Music
and its way to listen to it own the same history since the conception of the
music industry which started at the early beginning of the twentieth century.

 

 

The
use of the expression “music industry” began with the introduction of the
gramophone and the phonograph on the market, which has spread musical
consumption. It is this propagation of private consumption of music that
characterizes the use of the term “music industry” which thus leads
to the mass production of material for the record and listening of sound.

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Those
two items, which were the phonograph and the gramophone, needed the use of two different
types of discs: the phonograph was using a metal cylinder and the gramophone
was using a shellac disc. The discs were only compatible with the reading
machine that was intended for them. This incompatibility spawned a real battle
in which the shellac disc came out victorious especially because the shellac discs
were easier to store and produce. This victory engendered a mass production of
those kind of discs: for example, more than 27 million records were sold
annually in the United States during the 1910s. But the production of the
shellac discs is gradually fading, the arrival of the electric turntables made
the use of the shellac (component of the shellac disk that allows the reading)
less essential, the industry of the record looks, therefore, on vinyl records.
The Second World War disrupted the importation of shellac and consequently
strengthened the vinyl record as a reference medium. The production of the
shellac disc stopped in 1948, the vinyl record becoming the mean that all the
record companies will use from now on.

The
audio cassette is another mini revolution for the music industry. Beyond its
innovative character, it will also create a new way to consume music to
challenge the supremacy of vinyl.

The
audio cassette came on the market in the 1970s. It uses magnetic stripe
technology to record and listen to music sounds. It allowed to establish a
freedom to the listener without precedence, this one could record, program,
exchange, and discover without limit the music which he wished. Thus, the young
artists could record their music on a tape and then share it with whomever they
want. But the recording that allowed the tape has inevitably generated copies
of vinyl records of the time as well as their exchanges and their sharing.

A new
format appears on the market: the Compact Disc (CD) which brings a notable
improvement in sound quality. The sound is clearer and more respectful of
reality than these predecessors. It is mainly developed by the music industry
because of its unalterable nature. It cannot be copied or shared. The audio
cassette and especially its copy capacity were a thorn in the foot of the music
industry that the CD just removed.

The invention
of the Personal Computer (PC) in the 1960’s marks a turning point in the music
industry. Indeed, this represents the start of the sound dematerialization; without
its support, the sound is not tangible anymore and is then no longer a
material. This dematerialization is a real break in the sense that the music
industry and in particular the record industry is offloading the material that
characterizes its industrial nature. The PC has simply been the central tool
for digitizing sound and its volatility. What is meant by volatility is the
capacity of the sound to be shared, listened to and transported without its
material support. Therefore, the computer thanks to the Internet and especially
to the Web, has networked listeners-consumers from all over the world who
exchanged dematerialized music: it is the arrival of the Peer 2 Peer (P2P).
Music is now compressed in mp3 format and can easily be shared between
listeners-consumers in a completely free and illegal way.

But the evolution of the dematerialized music
industry does not stop there. The arrival of portable digital players (mp3) and
then the IPods continue this development of illegal downloading. One of the results
is also the disappearance of CD players and Walkman.

Indeed, they cannot compete with the IPod which allows
to walk with more than 1000 music when the players need a tape or a CD limited
to a few dozen music. As a result, the vanishing of CD players and Walkman was inevitable.

New actors enter the game
to circumvent illegal downloads. They understood the wants of the Internet
users to have access to free services; some companies, then, decided to make
available catalogs of music searchable online for free. The idea of ??these
companies is to pay the artists through the advertising generated the traffic
on their site. The listener is the target of the advertisement but beneficiate
of a very extensive catalog of music. Companies such as Spotify; which is the world
leader in streaming listening platforms or Deezer have been the main beneficiaries
of this system that combines free listening for listeners and remuneration for
artists. They also link their offer with monthly or annual subscriptions that
allow the subscriber’s music lists to be synchronized with his smartphone, so
that he can listen to his favorite music offline without having to load it in
his smartphone via his computer.

 

Strengths:

The amount of
songs and playlist available on Spotify’s makes it one of its most popular
benefit. Any research made or song the user had listen to can be found on the
different device he is connected on: phone, PC, tablets. The user can also
share his playlists on social media such as Facebook or Twitter. To beneficiate
from this service, Spotify offers different kind of subscription; instead of paying
for each song like some of his competitors offers, Spotify preferred to propose
a subscription cost for unlimited options. Therefore, subscribers have an
unlimited access the songs and playlists available.

But they also
offer another kind of subscription which is free. Indeed, the users can access the
large selection of music provided by Spotify without paying but there are some
differences with the Premium offer: presence of advertisement, no possibility
of downloading music, …

By offering two
types of subscription, Spotify attracts a lot of different kind of people and
in both cases, they manage to remunerate the artists.

