The Economic Model Of Spotify

After the period elapses, any person can use, print, publish, and distribute the original work. The music industry has been in dispute for many years in respect to music piracy. It went after software and website developers, as well as consumers in the courts (Easley, 2005, p.163). As a result, this may be why governing the expansion of the music industry towards later benefits for the industry; however, not toward those who pirate from them (Easley, 2005, p.163). There is clear evidence of a willingness to pay for online music in general through legal download services such as iTunes (Easley, 2005, p.163). It is clear that some new markets are emerging; for example, services such as 4G LTE combine music with other services. These markets may provide both better margins and better copyright protection to the music industry. Nevertheless, some forms of music piracy may ultimately come to be seen as an effective marketing channel for those services (Easley, 2005, p.163). Clearly the industry is adapting piracy issues.

Over the last fifteen years, the music industry has been revolutionized by technological improvements. It all began with the creation of the mp3 file format; music suddenly became easy to distribute. Napster took advantage of the new file format by creating a peer to peer network, which composed of the first on-demand streaming company. While their company was riddled with lawsuits, they became the initial leaders for digital music. With iTunes’ release, providing users a digital marketplace, the market began its initial shift. The desire to buy and listen to albums’ in entirety diminished; the industry changed to a singles market. In 2008, Spotify noticed the à la carte downloads that made iTunes quite valuable. Using Napster’s peer to peer model as an initial framework, they created a peer to peer system where they actually paid royalties to the copyright holders. With a freemium service, people could listen to whatever song they wanted as long as they could tolerate intermittent advertisements. Yet what Spotify has managed to do, which no other music streaming company has done, is that they have been able to amass a 40% premium user rate, an astonishing number especially when compared to Pandora’s 5.6% paid user rate. Despite streaming services, particularly Spotify, negative reputation, their entrance into the music industry has not only increased exposure for indie artists, but is also revolutionizing the industry.

Spotify was started to provide commercial music streaming services with facilities to search and browse music as well as download. Spotify has various opportunities in increasing the size of the company to a wide area. There are also opportunities in creating interactive websites and providing the customers with extra games and offers. However, there are various challenges to meet these opportunities which may include investments and customer issues. There are two recommendations for Spotify, first is to develop a mobile application for smart phones and second is to create new offers along with online gaming. This will foster growth in the Spotify’s reputation in the market.

This paper aims to improve Spotify’s strategies in order to make its business more profitable.

Spotify is a multinational music streaming organsation that operates in 58 countries around the world. Spotify was launched in 2008 and has since grown to 60 million active users with 15 million being premium subscribers as at the beginning of 2015. Spotify is know for its Freemium pricing model where non premium customers are able to use the basic features for free but in order to get premium features (listenting to songs offline) they must pay a monthly fee. This model seems to have allowed spotify to engage in growing their organsation as they have experienced massive growth over recent years which can be seen by their growing revenue figures from €430 million to €746m which is a 73.6% increase in revenues since 2012 to 2013. At the same time as they are seeing substantial revenue growth they are also experencing increasing losses from €21.9 milllion loss in 2010 to €93.1m in 2013. Spotifys increase in revenues whilst simultaneos increases in its losses maybe indactive of a pricing model that is unprofitable. So in order to find out whether Spotify’s pricing model is inherenly unproftiabel I will research and analyse the question “Can Spotify become profitable?”.

It would also be well to consider that with most music streaming services when you come across a song that you would like to buy it is quite easy and convenient to do so from within the service, and so in addition to greater pay, Spotify likely also causes more sales than radio play.

When speaking economically, the digital music sector of the international music industry is undoubtably the most important sector in the industry. Within the last decade, music has seen cardinal changes in the way both major and independent labels distribute their products. An industry that once relied on Payola 's and mass distribution of physical records and CD 's now relies heavily on the power of the internet. The first instance of mass distribution of music through the internet was by the service Ritmoteca.com in 1998 [1]. Ritmoteca had a library of over 300,000 songs, offering individual songs for 99 cents each and albums for $9.99. After signing distribution deals with many major music labels such as Warner

This case study about the Spotify business model allows a broader vision of what the digital music industry is. In a short time, many companies have developed and managed marked their territory in a highly competitive industry. The start-up Spotify has undergone a remarkable evolution in a financial point of view but also in terms of its popularity. Its various competitive benefits regarding the market leader and its respect for music labels have enabled the company to be renowned and to have a reputation in the real business. Today, five years after its creation, Spotify is certainly criticized in some aspects of

Streaming services took Napster’s idea and manipulated it to function better and have artists, songwriters, and music publishers agree with the use of their music in exchange for money based on the number of times streamed. Spotify offers millions of songs to listen to randomly, free of charge. This has caused a fiery feud between Spotify and the music industry with Spotify having “already settled two separate class action lawsuits for failure to pay mechanical royalties” (Jacobson). Services such as Spotify and Pandora are required to pay mechanical royalties and obtain many licenses in order to provide songs and albums for free consumption. Spotify has a history of not paying royalties to songwriters and music labels.

