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Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng
BUAD 497
Goal: Find out how Spotify needs to differentiate

Five Forces

Sustainability

Recommendations
What is an Online Streaming Music Platform?

Access to millions
of songs

Subscription &
Ad-based model

Social Networking...
Online Music Streaming Platforms

Introduction

5 Forces

Sustainability

Recommend

Conclusion
Introduction

5 Forces

Sustainability

Recommend

Conclusion
Introduction

5 Forces

Sustainability

Recommend

Conclusion
Rivalry- Moderately High
• Slightly differentiated functions
• Many competitors but not purely
competing on price

Introdu...
Threat of Entry - Moderate
• Easy to replicate
• Structural Barriers
• Licensure agreements
• High MES required for profit...
Supplier Power - High
• “Big Four” Record Label Oligopoly

• Copyright law, statutory licensing
• Unified negotiating fron...
Buyer Power - High
• Listeners and advertisers
• Low willingness to pay

• Low switching cost
• The effect of increased cu...
Many Substitutes
• YouTube, iTunes, CDs, radios, music piracy
• Low switching costs between streaming
platforms

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

Intr...
Unattractive Industry
Moderate
Threat of
Entry

Many
Substitutes

Online
Music
Streaming
Industry

Moderately
High Rivalry...
Economically Unsustainable
Current
revenue
gains
Consequences
of freemium
model

Weak payout
structures
Micropayments 
si...
Potential to Thrive
• Well differentiated from Internet radio and
on-demand music services
• Further performance improveme...
Introduction

5 Forces

Sustainability

Recommend

Conclusion
Goal & Impediment for Spotify’s Future
• Ultimate goal:
- Increase subscription revenues
• Impediment:
- Current business ...
Spotify Increasing Revenues & Costs

Introduction

5 Forces

Sustainability

Recommend

Conclusion
Modifying the current business model
•
•
•
•
•

More song plays allowed = More you pay
A new tiered subscription system
Sp...
Exploring New Opportunities

Platformization
Collaboration

Introduction

5 Forces

Sustainability

Recommend

Conclusion
Platformization: Music as Water
What is “platformization”?
– Existing integration in
cars, TVs, and smart media
products

...
Recommended Platformization
• Secure & expand integration - existing platforms
• Explore new platforms
- Gym media systems...
Why Platformization?
• Ever-expanding range of end points
• Value added by “access everywhere”

• Scale and find more paid...
Collaborate with Players in the Music Scene
• The idea
• Existing collaboration
Facebook
Urban Outfitters
Coca-Cola
So...
Recommended Collaboration
Clubs, party planners venues

DJ interface  online streaming songs to mix

Introduction

5 Forc...
Continuing Need to Differentiate

Introduction

5 Forces

Sustainability

Recommend

Conclusion
Key Obstacle: Advantages that Spotify has can be replicated by competitors
Key Strategies: Modifying the current model, Pl...
Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng
BUAD 497
Q&A
What is an Online Music Streaming Platform?
Online Music Streaming Platforms
Spotify UI
Spotify by the Numbers
Subscri...
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BUAD 497 Strategic Management- Spotify

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BUAD 497 Strategic Management- Spotify

