Analysis On Spotify and Its Partnerships
Recently, I’ve started conducting case studies and researches for products I personally use and love. This is interesting and beneficial activity that I think helps me in three ways. First, it is always interesting to get deeper into product details and think how you would solve their problems. Second, it helps me to improve myself and grow in terms of being better Product Manager. Last but not least, I send my case studies to these teams hoping I contribute my efforts in order to make products better.
This analysis is about Spotify — one of my favorite products.
*I am not related to Spotify in any way. This research is done by me voluntarily to find out how Spotify can be improved.
What is Spotify?
Spotify is a cross-platform music streaming service from Sweden. Service allows users to search for music, listen, get recommendations based on what you have listened before as well as to discover what music your friends listen to.
Spotify’s mission is: Give people access to all the music they want all the time — in a completely legal and accessible way.
Following this mission, Spotify approaches to a 100 million active users base out of which 30 million are paying subscribers.
Spotify’s target audience
Let’s take a look on what images company uses in social media accounts and website to understand target audience.
So, as you can see from screenshots above, Spotify obviously targets:
- Young people
- Who love outdoor activities
- Who love to socialize with friends
Potential partnerships
Spotify already formed number of different partnerships (we will take a closer look on this below) in order to build stronger relationships with users providing easy access to music and increase engagement as a result. Let’s break down which platforms are potentially interesting for Spotify and its users, as well as how Spotify can assess potential partnerships.
What platforms do millennials use?
In order to give answer to this question, I’ve decided to narrow down my scope within U.S. market. This is done for two reasons:
- U.S. is the biggest music market, hence it is highly important for Spotify
- Most comprehensive and reliable data that can be found is also about U.S. market
According to Nielsen 2015 Music U.S. Report following platforms are the most popular in US.
- Radio — 93%
- TV — 85%
- Smartphones — 74%
- PC’s — 50%
- TV connected devices — 40%
- Tablets — 29%
We can make a conclusion that Radio and TV are the main platforms for Spotify to be, in order to compete with other players and fulfill mission of providing music in accessible way to users. Spotify already has presence in Smartphones, PC’s and Tablets, so lets take a closer look on Radio and TV.
Radio
Here is information about how Millennials listen to radio in U.S. according to Nielsen research on Audio.
Quite predictably, people listen to radio mostly out of home and “the top daypart is PM drive”. So radio in a car looks like a good candidate for disruption.
TV
TV is on the second place in terms of reaching people in U.S. after radio, but the most heavily consumed. Take a look on chart below from another research conducted by Nielsen.
Despite that Millennials spent less time watching TV comparing to other adults, it seems to be a good place for growth and partnerships both with TV set producers and TV-connected devices due to high level of time spent on these platforms.
SWOT for Partnerships
Recently, Spotify’s CMO Seth Farbman said that it is crucial to stay focused and not get distracted by all of the opportunities to partner and go somewhere else.
Hence, Spotify might need to strategically focus on platform and brands their target audience currently already use and love.
One of the models that can be used to evaluate a potential partnership is SWOT analysis. Below is my attempt to reproduce questions in terms of this model.
Landscape for music streaming services and partnerships
Partnerships in music streaming market are common and competition is high.
Spotify is a leader in terms of partnerships and presents in almost every platform where users can listen to music. Apple Music hasn’t yet formed many partnerships and grow thanks to millions of existing Apple users. Other competitors are slowly catching up.
Companies form partnerships in order to accelerate process of reaching their goals. Goals, in broad terms, usually fall into two categories: product expansion(in areas outside of core competencies) or distribution. Alliances are formed not only to be beneficial for partners, but also for their customers.
To sum up with this section and conclude why Spotify form partnerships, I have three assumptions to answer:
- Distribution. New users acquisition which in future will turn to paying subscribers.
- Increasing conversion. Existing users who haven’t yet turned into paying subscribers see growing value of having premium account (e.g. only premium subscribers can use Spotify in Uber) and they finally convert.
- Decreasing churn rate. The more platforms customer will use to listen to Spotify, the less likely (s)he will leave.
Lastly, it is also worth to mention that Spotify smartly focused on use cases (e.g. people listen to music in a car, airplane, etc) when forms partnerships.
Idea to build: Spotify instead of traditional radio in cars
Since, Spotify’s goal is to provide easy access to music for its users and car is a great place for this aim, lets focus on that topic further down.
How Spotify can be there and most importantly what Spotify can do in order to be chosen by user instead of a radio stations?
In the long term, ideal scenario seems to me as forming new user habit. When you about to start driving a car, you think about turning on Spotify for music instead of radio.
How Spotify can start forming this habit?
Lets break down this question through Nir Eyal’s Hook Model (Trigger, Action, Reward, Investment).
We will not focus on a car as a platform where Spotify is already installed or can be installed, but on a car itself as a place where people listen to music. It is done by two reasons.
- Average age of cars in U.S. is 11.5 years old, thus I presume most of cars don’t have a technical capacity for Spotify app installed in Audio system
- Whereas around 85% of millennials in U.S. own smartphone and it can be used to listen to music in a car
Trigger
External triggers — ads, word of mouth, different marketing campaigns.
Internal triggers — wish to listen to music in a car.
Nir says that the success secret here is to couple external trigger with internal trigger as closer as possible. Taking that into account, one of the ideas to test and measure is sending push notifications when:
- Changing geolocation with the speed inherent to a car (but sending push notification only during intervals for safety reasons)
- Several minutes before most probable start of drive (i.e. identify most frequent drive time slot for user and send him/her push-notification)
Action
Spotify is a very user friendly app in terms of action (2–3 actions to start listening to music), so we won’t stop here for long.
Reward
Rewards of the Hunt — discovering new tracks through Recommendations, Discover Weekly and Genres & Moods.
Investment
Users primarily invest in building playlists and own music library. The more you invest, the better Spotify gets for user. In other words, the more tracks you save, the better your Discover Weekly experience.
Summary
Being represented in different platforms with aim to form closer and stable relationships with users is a great goal for Spotify. It will bring more engagement, positively affect business metrics and conversion to paid subscribers rate, become stronger habit-forming product and delight its users.
Special thanks for reading draft of this post and giving feedback:
- Jessica Johnson
- Nick Ivanecky
- Ilya Matvienko
Thanks for reading, feel free to response and press 💙 if you liked this post
- I am not related to Spotify in any way. This research is done by me voluntarily to find out how Spotify can be improved.
You might also like the following posts:
