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SPOTIFY
An Analysis of Spotify’s Market Strategies

Spotify

Spotify

AN ANALYSIS OF SPOTIFY’S STRATEGY

Spotify is a Swedish online music streaming service that was launched in 2008. Since, its launch Spotify has had a meteoric rise and currently boasts a library of around 15 million music tracks and about 20 million users. Though Spotify still lags behind Pandora, the market leader, it is interesting to understand how Spotify managed to succeed in the competitive music streaming industry. The following report will start off by giving a brief overview of the music industry, Spotify’s features and the competition Spotify faces. We will then analyze how Spotify managed to succeed in the competitive music streaming industry. Finally, we will discuss the risks Spotify faces and future strategies it could undertake in continuing its success in the online music streaming industry.

DIGITAL MUSIC INDUSTRY The digital music industry can be divided into two submarkets: the streaming market with numerous competitors and the digital download market dominated by iTunes and Amazon. Digital music industry revenues have grown by 8% in 2011 reaching a valuation of $5.2 billion. Currently the streaming market only generates 10% of digital music industry revenue but the growth rate of this market is greater than the growth rate of the download market. Competition within the streaming industry is very strong as many companies operate in this market with similar business models. Companies differentiate from one another with variations in packaging, licensed music libraries, regions of operation, and features. Switching costs are quite high for customers as there is limited compatibility and transfer possible between streaming services. Moreover, streaming companies are trying to create network effects among their services by including social components. Several services…...

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