How will the future of Spotify looks like?
Most people have heard about the music streaming service Spotify. It’s the number one in the streaming market for music. The growth of Spotify is enormous and has triggered the attention of Apple. Currently Spotify is the number one, followed by Deezer. Apple entered the music streaming market this year and has not yet released reliable sales figures. Spotify however saw a dazzling rise in paid subscribers in the first half year of 33%, now counting 20 million customers. Besides the paid subscribers, Spotify also counts 55 million free-users (Spotify.com, 2015).
Although the market for streaming music is quite lucrative and fast growing, Apple joining is not desirable. According to Techinsider.io (2015) the service Apple Music is offering is not that different from Spotify. The streaming music market is a market consisting an information good. The fixed costs are high, the variable low. Two players offering the same product is going to be a fierce price completion. Spotify, as a Swedish company worth around 8 billion, is nog going to win this battle from the biggest company on earth. They need to come up with something innovative.
Information is key. That’s what Spotify must thought when they introduced the personalised playlist ‘Discover weekly’. This playlist is updated every week with music you might like (Techinsider.io, 2015). The recommended songs are based on complex algorithms who analysed your previous music choice. Spotify is creating so called ‘taste profiles’ (Fivethirtyeight.com, 2015). Based on your music preferences Spotify comes with suggestions.
Not yet introduces in The Netherlands Spotify also added music videos and podcasts. This new feature is introduced under the name ‘Spotify Now’. New features, especially innovative features which differ from the competition, are needed to gain a sustainable competitive advantage.
Spotify is a first mover and must use their first mover advantage. All the information of their paid and non-paid users is valuable. Based on my own experience with Spotify and Apple music (yes, I tried both) I decided Spotify suits me best. The recommendations based on my listening history from Spotify are the main reason to choose for Spotify. The bad side for Spotify is: this is not sustainable. They have to come up with more.
What could secure Spotify’s future?
MusicIndustryBlog (2015). Apple music: A platform play with hidden nuance. Available at: https://musicindustryblog.wordpress.com/2015/06/10/spotify-plays-the-big-numbers-game/. Retrieved at: 17 October 2015
Hickey, W. (2015). Spotify knows me better than I know myself. Fivethirtyeight. Available at: http://fivethirtyeight.com/features/spotify-knows-me-better-than-i-know-myself/. Retrieved at: 17 October 2015
Spotify (2015) Information. Available at: https://press.spotify.com/au/information/. Retrieved at: 17 October 2015
Spotify (2015) Spotify Now. Available at: https://www.spotify.com/now/. Retrieved at: 17 October 2015
Heath, A. (2015). Inside Spotify and the future of music streaming. Techinsider. Available at: http://www.techinsider.io/inside-spotify-and-the-future-of-music-streaming. Retrieved at: 17 October 2015