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A Market Analysis for
Spotify
Hannah (Nova) Granite
Full Sail University
Project & Portfolio II: Business and Marketing
12/17/2020
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EXECUTIVE SUMMARY
This analysis report takes a look at Spotify’s current market. It looks at the growth of streams,
downloads, and the effect these are having on Spotify’s revenue stream. The report gives an
overview of the company and its parent companies, Spotify Technology S.A. As well as
reviewing Spotify’s market position and relations to major labels and networks. The report also
shows suggestions on how Spotify could increase their revenue on streams, growing the brands
name in the music industry. As Spotify enters a new era of growth post-IPO, the company will
be focusing on leveraging data, further enhancing its platform, growth in customer base,
expanding into new markets around the world, and creating profitable revenue.
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OBJECTIVE
Spotify is the world’s largest music streaming subscription service, and has played a key
role in transforming how consumers experience music by offering unprecedented convenience,
based on their current trend in the market, suggesting ways for Spotify to increase their
customers and music database to keep the brand topping the industry.
RESEARCH METHODOLOGY
The information gathered in this report is mostly secondary information sourced from the
online databases and was gathered during the month of December 2020. Most of the financial
information was current to date when sourced. Information on parent company Spotify
Technology S.A., was based on the most recent year-end figures from 2019.
RESEARCH AND KEY FINDINGS
Spotify is a Swedish owned company by Spotify Technology S.A. They are the world’s largest
music streaming subscription service, and have played a significant role in transforming how
consumers experience music, offering unprecedented convenience, accessibility, and data-driven
personalization to drive discovery and engagement. Spotify has over 108 million subscribed
listeners and another 124 million free users. They have the biggest music library with over 50
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million songs and over 700,000 making them the biggest streaming platform. (Spotify Usage and
Revenue Statistics (2020) 2020) Spotify’s parent company is financially secure, having a net
income, in 2016, of 6 million, (Spotify Technology S.A. (SPOT) Analyst Ratings, Estimates
& Forecasts 2020) and a net profit margin of 25%.
Although the company has taken the lead in music streaming services, competitors are learning
how to take their products further. Spotify relies on deals between record labels and artists to use
their music, in return the artist and labels receive royalties per song streamed. In January 2019,
Spotify reported royalties of $.0038 per song play. (What Is the Pay Rate for Spotify Streams,
2019) Spotify is reportedly one of the lowest royalty payout streaming services, causing some
artists to pull their music off of Spotify.
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CONCLUSIONS
If there's one thing Spotify has done that no other streaming platform has managed to
achieve yet, is their global success. By being available in almost 100 countries and being in a
position for strategic partnerships, Spotify could establish a major presence in the music
industry. by utilizing their partnerships and presence they could promote their brand and
products through events such as music festivals, exposes, etc…
Polydor Records is still holding well against its competition, but due to the fact it relies on
physical sales it’s revenue streams are a bit too narrow to compete with digital downloads and
streaming. Having UMG as its parent company has helped because it has enabled Polydor to
release various big American names, such as Lady Gaga and Eminem, to the European market.
The continuing problems with illegal downloading and the increase in streaming means record
companies must look at other ways to increase their revenue, and Polydor must find different
ways of reaching its target audience while continuing to promote its iconic brand image
RECOMMENDATIONS
Looking at all the aspects of Spotify, there are a few things that could be improved in
order to turn their weaknesses and threats into strengths and opportunities. Spotify's biggest issue
that needs to be addressed in order to maintain their services is giving artists a better cut of
royalties. With low revenues of less than a cent per song play, which means an artist with one
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million plays on Spotify makes roughly $3,970, this alone is not enough to cover producing a
record cost in most commercial situations. (- et al., 2018) This is a big aspect of why Spotify
losses users of both artists and listeners. Being the most popular streaming service as of right
now, I think it would be in Spotify's best interest to review their finances and offer more
royalties to their artists creating a loyalty bond betwprindleposteen them. By doing so, can lead
to a strength against the other platforms.
Spotify faces the threat of tough competition. Spotify should consider developing core
competencies to protect themselves against threats such as Apple, Amazon, and Tidal while
finding ways to strategically exploit emerging opportunities. Making themselves more of a
competitor against the other platforms taking a deeper listening to their clients needs. This may
involve better benefits for the user, better branding, or expanding so users get more from the
service. As mentioned in the analysis report, one way to increase their gap in competition is to
develop a multi-compatible service. (na, 2020)
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REFERENCES
Designer calls Spotify's new logo 'self-indulgent'. (2015, June 17). Retrieved December 21,
2020, from https://www.businessinsider.com/designer-criticizes-spotifys-logo-redesign-self-
indulgent-2015-6
S.A., S. (2020, February 12). 20-F Annual Report Wed Feb 12 2020. Retrieved December 21,
2020, from https://last10k.com/sec-filings/spot
Hinsen. (2019, April 10). Understanding Spotify: Making Music Through Innovation. Retrieved
December 21, 2020, from https://www.goodwatercap.com/thesis/understanding-spotify
Spotify Usage and Revenue Statistics (2020). (2020, October 30). Retrieved December 21, 2020,
from https://www.businessofapps.com/data/spotify-statistics/
What Is the Pay Rate for Spotify Streams? (n.d.). Retrieved December 21, 2020, from
https://help.songtrust.com/knowledge/what-is-the-pay-rate-for-spotify-streams
Spotify Technology S.A. (SPOT) Analyst Ratings, Estimates & Forecasts. (2020, December 21).
Retrieved December 21, 2020, from https://finance.yahoo.com/quote/SPOT/analysis?p=SPOT
-, A., By, -, Andrew BobkerAndrew Bobker is a senior staff writer at DePauw University. He
began writing for the Prindle Post in the fall of 2017. He is originally from the state of Maine.,
Bobker, A., & Andrew Bobker is a senior staff writer at DePauw University. He began writing
for the Prindle Post in the fall of 2017. He is originally from the state of Maine. (2018, December
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03). Spotify and the Ethics of Music Streaming. Retrieved December 08, 2020, from
https://www.prindlepost.org/2018/11/spotify-ethics-of-music-streaming/
Spotify SWOT & PESTLE Analysis: SWOT & PESTLE. (2020, September 04). Retrieved
December 08, 2020, from https://www.swotandpestle.com/spotify/
