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Spotify Business Model

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this presentation shows spotify's business model & who are the spotify's investors.

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Spotify Business Model

  1. 1.  Done by:  Ahad Rabbanidoost School of Entrepreneurship University of Tehran Code: 31
  2. 2. Spotify Spotify is proprietary music streaming program, whitch allows instant listening to specific tracks or albums with almost no buffering delay.
  3. 3. What is Spotify?  Spotify is a music service that gives on-demand access to over millions of songs, wherever you are. The music service makes it easier than ever to discover, manage and share music with friends, while making sure that artists get a fair deal. Spotify is available on the computer, smartphone, and a whole heap of other devices from Android to iPod. Key Features: • Downloadable application • Share songs and playlists with friends
  4. 4. History  Spotify was developed in 2006 by a team at Spotify AB, in Stockholm, Sweden. The company was founded by Daniel Ek, former CTO of Stardoll, and Martin Lorentzon, co-founder of Trade Doubler. Spotify Ltd. now operates as the parent company in London. Spotify AB handles research and development in Stockholm.
  5. 5. Daniel Ek Daniel Ek (born 21 February 1983) is a serial entrepreneur and technologist who started his first company in 1997 at the age of 14. He is currently the CEO of Spotify.  He founded his first company in 1997 at the age of 14. His ventures have included the founding of Ad vertigo, the advertising company acquired by Trade Doubler and has been a part of the Nordic auction company Trader (acquired by EBay) and Evertigo.  Ek's previous jobs include CTO at Jajja Communications, CTO at Stardoll and CEO of uTorrent one of the most popular bitTorrent Clients. Daniel Ek joined the IT Gymnasium in Sundbyberg. He enrolled at the KTH Royal Institute of Technology but did not complete his degree. He has a total net worth of approximately $400 million.  On 3 October 2013 Daniel Ek was inducted into SUP46's Swedish Startup Hall of Fame.
  6. 6. Martin Lorentzon  Martin Lorentzon (born 1 April 1969) Is a Swedish entrepreneur. He is the co- founder and chairman of the music streaming service Spotify. Martin Lorentzon alongside Felix Haganö founded Trade Doubler in June 1999. He quit his position in 2006. Martin started working at Telia Sonera in 1995 as a management trainee. He stayed at the company until 1998. Shortly after, he started working at Cell Ventures as a business strategist.
  7. 7. Launch  The Spotify application was launched for public access on 7 October 2008. While free accounts remained available by invitation to manage the growth of the service, the launch opened paid subscriptions to everyone. At the same time, Spotify AB announced licensing deals with many major music labels. The company reported a US$4.4 million loss for 2008.  The first steps towards offering free accounts to the public without invitations were taken on 10 February 2009, when Spotify opened free registration in the United Kingdom. Registrations surged following the release of the Spotify mobile service, leading Spotify to stop open registrations in the UK for part of 2009, returning to an invitation-only policy.
  8. 8. Evolution  On 4 March 2009, Spotify announced a security flaw in the service, by which private account information (including email addresses and hashed salted passwords) of members registered prior to 19 December 2008 were potentially exposed.  On 28 January 2010, Symantec's antivirus software marked Spotify as a Trojan horse, disabling the software across millions of computers.  In February 2010, Spotify received a small investment from Founders Fund, where board member Sean Parker was recruited to assist Spotify in "winning the labels over in the world's largest music market".  On 18 May 2010, Spotify announced that two more types of accounts were available: Spotify Unlimited, an equivalent to Spotify Premium without mobile and other features, and Spotify Open, a reduced-feature version of Spotify Free, which allows users to listen to up to 20 hours of music per month.  On 1 September 2010, the World Economic Forum announced the company as a Technology Pioneer for 2011.  During 2010, Spotify paid more than €45 million to its licensors.  In March 2011, Spotify announced that it had one million paying subscribers across Europe, and by September the number of paying subscribers had doubled to two million.  On 25 March 2011, Spotify temporarily removed display advertising from external sources on its open and free accounts, due to an attack which used an exploit in Java to place malicious code on victims' computers.
  9. 9.  All this being said, Spotify still has tremendous room to grow. In December 2013 Spotify launched in over 20 new markets, taking the total number of countries where Spotify is available to 55. In 2014,
  10. 10. Spotify has already made considerable progress towards restoring the value lost to piracy and other less well monetized forms of music consumption. As of November 2014, Spotify had over 50 million global users. 37.5 million of them were using free tier, where in listeners pay for their consumption by viewing and listening to advertisements. At that time, as well, more than 12.5 million users were paying a $9.99 / £9.99 / €9.99 monthly subscription to use Spotify’s Premium tier.
  11. 11. Funding Rounds
  12. 12. Funding
  13. 13.  Spotify’s model aims to regenerate this lost value by converting music fans from these poorly monetized formats to our paid streaming format, which produces far more value per listener. The chart below shows the money a Spotify Premium customer spends per year compared to the average spend of a US music consumer who buys music (not including those who spend $0 on music).
  14. 14.  The average amount of money spent by US adults on music is $25, whereas the average Spotify user is worth $41. Simply put, a Spotify customer is 1.6x more financially valuable than the average adult non-Spotify US music consumer.
  15. 15.  Spotify’s high royalty payments in comparison to these other services means that if all of this streaming activity (from video and radio services) was through Spotify instead, then the amount of royalties generated in the US by streaming activity would more than double from $530m in 2013 (actual streaming royalties across all services) to $1.3bn (if all streaming occurred on Spotify).

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