Spotify: The challenges a world of infinite music brings
The world of music has evolved. Sadly, the days of record players, Walkman’s and HMV are past us. We have upgraded from collections of 20 CDs to streaming services hosting over 82 million songs and podcasts. We have now become accustomed to being able to find and play any song created at any point within seconds. In 2006, the Swedish streaming giant Spotify was born and now dominates the music streaming industry. However, will the further evolution of technology impact Spotify and the music industry?
Spotify’s global opportunities
Spotify has retained users by building a powerful brand loyalty due to its expert ability to innovate its mobile app design, music quality, and sharing capabilities. If you ask anyone to play a song, you will doubtlessly see the green “wifi esque audio waves” pop up before you can bust out your best moves. This brand awareness has resonated globally, attracting a user count of 406 million and the largest market share of 31%, utilising their opportunity to dominate the industry. Spotify has maintained a competitive advantage due to nine years of experience and brand loyalty over their largest competitor, Apple Music, gaining a plethora of extra data to tailor features.
Spotify has created a unique platform inclusive of the essence of social media. Spotify has created an experience rather than a service providing custom content based on personality, creating a collaborative and interactive “one-stop-shop” evolving past just music. Spotify has distinguished its market dominance through users’ ability to follow friends, share group listening sessions and scan songs using unique codes. Spotify takes users on a discovery journey normalising new music exploration through data analytics. My favourite feature, ‘Release Radar,’ uses analytics to discover new songs based on users music preferences in the same or similar genre and presents it in a playlist updated every Friday.
How can Spotify further evolve?
Spotify has the opportunity to utilise its platform to gain new partnerships. It could take an exploratory approach to create new strategic alliances within internal and external industries. Spotify currently has a 47 partner ecosystem, with an example being Musixmatch, whose system is integrated into Spotify, allowing users to follow lyrics live when playing a song. Spotify could further expand through external markets partnerships such as the automobile industry to impose strategic challenges for competitors such as Apple Music and Tidal. Spotify could be an additional feature to cars’ internal media systems to challenge radio with subscriptions included in the vehicle as who doesn’t listen to music when they drive.
Spotify has evolved the music streaming service and used its platform to create a new way to develop and present content other than just music. Spotify is currently altering its content variation after noticing the significant growth in the podcast industry by investing over $200 million into it. This works towards their goal to become the “premier producer” of not just music but audio. Spotify could follow this play by investing in their own production company, developing a similar business model to Netflix. They could provide infrastructure and funding under the ‘Spotify’ name to combat the negative perception of how they treat their creators.
What challenges may hinder Spotify’s growth?
Over the past few years, a widely highlighted problem facing Spotify is “allegations for unfair artists compensation”. This problem stems from the lower end of the spectrum, as niche artists are the “grassroots referendum on the music industry”. The degradation of creative labour fuels artists’ requests for fair treatment. Spotify’s model “over-reward stars at the expense of everybody else” using a pro-rata system. This collates money from ads and subscribers and distributes by dividing the number of streams, giving top percentage holders money from users who have never listened to their music. Algorithmic recommendations favour discovering famous artists rather than promoting grassroots creators, thus widening the gap. Alternate platforms such as SoundCloud have adopted a user-centric model which evenly distributes money based on what each user listens to.
As Spotify grows exponentially, has to consider its longevity due to the global access to the internet. Due to Spotify being a Software as a Service (SaaS), potential customers are restricted only to those with access to the internet. Despite the ever-growing world inter-connectivity, there is still a lack of global telecommunication infrastructure due to the cost of connectivity, excluding 37% of the world population. Therefore, Spotify’s international expansion is limited from certain developing countries for future years.
Can Spotify’s own app hold them back?
Spotify relies on third-party providers and competitors like Apple and Google despite being developed independently. Spotify requires a platform such as Apple’s App store as the “primary gateway for accessing and installing mobile apps”. Like Apple, Google hosts the Google Play store with both tech giants developed music streaming services that compete with Spotify. Apple gains a competitive advantage over Spotify, which pays 30% commission on fees to Apple on revenues generated from their iOS app as Apple defines subscription fees as digital purchases. However, they accept this as the cost of fees outweighs revenue generated within the iOS market.
What does the future hold?
Spotify has substantial brand loyalty, and I believe their retention rates and market share will remain high unless competitors such as Google and Apple integrate their services for free onto their devices and hide the cost in the hardware price. A second problem Spotify faces is the evolution of the internet to Web 3. Evolving decentralised streaming platforms may allow users to illegally stream music better than before. However, the lack of certainty around free music streaming outweighs Spotify’s monthly cost. However, will be a lack of incentive if Spotify maintains its custom content and social media characteristic driving a solid community.
Overview
Since international expansion in 2009, Spotify has become a music streaming powerhouse with a noteworthy brand loyally, causing users to have no incentive to change. Their engaging custom content exposes users, including myself, to discover new music, either like their taste or undiscovered, to expand their music library. However, some challenges will become more problematic for Spotify, especially publicity involving their unfair treatment of content creators at the lower end and the evolution of a decentralised internet.
