-By

• MAITRI VASA
• PRASHASTI DWIVEDI
• RITIK MAHESHWARI
• SAKSHI VERMA
• SAMAKSH CHATURVEDI
• SARVESH KELA
 BACKGROUND
• Spotify, founded in 2006 by Daniel Ek and Martin Lorentzon, is a music
streaming platform which offers free and paid services of online music
streaming.
• Spotify achieved €3 billion in revenue by 2016 but posted financial costs of
€336 million the same year. 
• The company went public with a direct listing on April 3, 2018 with a price
of $165.90.
• As on April 6, 2018, its stock SPOT was trading at $147.70 which
represented a market capitalization of $26.3 Bn.
• The company had debt to the tune of $1 billion, some of which were
converted to equity in January 2018 and sold to Tencent, a Chinese
conglomerate.
 THE EVOLUTION OF MUSIC INDUSTRY
• The music industry was a high growth lucrative industry with music labels selling albums through mainly
CDs, vinyl and cassettes.
• When Napster was founded people adapted it very fast and it gained 60mn users very fast and due to
MP3 format it became very easy to adapt and trendy to share it with your friends. Thus, began the fall of
music industry.
• Hence, this forced all the traditional players to adopt digital transformation of their business models. 
• Industry gradually shifted towards streaming platforms, that it forced CDs and other physical measures
started to become collectibles.
• The success of the early iTunes model, every player operated based on the Digital Rights Management
(DRM) technology which made people go for individual company made ecosystems and owning of devices
necessary.
• In late 2007, Amazon entered the music streaming industry and distributed music without DRM
requirements which in turn forced the industry to abandon the model
• Subscription models from Rhapsody with a monthly fee was brought in, this format has been changed but
carried on since then,
• Popularity of smartphones helped in growth of streaming services and they became the way of the music
industry.
 2000-2010 changed the world We can see the peak came We can see that digital
in terms of labels to as more just before the launch of revolutionized the industry
number of independent artists Napster. but it reduced the revenues Looking at the
emerged. The number of big significantly financials of Spotify
labels reduced from 5 to 3 & other players we
can say that the
industry no longer
We can see the revenues has profits.
decreasing as the songs This might not be
We can see changes
are readily available. the case in future
in the industry
We know that people but right now the
whenever a transition
purchased records to play providers are just
in the industry takes
their favourite songs on burning money for
place.
the go and due to digital it gaining more
Cassette and CDs
was made possible at subscribers
changed the industry
much cheaper price
as vinyl records
started fading away

For the first time from 1998

the revenues have started
increasing, this is mainly
due to the change in
subscription plans. From
As Vinyl Records the birth place of pirate bay
became a now we have the streaming
collector's item the The introduction of MP3 was a game service that is formalising
cassettes and CDs changer and was true beginning of the business
took over to take digital. All the huge space required
industry to its peak for storing songs became irrelevant
and thus CDs started declining

Negotiate with artists &
labels to pay the lowest
Can Spotify percentage of revenue
possible
be
YES
Profitable?  Accepting more 'window'
releases. Spotify’s gross
profit on each premium
user is much higher than its
gross profit on “free” users.
Offer attractive bundle plans
regionwise( family, student
etc.) to attract customers to
low price, thereby ensuring
low costs for itself.
Ensure optimum
expenditure on product
innovation, to personalize
playlist & ad experience for
the user further.
 SPOTIFY'S COMPETITIVE ADVANTAGE
• The 'discover' feature suggesting new artists based on user's listening habits,  resuming of last active playlist & access to most popular and favorite
tracks of customers ensured enhanced user experience. 
• Each listener would get a unique ad experience based on their interests and real-time demand for ad inventory.
Personalization • The social features also resonated well with the users. Playlist sharing with friends & connectivity to artists via Twitter/FB, created customer
of User Experience enthusiasm.

•  The company’s streaming service is available in two tiers: the advertisement-supported free tier and the premium tier.  This business model makes
the streaming music service available to practically every online person, regardless of intent or capacity to pay for the service.
Freemium Business
• The freemium business model also relates to the company’s intensive growth strategies by enabling competencies for market penetration.
Model- Cost • Offering bundles & discounts to potential customers( family plans, student packs etc.) increased accessibility & usage. 
Leadership Strategy 

• Encouragement of informal interaction & cross pollination between working group(squads) facilitated brainstorming.
• Allocation of 10% of employees' working hours to 'hack time', fostered innovation & creativity.
Autonomy within • Agility to changes & an attitude willing to make mistakes, enhanced speedy implementation of improvements
the organization:
Driving Innovation
 ERRC MATRIX FOR SPOTIFY

Eliminate Raise  Reduce Create

• The dependence on • New song additions • The buffer time • A link with YouTube
artists from independent • The advertisements to access all the
• Big labels from artists between a playlist content.
their business • The revenue from • The wrong genre • Produce songs
model by a long advertisements prediction in their under own label
term deal • Integration with algorithm like the Netflix
• Inequality among other social media model
various artists on platforms • A profit sharing
the platform deal that has
worked in the past
 Exclusive deals with telecom giants worldwide Verizon & AT&T
(US), Airtel & Jio (India) etc.

A long term deal with labels so that they don’t have to

renegotiate again in the near future.

Window releases is not a good way to progress, the free users

will go away and advertising revenue will reduce.

STRATEGY OF In the future promoting their own label is the way of future &
more people not going under the 3 major labels will help them
THE FUTURE
Protection from unsigned artists will decrease the possibility of
unsigned artists coming up.

The company is in a great shape right now the current share

price of $145 is good.

A low cost structure should be made and a subscription model

will not work in their financial structure.