Spotify has provided a way for people to access and share music with services such as exchange of selections and even mobile access. In the process of providing these services, the users’ data is acquired through initial registration and this helps categorize the market. The main target for Spotify is not registration of premium accounts without adverts but the free use by the public where adverts can be played in between songs.
There are many issues handled by Spotify in the business including competition from existing online music selling companies like Sony and Apple, and challenges on fair artists’ royalties with restrictions by copyrights in some regions. The e business strategy is well established for Spotify as the company deals with music producing companies and companies who look for a way to advertise brands. The peer to peer technology used and the feature of listening to music even when offline together with a simple user interface are all technological advantages of Spotify that make it popular in the market.
The future of Spotify is based on integration of the software into hand held processing devices like modern phones, and having a good relation with the sources of music. E-Business background Spotify’s business idea was to create a medium through which to provide advertisers with a way of reaching a traceable and response predictable market. By creating a digital library of a wide variety of music and an interface through which listeners can register and listen to music free, Spotify was able do just that. There are adverts pushed in between songs and last for between 15 and 30 seconds.
The users that don’t want to get interference from the audio adverts can pay a monthly fee to stop them. The portion of listeners who pay this fee is so small compared to the free users, who form the main market idea for Spotify. The company has arrangement with the world’s major labels to provide their music and in return claim an 18% stake in the company. The integration of the music producing companies, the listeners and the advertisers forms the e-business model for Spotify. There is competition from similar companies like Last.
fm, Amazon (which sells music online), my space and facebook; with the direct rival being Last. fm. Spotify and Last. fm have integrated their systems though and this form a way to create an entry hardship in an effort to protect high profit business and raise competition advantage for both companies to realize. Porters Five Forces model Spotify’s business faces the five forces from threats of substitute, barriers to entry, supply power, buyers power and rivalry (Porter 1985). There are various ways that it has put up strategies to deal with this.
First, there is the presence of substitute firms like Last. com; Spotify has planned to sing a deal in merged operations with the company in order to increase the business opportunities for both sides. It was proposed that the advertisers/brands could then be able to buy advertising services across the platforms of the two companies (McCormick 2009). According to the nature of the platform on which the adverts are run, Spotify has created a medium where the message is streamline with the music being listened to.
Apart from the major rival with whom Spotify agrees to merge business with, the brands will face a hard time looking for an alternative service of the kind. Thus the buyer’s power is low, considering that there are also many scattered brands to advertise through the electronic platform. Furthermore, the platform provides a way of major record labels availing their music to the users, making sure that brands can get the largest number of music fans at Spotify, which they cannot get from online music shops. On the suppliers’ power towards Spotify’s business, there are many music producing labels that offer a variety of music.
Also, the fact that the buyers of the service are somewhat weak, the suppliers are also put in the same line; because advertisers has no much power over Spotify, they cannot demand of specific record labels. Since the entry of Spotify into the e-business, the key issue is to keep the prices offered virtually low in order to provide a barrier of entry of new competition. One strategy applied by firms to this effect is merging their markets and operations so that they can enjoy economies of scale and protect the high profit market from other entrants while keeping the quality of services high.
This was a case possible from the Spotify’s deal with Last. fm. There is rivalry in the industry of e-business and marketing through electronic means has been applied by many companies. The industry is disciplined though, from previous competition, the methods of enticing the music fans and through ease of use of platforms by the market forming population. The application streams music with no buffering times and provides a very wide variety of ready to listen categories of songs; from major record labels.
The fact that the market for Spotify seems to be exponentially growing means that soon the buyers will be so many and so their power will go down, providing a business advantage for the company ( ). E-Marketing The internet is a unique marketing medium in that it provides a global market with instant response dynamism. The fact that when a product is advertised through the internet can reach millions of users within a short while is enough to make it a rich market. Spotify has its marketing strategy based on online access of adverts by the users in their endeavor to listen to music. Data and Market Analysis
The strongest part of Spotify registration of users is that it takes the demographic data so that the company is in a position to provide marketing strategies to advertisers based on age, location and music taste. The ability to analyze and classify a market is important to advertisers, especially when it involves technical goods and services. Promotion and mobile services The introduction of the mobile version of Spotify software has helped in a far reaching marketing strategy. The whole issue has been in news for sometime and major discussion blogs and websites like BBC NEWS, leading to less costly promotion effect in Europe.
The market in Spotify is really the online internet resource as well as the users PC’s and portable mobile Activities Spotify engages in various activities that are geared towards having a wide base of users so that it can reach more people when targeting an audience for an advert. These activities include; invite scheme, tell a friend and viral advertising. The “invite scheme” is where the newly registered and the existing members are given an opportunity to invite friends and family to experience Spotify while still promoting the premium membership.
The “tell a friend” activity involves a Spotify inbuilt tool to spread word of mouth. This is a strategy to use the existing users to get the message to their friends using the already existing internet framework. The other one is viral advertising where the medium mainly used is social networking frameworks like facebook. The most visited WebPages are targeted and a multimedia message displayed. Web-design Spotify has created a peer to peer application that streams music between the listeners computer, whether online or offline.
Spotify has a service to which clients connect and have the contents of the cache summarized in an index which is then sent to Spotify’s stream hub. The data in the index is usually used to alert other users of the additional peers they can connect to, to fetch streamed data for specific songs being played. This arrangement is enabled and tolerated by each upon start up. Each client listen to incoming connections from other Spotify clients like a server and connects to other users to exchange cached data. The users are actually not in apposition to configure the connections or alter the bandwidth of transmission of data.
