Sustainability

ConclusionRecommend

• YouTube, iTunes, CDs, radios, music piracy• Low switching costs between streaming

platforms

Many Substitutes

Introduction 5 Forces Sustainability

ConclusionRecommend

• Increased exposure through live music• Computers and mobile devices• But, not affordable for all

Few Complements

Introduction 5 Forces Sustainability

ConclusionRecommend

Online Music

Streaming Industry

Moderate Threat of

Entry

High Supplier Power

High Buyer Power

Moderately High

Rivalry

Many Substitutes

Unattractive Industry

Introduction 5 Forces Sustainability

ConclusionRecommend

Economically Unsustainable

Current revenue

gains

Consequences of freemium

model

Weak payout structures

Micro-payments significant

revenue loss

Introduction 5 Forces Sustainability

ConclusionRecommend

• Well differentiated from Internet radio and on-demand music services

• Further performance improvements• Tiered subscription system• Platinum service level users

Potential to Thrive

Introduction 5 Forces Sustainability

ConclusionRecommend

Introduction 5 Forces Sustainability

ConclusionRecommend

• Ultimate goal: - Increase subscription revenues• Impediment: - Current business model

growth of user base big losses

Goal & Impediment for Spotify’s Future

Introduction 5 Forces Sustainability

ConclusionRecommend

Spotify Increasing Revenues & Costs

Introduction 5 Forces Sustainability

ConclusionRecommend

• 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

Modifying the current business model

Introduction 5 Forces Sustainability

ConclusionRecommend

Exploring New Opportunities

Platformization

Collaboration

Introduction 5 Forces Sustainability

ConclusionRecommend

What is “platformization”?– Existing integration in cars,

TVs, and smart media products

Platformization: Music as Water

Introduction 5 Forces Sustainability

ConclusionRecommend

Recommended Platformization

• Secure & expand integration - existing platforms• Explore new platforms

- Gym media systems- Game consoles- More intelligent systems

Introduction 5 Forces Sustainability

ConclusionRecommend

• Ever-expanding range of end points

• Value added by “access everywhere”

• Scale and find more paid subscribers

Why Platformization?

Introduction 5 Forces Sustainability

ConclusionRecommend

• The idea• Existing collaboration

FacebookUrban OutfittersCoca-ColaSoundrop

Collaborate with Players in the Music Scene

Introduction 5 Forces Sustainability

ConclusionRecommend

Clubs, party planners venues

Recommended Collaboration

DJ interface online streaming songs to mix

Introduction 5 Forces Sustainability

ConclusionRecommend

Continuing Need to Differentiate

Introduction 5 Forces Sustainability

ConclusionRecommend

Key Obstacle: Advantages that Spotify has can be replicated by competitors

Key Strategies: Modifying the current model, Platformization, and Collaboration

Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng

BUAD 497

Q&AFive Forces (Summary)RivalryThreat of EntrySupplier PowerBuyer PowerSubstitutesComplements

RecommendationsGoal & Impediment for Spotify’s FutureSpotify Increasing Revenues & CostsModifying the Current Business ModelExploring New OpportunitiesPlatformization: Music as WaterRecommended PlatformizationWhy PlatformizationCollaborate with Players in the Music SpaceRecommended Collaboration

What is an Online Music Streaming Platform?Online Music Streaming Platforms Spotify UISpotify by the NumbersSubscriber Growth GraphStreaming Music Future GraphSummary

SustainabilityEconomically UnsustainablePotential to Thrive