                                                               

Weaknesses:

Converting free users to Premium subscribers
is a problem Spotify is facing: on the 140 million (June 2017) active users,
only 70 million (January 2018) of them have a Premium account

Indeed, Spotify
doesn’t promote his Premium service to free users well. Premium account is the
second source of income for Spotify, they need to develop it as much as
possible as the competition is increasing significantly.

 

Opportunities:

Spotify now proposes
university student discounts on their Premium service, making the total monthly
price £4.99. However, there is no such discount for students who are slightly
younger, such as high school students. But they can continue to increase their users
by expanding their library in the “long-tail”, or less popular genres.

Spotify is also in
collaboration with concert tickets seller website such as ticketmaster.com;
this partnership allows the user to find tickets really easily and helps to
grow a durable relationship with the user.

 

Threats:

Downloading music illegally
is always a risk for services like Spotify as users, specially the one using
the free subscription, can get tired of the advertisement and not being able to
listen to their music offline.

The competition on
the market of the music provider service is getting tougher as all the
companies offer the same kind of package for the same price. Spotify is also
facing another problem: if they lost a lot of subscribers at the same time, it
would probably be the end of the company; thus, having those many competitors
is dangerous for them.

Another main danger is the change which can occur
concerning the new technology. Indeed, the new technology market on which
Spotify is operating is a fast-moving market, which means Spotify may have some
problem to keep following the trends.

 

Competitive rivalry:

The
music streaming market hosts a lot of competitors with the same kind of offers
than Spotify has. Those competitors are some of the most prominent new
technology companies, which are already well-known and therefore have a lot of
money to invest on marketing strategies. However, Spotify is most likely to
keep is leadership as its subscribers have no interests in changing the service
they are using for another one. That’s why competitors are not axing their
marketing onto the users who already have a subscription but more on those who
want to get one. Thus, Spotify will probably remain the market-leader.

Threat of New Entry

There is already a lot of competitors on the music streaming market,
therefore the barrier to entry is really high. But profitability is still an
on-going problem not every firm can afford to try to fight. Therefore, if a
company wants to entry the market, they should be specialized in new
technologies, for it to be interesting for them and also be able to provide the
largest library they can. So, having a lot of money to invest in a must-have,
which limits the possibility of entry on the market.

 

Threat of Substitution

Music
streaming services appear to have substituted the main alternative methods of
listening to music, taking into account the decline of paid downloading,
physical sales, stagnation of internet radio and increase in streaming.

The only
company Spotify could be afraid of is YouTube as it’s offering kind of the same
services as Spotify but for free. The only difference is the user cannot listen
to music offline but the range of music is larger.

Another
threat would be illegal downloading; indeed, the amount of piracy is still high
and can be an alternative for the premium subscribers who will find the same
service as the one Spotify is offering.

 

 

Power of Suppliers

At the beginning of those music streaming companies, labels and artists
were suspicious about the service they were providing, but now that the companies
all grew in recognition, they seem to have a positive attitude towards them. Spotify and the labels are functioning
on common positive contracts, suggesting that it is not likely for the providers
to use their influence to negatively affect Spotify. This will doubtless concern
other streaming services as well, since the industry has indicated it looks favorably
upon music streaming and regards it as the future of the recording industry.

 

Power of Buyers

In order to keep their subscribers, the music streaming service need to
offer extra service. Spotify is offering some tools that competitors don’t but
most of Spotify’s competitors do offer an extra value as well but the Spotify’s
users don’t seem to be receptive to this as Spotify is not losing customers on
the contrary gaining in subscription. This is showing that brand-recognition is
sufficient for the users to not change their music platform.

 

Over the
years, Spotify has implemented many tools for Internet users that do not exist
among competitors. These tools generally allow a better follow-up of the
artists of the Spotify community. For example, in 2016, Spotify has unveiled a
new version of its platform which is enriched by a “Follow” button in
the manner of Twitter and Facebook, so that fans are kept informed of all the
new features of the artist. The music streaming service goes further with a
powerful recommendation system that adapts to the tracks to allow you to
“discover more and more music”.

In July 2015,
Spotify publishes a map on its website that reports the country’s musical
guests, city by city, according to the listening of its users. “Tell me
what you listen to, I’ll tell you where you come from.” The Swedish
service undertook to rebrand on an interactive map the most cost-effective
artists in a thousand cities around the world, from more than 60 countries,
mainly located in Europe. When we travel, we try to experience what makes the
difference: food, places … Spotify aims to make this experience through
music, by sampling musical trends in many cities around the world.

Spotify’s strategy is focusing on users from
the Millennials so born between 1980 and 1995 as this generation is generally marked by an increased use and
familiarity with communications, media, and digital technologies.

However, Spotify
has the possibility to operate on two other markets: teenage high school
students and young to middle-aged adult business professionals by using a
multi-segment strategy. Spotify can then adapt their marketing mixes according
to those distinct markets as the two segments have different needs and wants. Both
of the groups have active music listening habits and they spend a lot of time
online every day. Creating special offers could be very beneficial for Spotify
and would increase the number of Premium subscription significantly.