Music Business Models Course

1. Spotify Business Model
By:
Laura Hernandez
Lyndsi Johnson
Madison Canale

2. VALUEPROPOSITION
The company offers five core value propositions: Pricing, Accessibility, Customization,
Brand/Status, and Performance (Clootrack, n.d.).
PRICING
• Freemium model (free & premium).
• Spotify is a free music streaming service with an
option to pay for additional features.
ACCESSIBILITY
This is what they stand for.
• User-friendly platform with over 82 million songs
and curated playlists (Spotify, n.d.).
• Gives artists the access to monetize their music.

3. VALUEPROPOSITION
CUSTOMIZATION
• Create playlists and a unique
profile (as an artist or consumer.)
• Personalised recommendations
for each user.
• Collaborate and share music with
other users.
BRAND/STATUS
• Partnerships with well-known brands
to create service/product awareness.
• Entertaining and recognizable brand
image.
PERFORMANCE
• Strong performance supported by
tangible and statistical results (165
million paid subscribers.)

4. CUSTOMERSEGMENTS
STUDENT SEGMENT
Student Premium Subscription
$4.99 per month
Ad-Supported Hulu and SHOWTIME plans included
(Spotify, n.d)
Typically in their 20s - 30s
Average Salary (Part-Time): $36,824
(Part time college student salary, 2021)
This subscription allows for students to pay a smaller monthly payment
while still enjoying the perks Spotify Premium has to offer.

5. INDIVIDUAL SEGMENT
Spotify Premium Subscription
$9.99 per month
Ad-free listening and on-demand playback
More than half of Spotify's subscribers are 18-34 years old
(Hlebowitsh, 2022).
This subscription allows for individuals to enjoy music ad-free.
Solves the problem of having to purchase new music by including
one's favorite artist on one streaming platform.
CUSTOMERSEGMENTS

6. CUSTOMERSEGMENTS
FAMILY SEGMENT
Family Premium Subscription
$15.99 per month
6 premium accounts for members living under one roof,
ability to block explicit music, and a Spotify app made
just for kids
This subscription is perfect for families, allowing for up to
six premium accounts without paying $9.99 per individual.
It is catered to those with children as it has the ability to
block any explicit music and includes a Spotify app made
just for kids (Spotify, n.d).

7. CUSTOMER
RELATIONSHIPS
SPOTIFY WRAPPED
Spotify Wrapped reveals a
subscribers most-listened to artists
and songs. It is an experience that
subscribers look forward to at the end
of each year. The experience allows
you to share your data with on social
media in a fun and engaging way
(Hicks, 2021).
DISCOVER WEEKLY
Discover Weekly is a customized
playlist that Spotify gifts to its
listeners each Monday (Five ways to
make your Discover Weekly playlists
even more personalized, 2019). This
feature creates loyalty and curiosity
to see what new songs and artists one
will be introduced to each week.

8. CHANNELS
SPOTIFY IS A MUSIC STREAMING SERVICE THAT IS
AVAILABLE THROUGH THEIR MOBILE APPLICATION OR
DESKTOP WEBSITE. THE SPOTIFY PLATFORM IS KNOWN
FOR ITS SIMPLICITY AND EASE OF USE WHICH IS ONE OF
THE MANY REASONS IT HAS 165 MILLION PAID
SUBSCRIBERS (STATISTA, 2021).

9. KEYACTIVITIES
PROVIDES USERS THE ABILITY TO DISCOVER,
MANAGE AND SHARE AUDIO TRACKS &
PODCASTS
PROVIDE DIFFERENT AUDIO
SUBSCRIPTION SERVICES AND TIERS
(FREE, INDIVIDUAL, FAMILY, AND
STUDENT)

10. KEYPARTNERS
Spotify’s collaborations with many different brands
provide more opportunity and further promotion.
Two of the most recent key partners include FC Barcelona and Peloton.
In July 2022, Spotify and FC Barcelona are bringing football and music together in a
unique way. This partnership is going to be used in attempt to “shine a spotlight on
artists from all over the world” (Spotify, 2022).
In November 2021, Spotify and Peloton furthered their partnership and made music
meet fitness. There are now Peloton playlists, curated workouts, and even quizzes to find
your own personal instructor.
Other partners include: Uber, Google, Starbucks, XBOX, Shopify, SHOWTIME, Hulu, and
more.

11. KEYRESOURCES
MONTHLY USERS
AD REVENUE
Employees
Spotify’s main key resources are its paid active monthly users, ad revenue, and employees.
Spotify's paid users and ADs/partnerships continuously bring in revenue to the company.
Their employees are key assets in creating new innovative ideas and ensuring that the
platforms are maintained consistently.

12. REVENUESTREAMS
Premium Subscription
Service
Student, Individual, and Family plans mentioned
previously.
Ad-Supported Service
Generates revenue from subscription fees.
Provided €8,460million in 2021.
Generates revenue from the sale of advertising
spaces across its music and podcast content.
Provided €1,208million in 2021.
Comprised 91%of the total yearly revenue in
2020 (Johnston, 2021).
Comprised 9%of the total yearly revenue in 2020
(Johnston, 2021).
*These services are offered in 93 countries and territories.
*Total revenue from both streams in 2021: €9,668 million.

