GROUP 3

SRUJAN SHARAMA | SHREYASH

SURYAWANSHI | SARAH BOUGARA |
YUNXIAO GAO | VAMSI KRISHNA
 Disruption
Digitalization VS Conventional CDs
Spotify attributed to
Almost 3.78 billion of the
7.8 billion Total revenue
in 2016
 Evidence For Spotifys Disruptions

The, Revenue drop from CD sales was picked up by the Streaming industry and Apple Music + Spotify attributed to the
majority growth in on demand streams.
Why is Spotify a game changer for the
Music Recording Industry?
File-sharing teared apart its business model and destroyed half its value
in revenues.
The music streaming industry led by Spotify and Apple music has passed
the milestone of 100 m paying subscribers worldwide. The US music
industry is on track to record a second consecutive year of growth,
something that had not happened since 1999 (the year Napster was
launched).
Americans streamed 431 billion songs on demand in 2016, and Goldman
Sachs projects that streaming will help revenues double to $104 billion
by 2030.
Reduces piracy while increasing revenues of the music industry.
How is Spotify changing the music industry?
1. With its huge customer base, Spotify is
trying to overturn the power of suppliers, i.e.
the Big 4 music content right holders by
leveraging their customer base.

2. By integrating Artificial intelligence and

Data science to identify listening patters,
Spotify has the most considerate Data set of
the Worlds population Music preferences.

3. Personalization with Playlists and

recommendations play a huge role in keeping
the customer hooked onto the platform.
Landscape before Spotify
Entry into market
Invite-only beta
Restricted access to US market helped Spotify to create hype
Targeted right press and celebrity promoters
Tie-ups with leading music labels
Entry into US market
Integration with Facebook
Different Sides of the Platform.

Listeners
Music
Advertisers Labels/
Artists

SPOTIFY
Attracting music producers
Attracting customers: Pricing Strategies
Versioning (Freemium model):
Free Version with commercial
Premium Version
Third-Degree Price Discrimination:
At least two segments in the market.
Individual: $9.99
Students: $4.99 for college students
Family: $14.99 for at most 6 family members
Bundling:
Bundled with Hulu, full access to Hulus services.
How does Spotify make money?
Growth vs. profitability
 Is it WTA situation? NO.

Demand for differentiated features -

Low

Network effects High

Opportunities of growth Envelopment
into the Ticketing platform.
Challenges and suggestions
Flawed revenue model
Music labels take most profits
Spotify and song artists, writers get a very small chunk of profits

Vertical integration to Move into Music creation and ticketing.

Outsourcing infrastructure to Google Cloud platform.
Better advertisement strategy to leverage Customer Network
size.
References
https://medium.com/igeneris/spotify-people-dont-pay-for-online-
music-man-ab92c2a8792f
https://growthhackers.com/growth-studies/spotify
https://en.wikipedia.org/wiki/Spotify
https://support.spotify.com/us/
https://www.theverge.com/2017/6/15/15807826/spotify-140-million-
active-users
https://www.forbes.com/sites/alisoncoleman/2015/05/14/how-the-
music-retail-industry-is-being-disrupted-beyond-all-
recognition/#5a8406715b8c
https://venturebeat.com/2017/03/03/spotifys-path-to-50-million-
paying-subscribers/