1. Page 1
A Market Analysis for
Spotify
Derek J. McCullum
Full Sail University
Project & Portfolio II: Business and Marketing
October 24, 2020
2. Page 2
EXECUTIVE SUMMARY
This analysis report looks at the current market in relation to Spotify Technology S.A..
This report looks at the overall market including the total revenue, target markets as well as our
total number of subscribers and total monthly active users. This report offers diagrams and
graphs to showcase the information as well as to help demonstrate our status in the current
market. This report also includes recommendations on how Spotify can increase it total number
of subscribers as well as our total monthly active users by taking advantage of our largest
segmented market.
3. Page 3
OBJECTIVE
Based on today’s current market it is our goal to expand our customer base amongst our
largest target market, Millennials. We shall achieve this expansion by focusing our marketing
strategy around our Student Premium subscription package. Doing so will not only expand the
total monthly active users (MAUs), but also increase revenue.
RESEARCH METHODOLOGY
The information used for this analysis report was done using both internal and external
sources. This information was catalogued by use of primary and secondary information sourced
from the internet, online databases, previous shareholder documents and quarterly reports from
Q1, Q2, and Q3 of 2020.
RESEARCH AND KEY FINDINGS
Spotify, which was founded in 2006, is a Swedish based company that is a music
streaming service provider. The company, which goes by Spotify USA, Inc. in the United States
and goes by Spotify AB for all other territories. As of Q2 Spotify has $1.8 billion in total
revenue, which is up 13% year over year. Spotify also has 139 million subscribers with 299
million monthly active users, which is up 29% year over year. Spotify offers its customers a
Premium subscription packages, starting with the Individual package, their recent Duo package,
a Family pack and then their discounted Student Premium subscription package. This package,
which is $4.99 offers customers a Hulu (ad-supported) plan, SHOWTIME, listen to ad-free
music, the ability to play music anywhere even off-line, as well as on-demand playback.
Spotify has always maintained its competitive edge amongst its competitors and one such
was is through its playlists. Spotify utilizes its Spotify AI to generate personalized playlists for
4. Page 4
its subscribers, curated playlists as well as user generated playlists. Another competitive
advantage of Spotify over its competitors is the Spotify Algorithm, which serves users tracks
based on their crossover with other listeners’ histories and natural selection process. Also the
company has managed to secure over 690,000 artists and their teams, which is a growth of 68%
year over year.
6. Page 6
The largest market for Spotify subscribers is the Millennials or the age brackets of 18 to
24 and 25 to 34 years old. As seen in the graphs above 39% of Spotify listeners are under the age
of 30. 29% of Spotify subscribers are between the ages of 25 to 34 years old, while 26% are
between the ages of 18 to 24 years old. It can also be noted that 56% of all Spotify subscribers
are male, while only 44% are female. This is why our targeted market are the Millennials and the
subsequent age brackets because they make up 45%, which is the largest segment of our total
customer base. There are currently 19.7 million students projected to attend colleges and
universities in 2020 with the average college student being about 26 years old. Also the
Millennials, born 1981 – 1996, consist of over 72.12 million people in the United States alone,
which means only 27% of Millennials are college students.
Spotify has had some backlash over the past several years with incidents involving artists
and intellectual property as well as copyright infringement, necessary steps will have to be made
to correct this moving forward so as to prevent any further backlash. Another flaw that has come
to light is the dependence of Spotify on other technologies and sometimes that of our competitors
such as Apple’s App Store or Google Play. However, there is an opportunity for Spotify to grow
exponentially moving forward through partnerships with mobile device manufacturers and other
companies such as the recent partnership with Samsung and Samsung devices.
CONCLUSIONS
Even with all the recent backlash Spotify is trending well against its competitors.
According to Goodwater Capitol, Spotify currently has a Net Promoter Score, (NPS is a
customer loyalty metric that gauges how willing a customer is to recommend a product or
service), of 24 for Q3, Q2 had an NPS of 28, while Q1 had an NPS of 22. These are well above
the closest competitors. With such a large market available amongst college students and
7. Page 7
Millennials it is no surprise that the best action would be to promote the Student Premium
Subscription Package more across that age bracket.
RECOMMENDATIONS
Our Q3 2020 Guidance and Oulook projects our total MAUs (monthly active users) will
rise to 312-317 million with 140-144 million total Premium subscribers. Our Q4 2020 Guidance
and Outlook increases those numbers with. 328-348 million MAUs and 146-153 million total
premium subscribers. If we direct our focus towards the 45% of our customer base, which are
between the ages of 18 to 34, then we will easily bea able to reach these numbers if not exceed
them.
8. Page 8
REFERENCES
Spotify, (2020), Shareholder Letter Q2 2020 Final, Retrieved October 24, 2020 from
https://s22.q4cdn.com/540910603/files/doc_financials/2020/q2/Shareholder-Letter-Q2-
2020_FINAL.pdf
Iqbal, M., (2020), Spotify Usage and Revenue Statistics, Retrieved October 24, 2020, from
https://www.businessofapps.com/data/spotify-statistics/
Yahoo, (2020), Yahoo Finance – Spotify Technology S.A., Retrieved October 24, 2020, from
https://finance.yahoo.com/quote/SPOT?p=SPOT&.tsrc=fin-srch
Hwong, C., (2020), Verto Index Streaming Music, Retrieved October 24, 2020, from
https://vertoanalytics.com/verto-index-streaming-music-services/
Goodwater, (2017), Understanding Spotify: Making Music Through Innovation, Retreieved
October 24, 2020, from https://www.goodwatercap.com/thesis/understanding-spotify
Businesswire, (2020), Spotify Technology S.A. Announces Financial Results For Second
Quarter 2020, Retrieved October 24, 2020, from
https://www.businesswire.com/news/home/20200729005266/en/
Yahoo, (2020), Spotify Income Statement – Yahoo Finance, Retrieved Octo0ber 24, 2020, from
https://finance.yahoo.com/quote/SPOT/financials?p=SPOT
NCES, (2020), Back to School Statistics – National Center for Education Statistics, Retrieved
October 24, 2020, from
https://nces.ed.gov/fastfacts/display.asp?id=372#:~:text=How%20many%20students%20
will%20attend%20colleges%20and%20universities%20in%20fall,in%20fall%202020%2
0(source)
9. Page 9
New America, (2020), Perception vs. Reality: The Typical College Student, Retrieved October
24, 2020, from https://www.newamerica.org/in-depth/varying-degrees/perception-vs-
reality-typical-college-
student/#:~:text=The%20average%20college%20student%20is%2026.4%20years%20of
%20age
Statista, (2020), Resident Population in the United States in 2019, by generation, Retrieved
October 24, 2020, from https://www.statista.com/statistics/797321/us-population-by-
generation/