3-4). While these statistics provide a look into the numerical growth of the streaming industry, it is also important to discuss the power that these streaming services have generated—over both the music industry and over established/aspiring artists. Subscriptions are on the rise, having increased significantly over the past ten years, but as is the amount of users streaming music on a free-trial or ad-supported basis—ultimately undercutting the music industry and artists alike. Blewett and Gollogly (2017) elaborate on this point, stating that, by the end of 2016, paid music streaming subscriptions drove a revenue growth of 60.4%—this growth more than offsetting a “20.5% decline in downloads” and a “7.6% decline in physical revenue” (Blewett & Gollogly, 2017, para. 4). Moreover, Borja and Dieringer (2016) explore the concept of streaming even further in their academic article, positing that the decline in paid digital downloads may be a direct result of streaming—as, music streaming can be perceived as a “complement” for music piracy, in which listeners can freely sample music to pirate later on (Borja & Dieringer, 2016, p. 1). The authors also suggest that streaming can provide a “venue for discovering and listening to new releases”; and after completing their 1052 surveys, conclude that streaming increased the likelihood of piracy by

“Before the days of YouTube and the Internet, a band 's chances of striking it big depended on record companies. If a band was lucky enough to get a record deal, it gained access to a label 's vast resources and connections. The company paid for the band 's studio time, … and got its music played on the radio, reaching millions of record buying Americans” (Majerol, 1). Now, anyone with talent can post a video of themselves and become an internet sensation, only to then receive a deal with a label to continue growing their career. The issue is, with the Internet came digital downloading, and with the growing popularity of digital downloading came illegal downloading, known as Digital Piracy, which has affected the music industry greatly. This issue affects everyone involved in the Music Industry. From the small CD store owner to the Artist on stage, everyone has and continues to be affected by the growing popularity of digital downloading services. Artists, producers, and songwriters lose an estimated 12.5 Billion USD every year to illegal digital music services. Further, the economic impact from [digital downloading] is an estimated loss of 2+ Billion USD (Storrs, 1). This money affects the “little guys” in the industry and the average worker within the industry.

Introduction: Setting the trend for the future, the distribution and consumption of recorded music transformed dramatically with the launching of Apple’s iTunes in 2001. The proliferation of online music subscription services and other music sharing services exerted a great pressure on the conventional music distribution business model. Combined with this transformation, piracy of digital music had a profound impact on the whole industry. These worsening conditions in the market place for recorded music forced both established and upcoming new artists to experiment with new ways of selling their music.

When wanting to listen to a song today, one no longer has to buy or download a physical copy. In today’s world, streaming has become one of the top ways of retrieving music content. This major change has led to a profound shift for the music industry and its artists. It has developed a continuous conflict that affects the way music is distributed and how artists make a living. Listeners stream music electronically through their computers, phones, cars, and more. Most of these streaming platforms allow for the content to be free, which directs to the question of whether music should be free or not. Streaming is a topic that has presented itself to be a valid issue on whether it ultimately hurts or helps artists and their careers. Streaming has both pros and cons, but in order to aim to figure a possible solution there needs to an examination of the history of the issue, a proper analysis of both sides, and evaluating its importance.

Nowadays, teenagers are living constantly surrounded by technology. Even if the younger generation may not see it, technology has had an impact on different factors. The widespread use of digital technology in the music industry has allowed consumers to reproduce digital versions of copyrighted songs inexpensively, with the help of many software and websites. There has been an increase in digital copying activities and those are most of the time claimed responsible for producers’ loss in revenues. While some people claim that the increase of digital technology has killed the music industry, in fact it has lead to innovation and new ways of consuming and sharing music, such as

Companies like Apple, have decided that it is best to get in with the downloading business. However, an end to the illegal downloading conflict remains to be realized. The RIAA and associated artists continue to wage war against illegal downloaders while computer savvy audiences persist in sharing music files online every day. While it is undoubtedly true that downloading music is a crime, it remains to be proven that it is wrong. Without establishing this principle, most downloader's are likely to continue the activity. Even with new, inexpensive and available means of downloading files, they can still be shared for free online. The rift must be repaired between music lovers who feel that they have been taken advantage of in the past and recording companies and artists who worry about their future livelihood.