Industry Rivalry

Apple Music, the largest competitor is a global force with an extremely large
customer base has ability to add Beats Music to all of their applications and
services, which could decrease a large portion of Spotify’s market share.

Apple Music does not offer free service, whereas Spotify can attract new users with
a free offering to try out the service first before making the choice to buy, this gives
Spotify a competitive advantage in the industry.

Purchase of Beats Music by Apple can be a concern for Spotify as Apple can
promote the service to their already loyal customers and Apple could use their
market influence to get lower royalty rates in this way.

Spotify have an extremely large music catalog and provides huge variability which
allows users to create custom playlists, a service that Pandora does not provide.

Spotify has limited experience in offering music discovery recommendations while

Apple Music is seizing market share of Spotify by offering this service.

Bargaining Power of Suppliers

Bargaining power of suppliers
The bargaining power is high as the voice and ability of each artist is sole and thus
cannot be substituted. 
The ability of artists to promote & sell albums over their own web pages may
eradicate the need for most services provided by record labels and thereby can
increase the bargaining power of suppliers.
The bargaining power faced by Spotify however is quite low. As if an artist is against
streaming their music, they do not allow it to be streamed by any provider.
Spotify’s suppliers are the labels and artists. Spotify and the labels are working on
mutual interests, suggesting that it is not likely for the suppliers to use their power to
negatively influence Spotify.
Also Spotify provides the same large catalogue to its all users (free as well as
premium users), it can refuse any demand of artists that their music may be made
available to premium users only.

Threat of Substitutes
Spotify itself was created as a substitute to provide unique service for music
listeners.
 The key difference between Spotify and its substitutes, such as radios, is that users
can create their own customizable playlists and have unlimited access to wide range
of music.  
The largest substitute risk for Spotify is users staying with the free version instead of
upgrading to Premium. Thought advertisements plays on the free version to still
generate revenue for Spotify, their ultimate goal is to reach more paid subscribers.
Pirated music sites and free streaming music (such as those on My-space) which
offer music free of charge are the clearly identifiable substitute for Spotify. Although
the listeners do not receive the luxury of free of cost downloading and listening while
offline, it still can be considered as a substitute as it gives the entertainment option
to customers without any subscription charges involved.
Music streaming services seem to have replaced most of the alternative methods of
listening to music, taking into account the decline of paid downloading, physical
sales, stagnation of internet radio and increase in streaming. The most impactful
substitute service now is YouTube, offering a similar experience to on-demand
streaming services with an added video.

Bargaining Power of Buyers

The bargaining power of buyers is low if a particular area will be completely

controlled by Spotify. Spotify has certain standard, free service provided to all users
and offer the Premium service for those who desire to listen music offline.
The customer has the power to make their choice, but not necessarily the power to
influence Spotify in any other way. If the free subscriber does not want to deal with
advertisements, they can choose to switch to Premium. However, there is no
competitor, who provides the same service for free to have any advantage in this
field.
The acquisition of Beats Music by Apple must be taken into consideration as a
potential future influencer of the bargaining power of the buyers for Spotify. Thus,
Spotify needs to conduct a comprehensive analysis and must be prepared to meet
buyer requests in order to stay competitive in the market.
The buyers can easily change the service they are using. This raises the bargaining
power of the buyers significantly; requiring service providers to offer extra value in
order stay competitive. Although Apple Music have gained significant numbers of
customers, through their brand recognition and three month trial offer, Spotify still
manages to grow its user base, needs to offer certain additional customized
services.

Threat of New Entrants

The music streaming industry is a highly specialized sector. Established music
labels spend millions in undertaking image development campaigns, recording and
test market before the music of an artist is made available to the public. These areas
require specialized skills and having access to considerable amount of money.
Moreover, they might need an extensive distribution network, which is handy in
immediate distribution of albums to points of sale.
It is unlikely that a new strong competitor can enter the market, since the barriers to
entry are high and most large tech-companies have already offering streaming
services with established base.
The threat of new entrants is quite low for Spotify. At this point, the music streaming
market is quite saturated and the purchase of Beats Music by Apple will most likely
discourage future entry into this arena.
Spotify has a large subscription base, and now Beats Music has the power of Apple
behind them and they offer an algorithm based recommendation service as Pandora
does. New entrants would have to conduct a thorough analysis of the market and
require rigorous marketing strategies to enter the music streaming market, or
otherwise they will be failed or only able to gain a small market share and less
profitability.
 1. https://www.cnet.com/how-to/best-music-streaming-service/
2. https://www.t3.com/features/best-streaming-music-servies
3. http://referaat.cs.utwente.nl/conference/27/paper/7638/the-future-of-spotify-
assessing-spotify-s-position-by-analysing-the-competition.pdf

Spotify’s only other business model innovation was the creation of a free pricing tier that
offered users the option to listen to advertisements in place of paying subscription fees,
creating a new revenue model previous entrants had not accessed.

http://discovery.ucl.ac.uk/1488988/1/Striukova_350%20final%20submission.pdf

https://www.iese.edu/Aplicaciones/upload/IESEInsightCassimanFerraroarticle.pdf