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A Market Analysis for (Spotify)
- 1. Page 1 A Market Analysis for (Spotify) (Alex Hayton) Full Sail University Project & Portfolio II: Business and Marketing (9/24/2020)
- 2. Page 2 EXECUTIVE SUMMARY This analysis report takes a look at the market in relation to Spotify. It looks at Spotify’s subscribers and market share compared to other competitors in the streaming industry. It looks at the way Spotify brings in revenue. This report gives a brief overview of the company; Spotify’s relation to other streaming services are also reviewed. This report includes recommendations on how Spotify can increase their presence in the music streaming industry and increase their subscribers.
- 3. Page 3 OBJECTIVE Based on its current market, suggest ways in which Spotify could increase their presence in the streaming industry and increase their subscribers. RESEARCH METHODOLOGY Information used in this report is mostly external, secondary information sourced from the internet and online databases and was gathered during the month of September 2020. Financial information was current on the day it was sourced. The information is current as of 2020. The information on Spotify was based on recent year-end figures from 2019. RESEARCH AND KEY FINDINGS Spotify is a music streaming company founded by Daniel Ek and Martin Lorentzon. Spotify streams music, videos, and podcast through licensing agreements (Spotify: Most Innovative Company, 2000).
- 4. Page 4 Spotify is the world’s most popular streaming subscription service with 299m users, including 138m subscribers, across 92 markets (Spotify Company Info, 2020). Midway through 2019 Spotify was estimated to have a 35% market share of total paid subscriptions (Counterpoint, 2020). Spotify Offers streaming and subscription services in regions such as North America, Latin America, Europe and internationally. With demographics to include men and woman from both set of ages 18 -24 and 25 – 34 all in which are mobile users. Source: Counterpoint Research
- 5. Page 5 Spotify is not financially secured, as of September 6, 2020, they have a net income of -323,000 (Yahoo, 2020) and a net profit margin of -4%. Although Spotify is the world’s most popular streaming subscription service, the company is experiencing a slowdown in subscribers overall and the unsteady rate of revenue. There is hope in the future they can overcome these disadvantages. Majority of Spotify’s revenue comes from its Premium Service, which provides both online and offline ad-free music streaming to paying subscribers, but with subscriptions slowing down, this can become a challenge in the future. All hope to overcome these disadvantages turn to advertisement on their platform, their subscriptions and expanding in more regions. CONCLUSIONS
- 6. Page 6 Spotify is still holding on strong against all competitors to include but not limited to iTunes, Tidal, Pandora, Amazon Music, etc. However due to majority of the company’s revenue coming from its Premium Service and advertisements, revenue is still able to compete with other streaming music companies. One disadvantage is the fact that the company is still owned by both founders and they do not have the advantage of having a parent company. Existing problems such as payment agreements with rights holders such as publisher and clients and artist opting out of releasing music due to low payout fees causes Spotify to look at their legal rules regarding digital streaming and to focus on new ways to increase awareness in different regions and ways to increase subscribers. RECOMMENDATIONS Based on research and conclusions, Spotify needs to find new ways to increase their presence in the streaming industry and increase their subscribers. As music streaming continues to become bigger, so does the need to find other ways to make revenue. Spotify should focus on making fair payment agreements with rights holders such as publishers and clients to ensure more artist will release music through them, giving them are larger selection of music compared to competitors. Spotify should also focus on being fair when paying out artist to ensure they do not opt out of releasing music to their platform. Another analysis report should be produced in March 2021 to research how changes have impacted Spotify’s subscribers’ rates and how other streaming services have affected Spotify’s revenue. This could create more recommendations for Spotify.