SpotifyS T R A T E G Y T O R E M A I N T H EL E A D E R I N T H E M U S I C I N D U S T R Y

Market definitonDigital music streaming services, e.g. Spotify, Deezer or Apple Music, offer unlimitedaccess to their content libraries either for a monthly subscription-fee (without anyadvertising) or ad-supported, with forced commercial breaks between the tracks. Musiccan be streamed to various connected devices. Internet radio or video streams (e.g.YouTube) are not included.

Music streaming in 2016Revenue mUSD 1,931.3

User penetration 53.70% in 2016

expected 62.38% in 2020.

Revenue mUSD  351.4

User penetration 20.40% in 2016

expected 27.32% in 2020.

Revenue mUSD  309.7

User penetration 44.15% in

2016 expected 55.05% in 2020.

Revenue mUSD  229.0

User penetration 26.53% in

2016 expected 33.95% in 2020.

Revenue mUSD  141.9

User penetration 19.79% in

2016 expected 26.71% in 2020.

Amazon Prime music

Launch in December 8, 2015.More than a million songs. 54 million subscribers worldwide. Audio: 256 kbit/s VBR .Ad-free music streaming with a $99 annual Amazon Prime subscription. Limits international access by checking users' credit card issued country.Music service available to Sonos customers (US, UK, France, Germany).Freemium streaming business model. Market share in the US - 7%.Platforms - Windows, OS X, iOS, Android, FireOS.

Amazon Prime music

Possibility to save high-quality Primetracks to the device for offlinelistening. Playlists for specific moods andactivities. Recommendations based on the musicalready played. Ad-free prime stations. Account sharing: One device at a timecan actively stream music, while up tofour can play previously downloadedmusic offline. Up to 10 devices can besigned in to the same account.

Features

Apple music

Launched in June 30, 2015 in over 100 countries worldwide. More than 30 million songs. 17 million subscribed users worldwide. Owner: Apple Inc.Audio: 256Kbps in AAC.3 months free trial before becoming “paid only”. $9.99 / single license; $14.99 / familylicense; $4.99 / student license. Subscription business model. Market share in the US - 15%. Platforms - Apple’s mobile devices and watch, as well as Android devices. Mac andWindows desktop applications are also available.

Apple music

Strong curation, Apple Connect social network, Beats 1 Radio and genre-based stations Account sharing: The service can be used by only one device at a time forboth the free and paid versions. Family plans, however, allow for up to sixpeople to stream music. Offline playback: Paying subscribers can stream music when theirdevices are not connected to data or Wi-Fi networks. The iOS application is integrated with Siri voice commands. High-profile advertising. Vendor lock-in through network effects and DRM encumbereddownloads, occasionally deleting original music from a user’s hard driveand replacing it with DRM encumbered versions. Apple has the highest conversion rate from “free” to “premium” in Japan.

Features

DeezerLaunched in France in 2007. Became available in the USin July 2016. 40 million songs that reach more than 180 countries. 16 million users worldwide, with 6 million subscribed. Founder: Daniel Marhely Key people: JonathanBenassaya (Co-Founder), Hans-Holger Albrecht (CEO),Simon Baldeyrou (CFO).Audio: 20kbps MP3, 1411kbps FLAC £9.99 a month, £14.99 a month Elite, Free ad-fundedservice. Strong curation, Facebook integration, optional apps,recommendations based on listening habits, mixes. Ad-free service only for premium users, free streamingbusiness model (freemium). Unlimited ad-supported free access to on-demandmusic. Platforms: Android, iOS, BlackBerry, web player.

Google Play musicLaunched in November 16, 2011. More than 30 million songs. Audio: 320kbps MP3. Basic service, which lets users upload up to 50 000songs to personal cloud libraries, is free. 30-day free trial of "All Access”. A subscription plan,which lets users stream most commercially availablesongs, is available for $9.99 a month, includes accessto YouTube’s subscription service, YouTube Red, whicheliminates ads on that platform. US$14.99/month for"All Access" for up to 6 family members. Freemium business model. Market share in the US - 8%. Platforms - Apple and Android apps, plus webbrowsers.

Google Play music

Unlimited subscribers have access to on-demand music, while users ofthe free service are able to customize radio stations. Account sharing: With Unlimited Google Play, users can authorize upto 10 devices, but can stream only on one device at a time. Offline playback: Available only with an Unlimited subscription.

Features

SpotifyLaunched in September 2008 by Swedishstartup. More than 30 million songs. 100 million users, 30 million subscribers. Founders – Daniel Ek, MartinLorentzon. Audio: 320kbps OGG Free version comes with ads. Ad-freeSpotify Premium costs $10 a month,family and student discounts available. Freemium business model. 7 types of ads: Audio Ads, Display Ads,Billboard Ads, Homepage Takeovers,Branded Playlists, Lightbox andAdvertiser Pages. Ads vary in size, typeand user engagement.

Market share in the US ­ 13%. Platforms ­ Apple and Windows mobile anddesktop computer applications;Androidphones; PlayStation; Roku, a streaming devicefor televisions; and web browsers. 

Spotify

Moderate curation, Facebook integration, optional apps, recommendationsbased on listening habits, genre and artist-led radio stations, DiscoverWeekly playlists 'On Tour' feature, which means you'll know if an artistyou've searched for is playing a concert in your country any time soon. Account sharing: Music can be played on only one device at a time, with upto three devices signed in to the service at any time. Offline playback: Only for Premium users.

Features

TidalLaunched October 28, 2014 More than 30 million songs and 75,000videos. 3 million subscribers. Developer – Project Panther Ltd. (JayZ) Audio: 1411kbps, 16-bit/44.1 kHz FLACand ALAC music streams $9.99 a month for Tidal Premium or$19.99 for Tidal HiFi, which offershigher-quality sound. Both versionsare ad-free. Subscription business model. Market share in the US - 5%. Platforms - Apple and Android apps,a PC app and web browsers.

Tidal

All subscribers get music and videos ondemand. In addition, they get access toTidal X, a program that gives artists aplatform to connect with their fansthrough special events, includingconcerts. Exclusive content from artists, rewardsfeatures, ”Tidal rising” for unknownsingers.Account sharing: One device can streammusic while connected to cellular data orWi-Fi, and three devices can play music inoffline mode at one time. Offline playback: Both subscription levelsallow users to listen while their device isoffline.

Features

Main strengths

Apple - HardwareGoogle - AdvertisingSpotify - Data

Strategy for Spotify

The need to increase the number of subscribers in order to getmore revenue without decreasing the royalty fees to the labelsand artists. Obtaining streaming rights to a large library is a key factor inthe success of a streaming service. Become more sustainable (more emphasis on data andinformation).

Goals

Strategy for Spotify

Offering limited free trial periods as an incentive for consumers to makethe switch (Apple example), leaving the subscription price low. Partnering (Sonos example, Soundcloud – to expand the music library) Limit free streaming to an introductory offer, incentivizing paidsubscriptions through exclusive offerings (Tidal example).Organise a channel for artists to communicate with fans, transformSpotify into an artist marketing platform.Windowing. Organize crowdfunding for improving the services, thus saving resources.Enter the market of audiobooks and podcasts to raise income.Initiate a PR campaign for market correction to properly value musicconsumption as Spotify has problems with artists not willing to cooperatebecause of its business model.

Solutions

Thank youfor the attention