This paper takes off from an examination of the historical and current business moves of Spotify, alongside its traditional cost structure and other relevant data, to piece together its current and emerging business strategies. From there, the paper uses theoretical analytical models, among them SWOT and Porter’s Five Forces models, to assess and analyze the soundness of Spotify’s business strategies, and to recommend ways forward for the firm based on the findings of that analysis.
Piecing Together Spotify’s Current and Evolving Strategy
Newer data reveals that the total user base of Spotify has grown to 24 million users who are active by 2013, with the number of paying subscribers roughly equal to one quarter of that number, or six million. Moreover, the company has pushed to widen the range of free music it is able to offer to mobile users, aiming to break free from a model where users have to pay 10 British pounds in the UK, to be able to access music from mobile devices as well as tablets. This is in line with the pricing of rivals such as Deezer, Napster and Rdio, which all charge the same monthly fee. A glimpse of its business model can be gleaned from the way it has allocated revenues to differing costs, key among them the payouts to the holders of the copyrights to the songs, which reached 188 million Euros in 2011. This payout to the holders of the song copyrights translates to 70 percent of all revenues. Since 2006 when it was launched, total payout estimate to the holders of the copyrights has reached half a billion dollars. The company has not turned a profit from its operations as of 2012 (Halliday 2013; CrunchBase 2013; Facebook 2013). Other recent developments that give a hint as to the evolving business strategy of Spotify include its first forays into advertising in the