Portfolio II Spotify Analysis

1. Page 1
A Market Analysis for
Spotify
Bryn Nelson
Full Sail University
Project & Portfolio II: Business and Marketing
December 16, 2022

2. Page 2
EXECUTIVE SUMMARY
This report is an analysis of the current Spotify revenue data. The method of analysis
includes the rising trend in paid users over previous quarters and success in the music-streaming
business. The report includes recommendations on how Spotify can reduce the price of monthly
subscriptions to generate more premium subscribers and generate more revenue over time. This
report is a suggestion on how the company can grow and continue to provide a great service to
all its customers.

3. Page 3
OBJECTIVE
This report is to show how Spotify can reduce the price of premium memberships to
increase the number of paying members.
RESEARCH METHODOLOGY
The information in this analysis was gathered using secondary internet research. Though
mostly quantitative, qualitative research was also conducted. All information was gathered in the
months of November and December of 2022 with current data. A STEEPLE and SWOT analysis
have been completed and noted in this analysis.
RESEARCH AND KEY FINDINGS
With over 456 million users worldwide, Spotify is the leader in music streaming.
Founded in Sweden in 2006, Spotify has dominated the streaming world by creating an
affordable and accessible way to stream music and podcasts from any device with an internet
connection. Most artists have their music available for streaming, and some make their music
exclusive to Spotify for a short time before releasing it on all platforms.
The main way Spotify brings in
revenue is through paid premium
subscriptions. At an average of $9.99 a
month for a single membership, users are
not required to pay for a membership. Since
the service is free, it is supported by ads.
The incentive to purchasing a premium

4. Page 4
subscription is that you can listen ad-free, download your favorite playlists, and have unlimited
skips. The number of paid subscribers has steadily gone up over the years, but with just 195
million paying subscribers, that’s still only 45% of total users. (Statista, 2022b)
As found in the SWOT analysis, one of the major threats to the company is paying out to
the song publishers and songwriters which is ultimately how artists are paid. When calculated
out, Spotify streams amount to $.0033 per stream. (Mulroy, 2022) Only counting paid
subscriptions, Spotify brings in almost $2 billion a month in revenue. In the last month, stock
prices have been raising at a steady rate, ending in the green almost daily.
One major advantage Spotify has over other
streaming services is their annual end-of-year Spotify
Wrapped catered to each user. Users look forward to this
all year and this research was done when Spotify
Wrapped was released. Stock prices rose almost $1
overnight noting the popularity of the feature available
to all users, regardless of whether they pay for premium
or not. Users are also said to like the curated playlists

5. Page 5
done using AI and machine learning. The development of machine learning helps keep users
engaged in music and creates exposure for artists that users may not otherwise know about (Sen,
2018).
CONCLUSIONS
Despite growth from its top competitors, Spotify remains at the top for global music
subscriptions. Users prefer a service that is accessible from anywhere and can be used with or
without an internet connection. With a paid, premium subscription, users can download
unlimited music to their device to listen offline and without an internet connection. Currently,
users who don’t pay for a premium subscription cannot download music or playlists to their
devices. To change this, users are being driven to upgrade to a premium subscription.
RECOMMENDATIONS
By reducing the cost of a premium subscription by just $2 a month, users are more
inclined to upgrade their subscriptions. This can create almost $448 million a month in revenue
with 100 million more subscribers. According to Yoganarasimhan (2022), customers prefer a
lower-cost item and will continue to purchase it if the price does not increase.

6. Page 6
REFERENCES
Andrew, S. (2022, November 30). Bad Bunny is Spotify’s most-streamed artist in the world –
again. CNN. https://edition.cnn.com/2022/11/30/entertainment/spotify-wrapped-2022-
top-artists-bad-bunny-cec/index.html
Castillo, M. (2018, April 27). Spotify IPO filing reveals how insanely complicated it is to license
music rights. CNBC. https://www.cnbc.com/2018/02/28/how-spotify-licenses-and-pays-
for-music-rights.html
Climate Action | Life at Spotify. (n.d.). https://www.lifeatspotify.com/diversity-equity-
impact/climate-action
Davis, W. (2019, December 28). Spotify Becomes Latest Tech Company To Hit Pause On
Political Ads. NPR.org. https://www.npr.org/2019/12/28/792078881/spotify-becomes-
latest-tech-company-to-hit-on-pause-political-ads
Dunkley, L. (2022, November 22). Spotify Free vs. Premium: Should you pay to play? Tom’s
Guide. https://www.tomsguide.com/face-off/spotify-free-vs-premium
Fellowes, J. (2022, December 1). When did Spotify Wrapped 2022 stop counting and when does
2023 start? Metro. https://metro.co.uk/2022/12/01/when-did-spotify-wrapped-2022-stop-
counting-and-when-does-2023-start-17858503/
Fischer, S. (2022, July 27). Spotify CEO says company isn’t seeing impact of economic downturn
yet. Axios. https://www.axios.com/2022/07/27/spotify-earnings-daniel-ek
Garcia, P. (2019, April 12). Spotify SWOT Analysis: Internal & External Strategic Factors.
Rancord Society. https://www.rancord.org/spotify-swot-analysis-internal-external-
strategic-factors
Hoover, A. (2022, December 1). The Big Problem With Spotify Wrapped. WIRED.
https://www.wired.com/story/spotify-wrapped-user-data/

7. Page 7
Kafka, P. (2014, October 20). Spotify Lowers Its Music Prices, Using a Family Plan. Apple
Wants to Go Lower. Vox. https://www.vox.com/2014/10/20/11632048/spotify-lowers-its-
music-prices-using-a-family-plan-apple-wants-to-go
Lapowsky, I. (2022, May 24). Spotify stopped political ads in 2020. It just quietly brought them
back. Protocol. https://www.protocol.com/bulletins/spotify-political-ads
Mulroy, C. U. T. (2022, December 1). Spotify pays artists (sort of), but not per stream. Here’s
how it breaks down. USA TODAY. https://eu.usatoday.com/story/life/2022/10/22/how-
much-per-spotify-stream/8094437001/
Sen, I. (2018, November 26). How AI helps Spotify win in the music streaming world. Outside
Insight. Retrieved December 3, 2022, from https://outsideinsight.com/insights/how-ai-
helps-spotify-win-in-the-music-streaming-world/
Spotify Technology Revenue 2018-2022 | SPOT. (n.d.). MacroTrends.
https://www.macrotrends.net/stocks/charts/SPOT/spotify-technology/revenue
Statista. (2022a, October 17). Spotify ad revenue 2017-2026.
https://www.statista.com/statistics/1305705/spotify-ad-revenue/
Statista. (2022b, November 22). Spotify’s premium subscribers 2015-2022.
https://www.statista.com/statistics/244995/number-of-paying-spotify-subscribers/
Wanjala. (2022, October 21). How to renew your Spotify Premium student discount. Make Use
Of. Retrieved December 7, 2022, from https://www.makeuseof.com/how-to-renew-
spotify-student-discount/
Yoganarasimhan, H., Barzegary, E., and Pani, A. (2022), Design and Evaluation of Optimal Free
Trials. Management Science, forthcoming.