These settings are hard coded in the system. The design of the entire architecture may be complicated but the interface used by the listeners is so simple and effective. There are just few controls of play, rewind and forward. The Spotify application offers the following features to the users; Catalogue: Spotify offers users access to millions of music tracks including songs from major music labels. Some specific music from some artists may not be available due to boundary regulations in the copyright. Playlists: it allows users to create collections of favorite music and lets them share them.
The users can also edit the playlists with other users together through collaborating software. For this purpose, the playlists can be shared through an email or instant messaging window. On accessing the link, the data gets downloaded into Spotify. Integration with Last. fm: the specific feature from last. fm is the ability to collect the users’ preference in music and store it into Last. fm’s database. This has been integrated into Spotify without requiring external plug-ins (Spotify Archives 2010). Radio feature: this creates random playlists of songs related to the music of the currently selected artist.
Spotify has a simple to use interface that allows the user to search for music by artist, album or title. It displays the user chosen playlist and some advert image, which on clicking, one can explore the promotion (Spotify Forums 2010). Business-to-Business (B2B) Spotify has introduced the music service to the listeners and charge a certain rate for ad free music. However, it does not rely on this for its source of revenue. It largely relies on the free service where the listeners will have to bear with the adverts. At this point, it does business with other firms that want to advertise their brands to the listeners.
The main target for business is therefore dealing with other companies that want to reach the audience. On the same platform, there is collaboration with major record labels where they claim a certain percentage stake in the company and in turn provide their music libraries to Spotify (Nylander 2009). Spotify focuses on doing business with other businesses in its plans. It has tailored it product for mobile phones and approached the mobile phone making companies like apple in an effort to do business with them (Emerald). This is a direct challenge to Apple’s iTunes though and touches on the competition end.
Mobile Commerce Spotify has produced a mobile version of the application that can allow users with premium accounts to access and listen to music wherever they go. It also allows the users to download a certain number of songs on to the phone for listening while out of network range. Mobile business seems to be the future of IT marketing, especially with the progress and expectations of pervasive mobile programming. By considering the mobile version of the application to target the users on the move and virtually at all instances of life, Spotify has provided a wider more reaching market for its business.
Given that all the mobile users will have to be premium users, the focus of mobile versions will be to create a customer base where the services will be like a contract between Spotify and the user (Ionescu 2009). This eliminates the advertisers from the picture and allows Spotify to compete with earlier established businesses on the same line like Apple, while still spreading the risk. Instead of relying on the advertising source alone, the company can now create a one to one relation with the music fans through their premium accounts. Conclusions
It is a good business plan for Spotify to create such a huge market base by having so many users registered, both free and premium categories. The plan of pushing adverts into streamed music provides an excellent way of gaining the revenue from brands. On the mobile world, it provides a good way of reaching a wider market and a premium account for the mobile is a plus on the revenue. This was a wise decision considering the processing power of phones cannot be compared to that of PC’s. The strategy of extending into the mobile world was a good way of preparing for the future of IT with the trends in pervasive mobile programming.
Mobile marketing will form an even wider market considering the more frequent use and an extension of the PC use after work hours. Recommendations The competition in the market is high and Spotify will have to deal with some issues, especially with the application interface and specifically the technology on the size of bandwidth among other resource utilized on users machines. Criticism is usually on the fact that the interface does not give a user the access to control the amount of resources like bandwidth that Spotify uses against other systems on the same machine.
The issue of coming up with a way of establishing the classification of music sources with their effect on the market using the users data to determine the ratings would be an important thing to indulge in, in order to establishing a fair royalties to the artists in order to keep everyone happy and the future of Spotify bright (BBC News 2010). More concentration on helping the production teams with useful demographic and ratings information will give the company a strong relationship with the source of music, the medium they use to make money. References
BBC News, (2010) ‘Spotify boss Daniel Ek sets out future plans’, [Online], Available: http://news. bbc. co. uk/2/hi/8478599. stm Porter M. (1998) ‘Competitive strategy: techniques for analyzing industries and competitors’, Free Press, ISBN 0684005778, 9780684005775. McCormick, A. (2009) ‘Spotify and Last. fm moot partnership’, Britannica article; Revolution (14605953) [Online], Available: http://www. britannica. com/bps/additionalcontent/18/38216709/Spotify-and-Lastfm-moot-partnership Ionescu D. , Nov 23, 2009, Spotify Lands App for Symbian Phones, [email protected], [Online], Available: http://www.
pcworld. com/article/182833/spotify_lands_app_for_symbian_phones. html Robert Andrews, 2009, Apple Approves Spotify’s iPhone App, web article on Paid Content: UK, [Online], Available: http://paidcontent. co. uk/article/419-spotify-says-apple-still-testing-iphone-app-spotify-vanishes-from-app-s/ Emerald, Current CITE-ings from the popular and trade computing press, Library Hi Tech News, Volume 26, Issue 9, [Online], Available: http://www. emeraldinsight. com. ezproxy. cqu. edu. au/Insight/ViewContentServlet? contentType=NonArticle&Filename=Published/NonArticle/Articles/23926iae.
001. html Spotify Archives (2010) ‘Spotify for iPhone v0. 4 now available’, [Online], Available: http://www. spotify. com/int/blog/archives/2010/03/31/iphone-v4/ Johan Nylander, Record labels part owner of Spotify, from The Swedish Wire, Published Friday, 07 August 2009, [Online], Available: http://www. swedishwire. com/business/680-record-labels-part-owner-of-spotify Spotify Forums, What is Spotify? Why choose Spotify? How much advertising? [Online], Available: http://www. spotify-forum. com/what_is_spotify. php
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