Etude de cas Spotify

CASE STUDY [pic 1][pic 2]

[pic 3][pic 4]

Estelle Durivault

Corentin Guillerm[pic 5]

TC 21

E-MARKETING

Business study on Spotify.

QUESTIONS:

1. What is the business model of Spotify? Explain and justify.

1. Describe its whole model revenue.

1. Describe the MIX MARKETING of Spotify (product / price / place / promotion)

1. Assess how Spotify competes with traditional and online music providers by reviewing the approaches it uses for different elements of the marketing mix

1. According to you, Spotify represents an ADVANTAGE OR A DISADVANTAGE for the music industry. Justify your answer.

1. What is the business model of Spotify? Explain and justify.

Spotify had to think correctly on its business model before launching its activity. It isn’t the first company to launch online music services, and those which try by the past didn’t last much more because of their business model. Spotify analyses the market to find opportunities and don’t reproduce the errors of the others. Set the good business model is one of the most important aspect. Spotify wanted to become a market leader in music subscription, so they decided to innovate in marketing approaches. They focus on something special that no one did before, delivering more personalised music playlists to listeners.

Spotify is a music platform where 35 million songs gets stored. Instead of downloading the song users want to listen, Spotify will use cached files played locally.

The streaming music service purchase license from labels, artists, publishers and other rights holders for streaming their music on its platform. The royalties payed to artists are calculated by algorithms and delivered per stream. This is where Spotify is ahead of every other, its activity is legally viable. When Spotify arrived on the market there was a huge growth of piracy in the music business and artists were losing control of monetizing their production. Therefore, the platform is good for fans and artists.

The other “mission” Spotify stated was “the unlocking of human creativity”, it gives the possibility to million creatives artist to live off their art and for fans to discover them. Artist now don’t need to sign to a label to post their production on Spotify. The more the platform is capable of offering user’s music matching their preferences, the more they will be ale to retain ang grow a membership in them.

So, its principal partners are:

• Employees
• Users
• Creative community
• Brands
• Investors

1. Describe its whole model revenue.

Model revenue is another important aspect to consider in business. It will allow the company to last in time. If the model revenue doesn’t fit with the market and the targets, business is going to be bad.

As we saw, Spotify wanted to become a market leader. To reach this goal, they must attract and convince people to use the platform and the services proposed. It allows to create a whole customer base, and maybe the company will be able to bring them on the premium offer.

Spotify decided to operate a freemium model so that everyone has access to his offer. This business model is considered as the business model of the Internet.

It generates revenue from two sources:

• A free tier supported by advertising (90% of users)
• A premium tier with paid subscription (10% of users)

Free service:

It is a viable option for users who can’t pay for the premium service. It has no subscription fee. Listeners are confronted to ads every 5/6 songs; it represents 3 minutes of advertising every hour. Most people accept to have those ads and this exactly where Spotify generates revenue. Companies pay Spotify to be featured, and they pay a lot because the target is huge. The company demographic segment is primary made of users between 18 and 34 years old. This is an opportunity for both to do business, Spotify puts few seconds of ads between songs; and other companies can make business because listeners listen to the ads and consume.

Premium service

Users have access to unlimited online and offline high-quality streaming in exchange of a monthly fee.

Premium Services include standard plans, Family Plans, and Student Plans. The aim of each package is thought to appeal to Users with different lifestyles and across various demographics and age groups.

There is one last source of revenue, when customers want to listen music with Spotify, they must create an account and log in. When they register, they give personal information and that information go directly in a customer base of Spotify. The company analyse that information and then can sell it to other companies.

1. Describe the mix marketing of Spotify (product / price / place / promotion)

Spotify is well-know because of its way to market its offers.

Define the mix marketing help to reach goals, it fixes the global strategy to adapt.

• Product:

The main offer of Spotify is a music streaming service. The content is digital so users can access it with every electronical device they own.
Premium offer allows people to have personalised music playlist, skip ads, and be able to listen music off-line.

Spotify also provide tips, guides and customers support

• Price:

Spotify uses a Freemium model; most people doesn’t pay for the service (90%). They will have to listen to ads every couple of songs which is a source of revenue for the platform. Others pay a monthly fee for additional services (10%).

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