13. COSTSTRUCTURE
ROYALTIES
SALARIES
MARKETING( €1,135 MILLION IN 2021)
CUSTOMERSUPPORT
TRANSACTIONEXPENSES
PLATFORMMAINTENANCE
RESEARCHANDDEVELOPMENT
( €912 MILLION IN 2021)
The cost of revenue in 2021 was €7,077 million .
Spotify has paid over $23 billion in royalties to right holders
as of 2020 (Recording and Composition royalties.)

14. REVENUESTREAMOPPORTUNITY
VIP PREMIUM SUBSCRIPTION
The VIP Premium Subscription tier would offer rewards to super fans in the form of
special releases, merch, and other content from their favorite artists. This tier would
benefit the artist as well as the subscriber, creating a deeper sense of loyalty to the artist
and their fandom.

15. REVENUESTREAMOPPORTUNITY
VIP PREMIUM SUBSCRIPTION
This subscription tier would come at a higher monthly cost for the subscriber and would
be distributed to their most listened to artist(s). This subscription format would be set up
in a model similar to Patreon.
"This model is a win-win; creators retain creative freedom while getting the salary they
deserve, and fans get to rest easy knowing that their money goes directly towards
creating more of what they love" (About, n.d).

16. About Spotify. (2022, February 2). Spotify. https://newsroom.spotify.com/company-info/#:~:text=Life%20at%20Spotify,-
Learn%20More&text=Our%20mission%20is%20to%20unlock,and%20be%20inspired%20by%20it.
About. (n.d.) Patreon. https://www.patreon.com/about
Available plans. (n.d.). Spotify. https://support.spotify.com/us/plan_help/available_plans/
Clootrack. (2020, January 14). Customer Value Proposition. https://clootrack.com/knowledge_base/customer-value-proposition/
Five ways to make your Discover Weekly playlists even more personalised. (2019, May 1). Spotify. https://newsroom.spotify.com/2019-05-02/five-ways-to-make-your-
discover-weekly-playlists-even-more-personalized/
Götting, M. (2022, February 10). Spotify Maus Worldwide 2021. Statista. https://www.statista.com/statistics/367739/spotify-global-mau/
Gupta, J. (2021, December 16). Spotify Business Model | How Does Spotify Make Money? Feedough. https://www.feedough.com/how-does-spotify-make-money/#:
%7E:text=Spotify%20uses%20the%20freemium%20business,of%20users%20and%20offer%20discounts.2021
Hicks, J. (2021, December 1). Spotify Wrapped 2021 is ready to share your music listening history with everyone. The Verge. https://www.theverge.com/
2021/12/1/22811900/spotify-wrapped-2021-music-recap-iphone-android
Hlebowitsh, N. (2022, March 3). 50+ statistics proving Spotify growth is soaring. Siteefy. https://siteefy.com/spotify-statistics/
Johnston, M. (2021, February 11). How Spotify Makes Money: Premium Service Generates the Biggest Share of Revenue. Investopedia. https://www.investopedia.com/
articles/investing/120314/spotify-makes-internet-music-make-money.asp
REFERENCES

17. REFERENCES
Olson, C. (2021, November 3). Peloton and Spotify pump up their partnership. Forbes. https://www.forbes.com/sites/cathyolson/2021/11/03/peloton-and-spotify-pump-up-their-
partnership/?sh=66fc8e636f7f
Part time college student salary. (2021, November 3). ZipRecruiter. https://www.ziprecruiter.com/Part-Time-College-Student_Salary
Samuely, A. (n.d.). Starbucks and Spotify partnership highlights link between Mobile Loyalty, content. Retail Dive. https://www.retaildive.com/ex/mobilecommercedaily/starbucks-and-
spotify-partnership-highlights-link-between-mobile-loyalty-music
Spangler, T. (2021, October 20). Spotify adds Virtual Merch tables for music artists in pact with shopify. Variety. https://variety.com/2021/digital/news/spotify-shopify-ecommerce-
merch-1235093368/
Spotify and FC Barcelona announce a first-of-its-kind partnership to bring music and football together.(2022, March 15). Spotify. https://newsroom.spotify.com/2022-03-15/spotify-and-fc-
barcelona-announce-a-first-of-its-kind-partnership-to-bring-music-and-football-together/
Spotify. (n.d.). About. https://newsroom.spotify.com/company-info/#:%7E:text=Discover%2C%20manage%20and%20share%20over,ad%2Dfree%20music%20listening%20experience.
Spotify.Investors. (2022, February 2). Spotify Technology S.A. Announces Financial Results for Fourth Quarter 2021. https://investors.spotify.com/financials/press-release-details/2022/
Spotify-Technology-S.A.-Announces-Financial-Results-for-Fourth-Quarter-2021/default.aspx
Statista. (2022, March 9). Spotify's segment revenue 2012–2021. https://www.statista.com/statistics/245125/revenue-distribution-of-spotify-by-segment/
Vicente, V. (2020, February 5). How to discover New Music on Spotify. How-To Geek. https://www.howtogeek.com/541887/how-to-discover-new-music-on-spotify/
4 new partnerships bringing Spotify Premium across the Globe. (2019, November 21). Spotify. https://newsroom.spotify.com/2019-11-21/4-new-partnerships-bringing-spotify-premium-
across-the-globe/