Spotify; The Company From the Perspective of a Marketing Student

Introduction to Spotify

Spotify’s mission is to “unlock the potential of human creativity—by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it” (2020). They have followed their mission statement through their strategic priorities and onto their results.

Today, Spotify is the world’s most popular audio streaming subscription service with 345m users, including 155m subscribers, across 178 markets including Canada, Ecuador, Germany, Greece, Lebanon, Russia, Vietnam and so man more (Spotify, 2021).

black headphones with mobile smartphone
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What is the Spotify Business Model?

Their main business model is gaining subscribers that listing to the music, podcasts, and other audio on their site, as well as earning ad revenue on those that have a free subscription to the service. Their expenses, however, are a lot less straightforward. They need to pay those that have the rights to the music themselves. Due to their business model, “all the streaming services license music from record labels, copyright holders, and publishers with rates set at a statutory level by local copyright boards….Given that no streaming service can exist without these licenses to play music, they always start talks at a disadvantage” (Cross, 2020).

SWOT Analysis

The SWOT analysis of Spotify is comparable to many other businesses in the music industry. which mean there are similarities in their external and internal environments. There are a couple of external environments and contextual events that are causing interesting dilemmas for Spotify and the rest of the industry. The Covid-19 pandemic is encouraging more people to find entertainment at home. This includes activities such as streaming shows, music, podcasts and so on. On the other hand, the economic downturn caused by the pandemic has caused many do not to have the budget for a significant portion of the streaming services, they would normally enjoy.

Spotify has the strengths of being able to provide on-demand and online streaming services. This means less overhead cost compared to typical commercial businesses; being able to have a wide reach over demographics and geographical locations. Their weaknesses are dependency upon technology and the internet, payment negotiations with rights holders. As a business in the music industry, they have similar threats and opportunities. Their opportunities include potential expansion with the growth of the music industry; diversification for different products or upgrades as technology advances; growth with new partnerships as the music industry expands. Their threats are also similar. It includes legal disputes over copyright, competition with other companies in both the music industry, entertainment industry and the technology industry.

What does Spotify Pay Artists?

Spotify could more money by primarily increasing the value of their service. Pay artists more. Their musicians are the basis of their company. That being said, Spotify’s mission is to give “creative artists the opportunity to live off their art” (Spotify 2021). Unfortunately, not many artists can live off their art at least not with Spotify alone.

Despite the amount of money that Spotify is making per year, only a little is being sent to the artists. Spotify pays between $.003 and $.005 per stream, meaning you’ll need about 250 streams to make a dollar and that payment depends on their distribution contract and listener base (Jacob, 2021). A petition called Justice at Spotify is aiming for a boost in per stream payout to at least a cent. This would provide, “a significant increase from the current rate, which averages to around $0.004 per listen — that’s 0.4 cents or four-tenths of a penny.

At this rate, a musician would need around 250 streams to earn just a dollar, or about 650,000 streams a month to make the equivalent of $15 an hour. An increase to one cent per stream would — well, do the math” (Cross, 2020). A few ways to do this are to increase the amount of profit not only for Spotify but also for their listeners. This is to promote those that have their rights to the music without the need to pay external publishing companies. As well, they can buy rights or a portion of the rights of various companies and musicians similar to what Disney is doing with every other film company. Having a monopoly is not the suggestion but eliminating the middlemen between your content creators and their content.

Spotify Design and Userability

From a design perspective, their customer interface is highly specified for what they do. Compared to other sites where you can stream music such as apple, google music, and YouTube, Spotify can specifically focus on audio across multiple platforms and devices.

In terms of site design and structure, let’s start with what the customer interface is. It’s an app similar to google music and iTunes, not a web-based program like YouTube. That has some interesting issues that will change the demographics of people that will access their interface. There are technical concerns such as operating system, age and maintenance of device hardware, internet access, and so on. These will greatly limit the ability of users to use Spotify. In terms of page design, the customer interface is simple and aesthetically pleasing. However, it still allows the art of the album art to be highlighted. In terms of content design, Spotify does a fantastic job of providing content to its viewers.

Conclusion

Music is Spotify’s main industry. It’s what drives their listeners, their content, their business in general. From their website, they explain that Spotify transformed music listening forever when it launched in 2008 (Spotify 2021). From those beginnings, Spotify has become one of the most popular audio streaming services with 345m users, including 155m subscribers, across 178 markets (Spotify, 2020).

References

Cross, A. (2021). Would it be nice if Spotify paid more to artists? Yes, but it’s complicated. Global News.

Jacob, E. (2021). How much does Spotify pay per stream? What you’ll earn per song, and how to get paid more for your music. Business Insider.

Listening is everything. (2021). Retrieved 21 March 2021, from https://www.spotify.com/us/

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