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Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng
BUAD 497
Five Forces
Sustainability
Recommendations
Goal: Find out how Spotify needs to differentiate
Introduction 5 Forces Sustainability
ConclusionRecommend
Access to millions of songs
Listen to tracks online
Subscription & Ad-based model
Social Networking & Playlists
Search & Discover No downloads
What is an Online Streaming Music Platform?
Introduction 5 Forces Sustainability
ConclusionRecommend
Online Music Streaming Platforms
Introduction 5 Forces Sustainability
ConclusionRecommend
Introduction 5 Forces Sustainability
ConclusionRecommend
Introduction 5 Forces Sustainability
ConclusionRecommend
• Slightly differentiated functions • Many competitors but not purely competing on price
Rivalry- Moderately High
Introduction 5 Forces Sustainability
ConclusionRecommend
• Easy to replicate • Structural Barriers • Licensure agreements• High MES required for profit• High switching costs
Threat of Entry - Moderate
Introduction 5 Forces Sustainability
ConclusionRecommend
• “Big Four” Record Label Oligopoly • Copyright law, statutory licensing
• Unified negotiating front
Supplier Power - High
Introduction 5 Forces Sustainability
ConclusionRecommend
• Listeners and advertisers
• Low willingness to pay
• Low switching cost
• The effect of increased customization
Buyer Power - High
Introduction 5 Forces Sustainability
ConclusionRecommend
• YouTube, iTunes, CDs, radios, music piracy• Low switching costs between streaming
platforms
Many Substitutes
Introduction 5 Forces Sustainability
ConclusionRecommend
• Increased exposure through live music• Computers and mobile devices• But, not affordable for all
Few Complements
Introduction 5 Forces Sustainability
ConclusionRecommend
Online Music
Streaming Industry
Moderate Threat of
Entry
High Supplier Power
High Buyer Power
Moderately High
Rivalry
Many Substitutes
Unattractive Industry
Introduction 5 Forces Sustainability
ConclusionRecommend
Economically Unsustainable
Current revenue
gains
Consequences of freemium
model
Weak payout structures
Micro-payments significant
revenue loss
Introduction 5 Forces Sustainability
ConclusionRecommend
• Well differentiated from Internet radio and on-demand music services
• Further performance improvements• Tiered subscription system• Platinum service level users
Potential to Thrive
Introduction 5 Forces Sustainability
ConclusionRecommend
Introduction 5 Forces Sustainability
ConclusionRecommend
• Ultimate goal: - Increase subscription revenues• Impediment: - Current business model
growth of user base big losses
Goal & Impediment for Spotify’s Future
Introduction 5 Forces Sustainability
ConclusionRecommend
Spotify Increasing Revenues & Costs
Introduction 5 Forces Sustainability
ConclusionRecommend
• More song plays allowed = More you pay• A new tiered subscription system• Spotify Platinum $25/month• Family subscription plans• Share music in a household simultaneously and economically
Modifying the current business model
Introduction 5 Forces Sustainability
ConclusionRecommend
Exploring New Opportunities
Platformization
Collaboration
Introduction 5 Forces Sustainability
ConclusionRecommend
What is “platformization”?– Existing integration in cars,
TVs, and smart media products
Platformization: Music as Water
Introduction 5 Forces Sustainability
ConclusionRecommend
Recommended Platformization
• Secure & expand integration - existing platforms• Explore new platforms
- Gym media systems- Game consoles- More intelligent systems
Introduction 5 Forces Sustainability
ConclusionRecommend
• Ever-expanding range of end points
• Value added by “access everywhere”
• Scale and find more paid subscribers
Why Platformization?
Introduction 5 Forces Sustainability
ConclusionRecommend
• The idea• Existing collaboration
FacebookUrban OutfittersCoca-ColaSoundrop
Collaborate with Players in the Music Scene
Introduction 5 Forces Sustainability
ConclusionRecommend
Clubs, party planners venues
Recommended Collaboration
DJ interface online streaming songs to mix
Introduction 5 Forces Sustainability
ConclusionRecommend
Continuing Need to Differentiate
Introduction 5 Forces Sustainability
ConclusionRecommend
Key Obstacle: Advantages that Spotify has can be replicated by competitors
Key Strategies: Modifying the current model, Platformization, and Collaboration
Karen Duong, Emily Hsu, Shuying Huang, Kara Ing, Vincent Tsao, Menyee Zheng
BUAD 497
Q&AFive Forces (Summary)RivalryThreat of EntrySupplier PowerBuyer PowerSubstitutesComplements
RecommendationsGoal & Impediment for Spotify’s FutureSpotify Increasing Revenues & CostsModifying the Current Business ModelExploring New OpportunitiesPlatformization: Music as WaterRecommended PlatformizationWhy PlatformizationCollaborate with Players in the Music SpaceRecommended Collaboration
What is an Online Music Streaming Platform?Online Music Streaming Platforms Spotify UISpotify by the NumbersSubscriber Growth GraphStreaming Music Future GraphSummary
SustainabilityEconomically UnsustainablePotential to Thrive
Recommended