How to increase Spotify's presence in a crowded digital music streaming industry

1. SPOTIFY
By: Vitamin SEA
Aditya Saputra, Adrian Darmali,
Allan G. Pangaribuan, Somya A.
Wirawidia
How to increase Spotify’s
presence in a crowded digital
music streaming industry

2. “To bring music into every part of your life,
wherever you are, whatever you’re doing,
whatever your mood” – Daniel Ek
Launched on September 2008
49% of market share in the global market
15m subscribers & 60m
active users (end of 2014)
Introduce an alternative
to music piracy; music
streaming
Spotify’s vision has been consistent ever since its release in 2008, with increasing number of
subscribers.
Introduction Recommendation Financial Impact Implementation Conclusion

3. “Market leader within the digital music
industry”
Globally, loss increase annually → 59.9% (2010-
2011)
Profit from countries with high internet
connectivity (established market) offset initial
loss from new market
Advertising as primary revenue
Introduction Recommendation Financial Impact Implementation Conclusion
Although revenue in some countries increases, loss in other countries offset the
effect, yet the market value still reflects its position as the market leader.
Market Value: $6.2
billion

4. Introduction Recommendation Financial Impact Implementation Conclusion
The digital music industry has been growing in sales from 2004-now

5. Introduction Recommendation Financial Impact Implementation Conclusion
We aim to increase market share by using data as a leverage to further increase
users’ engagement, conversion rate, and in turn conversion rate. We name the
program, SpotiX.
Artists Users
UsersArtists
Users play an artists’ playlist a certain number of times
Artists give notification of upcoming concert,
giving early access to the tickets’ sale
Free
Subscriber
Artists give notification, offer
tickets to those who have
frequently played their playlist
Offer concert
tickets bundle
with 6 months
premium service
Offer cheaper
tickets and
exclusive feature
Premium
Subscriber

6. Introduction Recommendation Financial Impact Implementation Conclusion
We aim to increase market share by using data as a leverage to further increase
users’ engagement, conversion rate, and in turn conversion rate.
User
engagement
By connecting
artist to listener,
Spotify will engage
their customers
even more.
Conversion Rate Brand Loyalty
Increase in user
engagement will
result in an
increase in
conversion rate
from free user to
premium user
With the sense of
belonging and
increased
connection to their
favorite artist,
people will develop
more affinity to
Spotify.
Increasing switching
cost to other
providers
Provide connection
from artists to users,
eliminating the one-
way relationship

7. Introduction Recommendation Financial Impact Implementation Conclusion
An implementation of the program will lead to a change in the model, from one-way
relationship to a more direct three-way relationship
Three-way relationship
Artist
Artist
Artist
Record Label
Users
Artists
One-way relationship

8. Introduction Recommendation Financial Impact Implementation Conclusion
Risks such as elastic demand, non-cooperative artists, & copycat may arise in the
market, and some mitigations steps can be undertaken
Elastic Demand
“Music For Everyone, From
Anyone”
Big hit artists under recording
companies would not be
interested in doing the program
Intellectual Property Theft
New features of SpotiX
Create stronger brand equity
Positive associations of Spotify
Perceived as Spotify’s
appreciation towards art by
streamers
SpotiX
Differentiation
Prioritize on gaining
partnership with up and coming
artists
Brand Loyalty
Establish emotional connection
with streamers

9. Introduction Recommendation Financial Impact Implementation Conclusion
The financial impact of SpotiX will approximately add AUD 232.8 million of revenue
per year, AUD 19.4 million per month.
Australia’s
population:
Approx. 24
million
7.2 million
people go
to Music
Festival/Co
ncert
5.4 million
people who
go to
concert do
not use
Spotify
New 1.62
million
user
AUD 19.4
million/mo
nth
AUD 232.8
million/yea
r
30% 75% 30% x AUD 11.99/month
x AUD 143.88/year

10. Introduction Recommendation Financial Impact Implementation Conclusion
Implementing the ‘SpotiX’ strategy through partnership with artists and label
companies
Provide customer support and incentives
Communicating the program through multi channel means, both online
and physically
Imbuing as much as Spotify’s core values on SpotiX
Creating accessible and user friendly online platform for SpotiX
Establishing partnership with artists, label companies and promoters
0
10
20
30
40
50
60
70
80
90
Nov-10 Apr-12 Aug-13 Dec-14 May-16 Sep-17
millionsofusers
Spotify User Forecast
Premium user Monthly active user user

11. Introduction Recommendation Financial Impact Implementation Conclusion
SpotiX would be a strategic solution to compete against Apple’s growing market
share.
With SpotiX, Spotify
users can perceive
increased value in
its product
Through SpotiX,
non-Spotify users
are attracted to
convert.
Increase in
conversion rate
Increased perceived
value results in
brand loyalty
Increase in
market
share
Increase in
future sales