  1. 1. Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng BUAD 497
  2. 2. Goal: Find out how Spotify needs to differentiate Five Forces Sustainability Recommendations
  3. 3. What is an Online Streaming Music Platform? Access to millions of songs Subscription & Ad-based model Social Networking & Playlists Introduction Listen to tracks online Search & Discover No downloads 5 Forces Sustainability Recommend Conclusion
  4. 4. Online Music Streaming Platforms Introduction 5 Forces Sustainability Recommend Conclusion
  5. 5. Introduction 5 Forces Sustainability Recommend Conclusion
  6. 6. Introduction 5 Forces Sustainability Recommend Conclusion
  7. 7. Rivalry- Moderately High • Slightly differentiated functions • Many competitors but not purely competing on price Introduction 5 Forces Sustainability Recommend Conclusion
  8. 8. Threat of Entry - Moderate • Easy to replicate • Structural Barriers • Licensure agreements • High MES required for profit • High switching costs Introduction 5 Forces Sustainability Recommend Conclusion
  9. 9. Supplier Power - High • “Big Four” Record Label Oligopoly • Copyright law, statutory licensing • Unified negotiating front Introduction 5 Forces Sustainability Recommend Conclusion
  10. 10. Buyer Power - High • Listeners and advertisers • Low willingness to pay • Low switching cost • The effect of increased customization Introduction 5 Forces Sustainability Recommend Conclusion
  11. 11. Many Substitutes • YouTube, iTunes, CDs, radios, music piracy • Low switching costs between streaming platforms Introduction 5 Forces Sustainability Recommend Conclusion
  12. 12. Few Complements • Increased exposure through live music • Computers and mobile devices • But, not affordable for all Introduction 5 Forces Sustainability Recommend Conclusion
  13. 13. Unattractive Industry Moderate Threat of Entry Many Substitutes Online Music Streaming Industry Moderately High Rivalry Introduction 5 Forces Sustainability High Supplier Power High Buyer Power Recommend Conclusion
  14. 14. Economically Unsustainable Current revenue gains Consequences of freemium model Weak payout structures Micropayments  significant revenue loss Introduction 5 Forces Sustainability Recommend Conclusion
  15. 15. Potential to Thrive • Well differentiated from Internet radio and on-demand music services • Further performance improvements • Tiered subscription system • Platinum service level users Introduction 5 Forces Sustainability Recommend Conclusion
  16. 16. Introduction 5 Forces Sustainability Recommend Conclusion
  17. 17. Goal & Impediment for Spotify’s Future • Ultimate goal: - Increase subscription revenues • Impediment: - Current business model  growth of user base  big losses Introduction 5 Forces Sustainability Recommend Conclusion
  18. 18. Spotify Increasing Revenues & Costs Introduction 5 Forces Sustainability Recommend Conclusion
  19. 19. Modifying the current business model • • • • • 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 Introduction 5 Forces Sustainability Recommend Conclusion
  20. 20. Exploring New Opportunities Platformization Collaboration Introduction 5 Forces Sustainability Recommend Conclusion
  21. 21. Platformization: Music as Water What is “platformization”? – Existing integration in cars, TVs, and smart media products Introduction 5 Forces Sustainability Recommend Conclusion
  22. 22. Recommended Platformization • Secure & expand integration - existing platforms • Explore new platforms - Gym media systems - Game consoles - More intelligent systems Introduction 5 Forces Sustainability Recommend Conclusion
  23. 23. Why Platformization? • Ever-expanding range of end points • Value added by “access everywhere” • Scale and find more paid subscribers Introduction 5 Forces Sustainability Recommend Conclusion
  24. 24. Collaborate with Players in the Music Scene • The idea • Existing collaboration Facebook Urban Outfitters Coca-Cola Soundrop Introduction 5 Forces Sustainability Recommend Conclusion
  25. 25. Recommended Collaboration Clubs, party planners venues DJ interface  online streaming songs to mix Introduction 5 Forces Sustainability Recommend Conclusion
  26. 26. Continuing Need to Differentiate Introduction 5 Forces Sustainability Recommend Conclusion
  27. 27. Key Obstacle: Advantages that Spotify has can be replicated by competitors Key Strategies: Modifying the current model, Platformization, and Collaboration Introduction 5 Forces Sustainability Recommend Conclusion
  28. 28. Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng BUAD 497
  29. 29. Q&A What is an Online Music Streaming Platform? Online Music Streaming Platforms Spotify UI Spotify by the Numbers Subscriber Growth Graph Streaming Music Future Graph Summary Five Forces (Summary) Rivalry Threat of Entry Supplier Power Buyer Power Substitutes Complements Recommendations Goal & Impediment for Spotify’s Future Spotify Increasing Revenues & Costs Modifying the Current Business Model Exploring New Opportunities Platformization: Music as Water Recommended Platformization Why Platformization Collaborate with Players in the Music Space Recommended Collaboration Sustainability Economically Unsustainable Potential to Thrive

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