Individual Case Research

Report submitted by,

Tanziba Tahsin
ID: 0776654

As part of the course

MSMG 5710H
Legal Risks in Business
Professor: Lucas Thung

MASTER OF MANAGEMENT
SUMMER 2023
TRENT UNIVERSITY

“Spotify”
Five business risks and a “sustainable growth plan” for Spotify

1. Strenuous Competition

Established competitors like Apple Music, Amazon Music, and up-and-coming services like
YouTube Music all fiercely compete with Spotify. Spotify should concentrate on innovation
and distinction to reduce this risk. This comprises:

I. Exclusive Content: Partnering with up-and-coming artists or purchasing exclusive

podcast and music rights from well-known musicians can draw in new users.
II. Personalization: Constantly improving algorithms and user interfaces to provide
customised playlists and recommendations.
III. Strategic Partnerships: Working together to provide distinctive experiences and raise
user engagement with brands, media organisations, and artists.

2. Increasing Licence Fees:

The cost of negotiating licencing agreements with record labels and music publishers
increases as Spotify expands. Spotify can use the following tactics to reduce this risk:

I. Explore different revenue streams, such as podcast advertising, live events,

merchandise, and services for artist promotion.
II. Long-term Licencing Agreements: To assure cost stability, negotiate long-term
licencing agreements with significant record labels.
III. Geographic Expansion: Enter new markets, particularly developing nations where
licencing fees may be more affordable.

3. Innovation Disruptions:

The business model of Spotify is at jeopardy because to the rapid growth of technology and
changing consumer tastes. To lessen this, Spotify could concentrate on:

I. To keep ahead of technological disruptors like voice-activated streaming, virtual

reality, or augmented reality, invest in research and development.
II. Utilising data analytics, Spotify may modify its services and improve user experiences
by gaining insights into consumer behaviour, preferences, and trends.
III. Identify and purchase breakthrough startups or technologies that can expand Spotify's
capabilities and keep it competitive through strategic acquisitions.

4. Legal and Regulatory Obstacles:

The music streaming sector has a number of legislative and legal obstacles, such as licencing
rules and copyright conflicts. In order to control this risk, spotify should:

I. Maintain a competent legal team to manage licencing agreements, monitor regulatory

developments, and proactively resolve possible legal difficulties.
 II. Collaborative Approach: Hold discussions with industry stakeholders, such as
musicians, record labels, and legislators, to promote openness, forge connections, and
create beneficial rules.
III. Implement strong compliance controls to make sure that copyright laws, data privacy
laws, and other legal obligations are followed.

5. Customer attrition

Sustainable growth depends on keeping current customers and lowering churn. In order to
mitigate this risk, Spotify should prioritize:

I. Enhanced User Experience: To provide a seamless and interesting experience,

constantly enhance the app's functionality, user interface, and discoverability features.
II. Introduce tiered price structures, family plans, and student discounts to appeal to
various customer segments and foster greater patron loyalty.
III. Targeted Marketing and Promotions: To boost customer retention, use data analytics
to uncover client preferences and then customise marketing campaigns and
promotions.

To stay ahead in the cutthroat music streaming market, Spotify's sustainable development
strategy should combine distinction, innovation, diversity, strategic alliances, and ongoing
adaptability. In order to recognise and take action on new dangers and possibilities, it will be
essential to routinely monitor market trends and user feedback.
 Current State
The way individuals access and enjoy music has been revolutionised by the digital music
streaming service Spotify. As a company, Spotify works in the digital media and
entertainment sector, concentrating particularly on the music streaming market.

The major offering of Spotify is its music streaming service, which gives customers access to
a vast catalogue of songs in many different genres and languages. Users can make custom
playlists, search for particular songs, albums, or artists, and find new music that suits their
tastes. In addition to a premium subscription option that enables ad-free use along with extra
features like offline listening and high-quality audio, the site also offers a free version that is
supported by commercials.

Spotify's dedication to individualised recommendations is one of its main advantages. Spotify

uses sophisticated algorithms and machine learning to analyse users' listening patterns, tastes,
and actions in order to create personalised playlists and recommend related music. The user
experience is improved by this.

In recent years, Spotify has broadened its product selection to include podcasts in addition to
music. The business has made strategic acquisitions of podcast production companies and
struck exclusive contracts with well-known podcast producers. By branching out into
podcasts, Spotify can reach a wider audience and establish itself as a top audio content
platform.

Spotify collaborates with record labels, musicians, and content creators. The company works
with record labels to licence and distribute music. It also gives musicians tools and statistics
to communicate with fans, understand their audience, and promote their music.

Analysis and Suggestions

Practise Analysis:
1. Individual Recommendations: One of Spotify's key advantages has been the way it uses
cutting-edge algorithms and machine learning to provide customised music
recommendations. Spotify creates personalised playlists and suggests suitable music by
examining user listening preferences, behaviours, and habits. This increases user engagement
and loyalty.

2. Strategic Alliances: Spotify's services have been boosted and exclusive content secured
thanks to partnerships with record companies, musicians, and podcasters. Through these
alliances, Spotify has been able to set itself apart from rivals and draw in a larger user base.

3. User Interface: A pleasurable and engaging experience is made possible by Spotify's user-
friendly interface and clear features like playlist creation, social sharing, and collaborative
playlists. This emphasis on the user experience has aided Spotify in attracting repeat
customers.

Challenges that Spotify is facing

1. Strenuous Competition:

Established providers like Apple Music and Amazon Music, as well as up-and-coming
services like YouTube Music, fiercely compete with Spotify. Spotify must constantly
differentiate itself through exclusive content, cutting-edge innovations, and tactical alliances
in order to preserve a competitive edge.

2. Increasing Licence Fees:

The cost of negotiating licencing agreements with record labels rises as Spotify expands and
gains more users. Spotify needs to diversify its revenue streams and look into additional
revenue streams, such as podcast advertising, live events, item sales, and artist promotion
services, in order to handle this difficulty.

3. Innovation Disruptions:

The business model of Spotify is at risk from quick technical improvements and changing
consumer preferences. Spotify needs to constantly innovate and avoid potential disruptions if
it is to lessen this. For sustainable growth, it will be essential to make research and
development investments and investigate cutting-edge technologies like virtual reality or
voice-activated streaming.

4. Legal and Regulatory Obstacles:

The music streaming industry confronts a number of legislative and legal obstacles, such as
data privacy laws, licencing rules, and copyright conflicts. Through proactive legal measures,
compliance procedures, and building a strong legal staff to keep track of legislative
developments, handle licencing agreements, and anticipate prospective legal concerns,
Spotify must overcome these obstacles.

5. Customer attrition

Sustainable growth depends on keeping current subscribers and lowering customer churn.
The user experience must be improved, personalised services must be made, and targeted
marketing efforts must be run. It will be essential to continually enhance the app's
functionality, user interface, and discoverability aspects as well as the algorithms and
recommendation systems to deliver even more precise and personalised recommendations.
 Spotify's Sustainable Growth Plan

Spotify has been popular since 2008. Spotify has major challenges as the digital media and
entertainment business evolves, requiring a comprehensive, sustainable growth strategy.
Spotify's complete growth plan boosts productivity and revenue, reduces liabilities, and
promotes long-term success and market dominance.

1. Enhancing Effectiveness
I. Innovation that is ongoing
To keep up with technical improvements and satisfy changing customer expectations,
Spotify must place a high priority on continual innovation. The platform will be able
to improve its user interface, update recommendation algorithms, and investigate
upcoming trends like voice-activated streaming or virtual reality by investing in
research and development (R&D). Spotify can keep a competitive edge and entice
new customers by constantly enhancing its product.

II. Analytics of data

Spotify's expansion depends on using user data to acquire understanding of customer
behaviour, preferences, and trends. Spotify can enhance user experiences, hone its
recommendation algorithms, maximise targeted advertising, and enhance content
curation by utilising the power of data analytics. User happiness will be raised,
engagement will rise, and retention will be fueled by this data-driven strategy.

2. Income Generation
I. Expand Your Revenue Streams:
Spotify needs to diversify its income sources in order to lessen its reliance on music
streaming alone. One option is to increase its podcast advertising capacity, making
use of its expanding podcast library to draw sponsors and create income. In order to
increase profitability and develop new revenue sources, brand collaborations, artist
marketing services, retail sales, and live events should all be investigated.

II. Personalised Marketing

The considerable user data that Spotify has can be used to provide advertisers with
highly targeted and customised advertising. Spotify can boost advertising efficacy and
income by enhancing its advertising platform and giving advertisers useful audience
analytics. Its ability to generate revenue will be further strengthened by implementing
cutting-edge advertising formats and providing individualised advertising packages.
3. Expansion internationally:
The main goal for Spotify should be to penetrate unexplored overseas markets. By adapting
its services to regional tastes, cultures, and languages, Spotify may draw in more users and
grow its market share globally. Spotify will be able to take root in new regions by localising
content, making regional marketing investments, and establishing licencing deals with
regional musicians and record labels.

4. Improved Interaction Between Artists:

Spotify needs to strengthen its relationships and partnerships with artists if it wants to
develop sustainably. Top-tier artists may be drawn to the platform by special content deals,
behind-the-scenes chances, and opportunities for direct fan involvement. Spotify may gain a
competitive edge, improve user engagement, and boost subscriptions through encouraging
artist loyalty and participation.

5. Community development and user involvement

Spotify should concentrate on community-building initiatives if it wants to create a thriving
and active user base. The user experience will be improved and a feeling of community will
be created inside the Spotify community by promoting user-generated material, allowing
social interactions between users, and offering venues for up-and-coming musicians to
display their skills. User retention and advocacy will increase with interactive features,
competitions, and events that engage users.

6. Reduce Liabilities:
I. Legal proactive measures:
As one of the top digital music platforms, Spotify is subject to a number of legal and
regulatory restrictions, such as rules governing data protection, licencing, and
copyright. To reduce risks, Spotify should put together a specialised legal team to
keep track of legislative amendments, handle licence agreements in a proactive
manner, and guarantee compliance with changing legal frameworks.

II. Copyright protection and content moderation:

To reduce legal liability, effective content filtering systems and copyright protection
measures are essential. Spotify can effectively identify and resolve copyright
infringement and unauthorised content by utilising artificial intelligence and machine
learning technology, assuring a fair and legally compliant platform.
7. Churn reduction and customer retention
Retaining customers is essential for long-term success, and lowering churn rates is key for
Spotify. The following are some tactics Spotify can use to improve customer retention and
reduce churn:

8. Individual Recommendations:
To offer consumers highly customised music recommendations and playlists, Spotify needs
continuously improve its recommendation algorithms. The ability of Spotify to provide a
compelling user experience that motivates users to remain active and devoted to the platform
comes from its ability to recognise individual preferences and deliver customised content.

9. Enhanced User Experience and Interface:

Higher customer satisfaction and retention will result from ongoing user interface and
experience improvements. Spotify should put a high priority on usability, clarity, and an
intuitive design to make it simple for customers to navigate and find new music or podcasts.
The overall user experience will be improved by regularly incorporating user feedback and
introducing new features depending on user preferences.

10. Collaborations between artists and exclusive content:

Spotify will set itself apart from rivals by securing exclusive content agreements and
encouraging partnerships with well-known musicians and podcasters. Spotify may encourage
users to stay subscribers and engaged with the platform by providing exclusive experiences
and access to exclusive content. User excitement and loyalty can be increased by working
with musicians on limited releases or live performances.
Appendix and References
References:
1. https://www.linkedin.com/pulse/behind-brief-shutdowns-challenges-spotify-faced-media-
music-news/

2. https://medium.com/digital-society/spotify-the-challenges-a-world-of-infinite-music-
brings-f3dc70a82065

3. https://www.fool.com/investing/2023/01/24/layoffs-wont-solve-spotifys-biggest-problem/

4. https://www.latimes.com/entertainment-arts/business/story/2023-03-08/after-controversies-
challenges-shakeups-spotify-charts-its-podcasting-future
5. https://www.rollingstone.com/pro/features/a-radical-solution-to-spotifys-biggest-problems-
and-the-record-industrys-woes-828663/

6. https://www.tipranks.com/news/inside-spotifys-newly-added-risk-factors

7. https://www.forbes.com/sites/greatspeculations/2020/10/13/it-sounds-like-spotify-is-in-
trouble/?sh=f1e510a813b3

8. https://wire.insiderfinance.io/investing-in-spotify-opportunities-and-risks-cb9423abd5bd

9. https://www.cnn.com/2019/12/20/media/spotify-dawn-ostroff-risk-takers/index.html

10. https://hrblog.spotify.com/2021/01/19/taking-sustainability-to-the-next-level/

11. https://lifeatspotify.com/reports/Spotify-Equity-Impact-Report-2021.pdf

12. https://www.lifeatspotify.com/reports/Sustainability-Report-2019-FINAL.pdf

13. https://www.fool.com/investing/2022/06/02/where-will-spotify-be-in-5-years/

14. https://www.lifeatspotify.com/diversity-equity-impact/climate-action

15. https://www.oneskyapp.com/blog/spotify-global-expansion/