Spotify - Redefining iMusic


Today’s brew is for Spotify,
Brew Date: 11th June 2015
Type: Served Hot – Redefine and Transform brew.

To understand the business model of Spotify, check out the following links:

The Brew will analyze Spotify on the following points:
a) Business Analysis
b)   Improvisation to Business Strategy (Not required, the frameworks are all laid in the Business Analysis part)

Spotify is a commercial music streaming, podcast and video service that provides digital rights management-restricted content from record labels and major media companies. Music can be browsed or searched by artist, album, genre, playlist, or record label. Paid "Premium" subscriptions remove advertisements and allow users to download music for offline listening

a) Business Analysis:
1) Spotify is a Technology platform which offers Music, and not the other way round, effectively meaning that it has to build a competence from technology, along with its offerings.

2) The aim of Spotify is to offer music, as the result, it has to open up its gates for all kinds of music, ideally, it should ideally be a platform for all kinds of music, music folks, ideally promoting the end to end value chain of music -  creation, distribution and consumption of music

3) In its current avatar, Spotify’s value differential ratio (Value Creation v/s. Value Captured) is low. No doubt, its offerings have high acceptability, however the value transfer is low, making it vulnerable to lower levels of monetization, losing of consumers, and / or losing out to competition.

4) The theory of borrowed innovation from last.fm. The Personalisation offering for music is where Spotify is dependent on Last.fm (another music service provider). By the means of this, Spotify cannot aspire to be in the climbing up the consumer value chain (both, in terms of enhancing the experience and creating value). Spotify will either have to leverage on such market offerings by organic means to better the Consumer current experience levels.

5) Given that the music industry is witnessing a jam of players offering similar services, along with the major media houses flaunting the dominance, the time is possibly ripe to have a business model innovation in place with effects of disruptions on the entire value chain of music creation – publishing – distribution chain, essentially with the framework of technology, and different set of principles. This point holds valid provided Spotify is able to establish competence in its product bettering the consumer experience by a substantial differential.

Spotify’s focus on the getting the supplier on its services while at the cost of adding experiential value to the consumers will only add the development of Ecosystem (and not Spotify’s offerings), motivating the competition to enter. Rather, the thought should be to focus on the other end of the spectrum by adding experiential value to the consumer, triggering the winning circle of making Spotify, an open platform to publish music

6) Spotify as well faces an identity conflict in the value proposition hindering it to exploit the market value potential of its offering. Given that online Music space is crunched with players, it makes sense for Spotify to establish itself as Social Network for Music for the users. Along with having an edge over other players with a unique proposition, it can as well be an open platform, enabling better experience value to the consumers.

7) Aligning it to Consumer Needs and driving the music ubiquity – Not just Music, value props on Social, Personalised, and for every moment, every mood, to change the state of mind and hence Spotify’s attempt should be to promote more music rather than promote more of Monetized Spotify. It does not have sell music which Users love, rather it has to offer more music so that Users start loving music along with the stickiness of the experience and value created by Spotify, which can be a decent strategic advantage.

Differentiation to experience music with Tech Competence with enhanced value – Cos Music is experience

8)    Offerings Expansion with refocus on consumer needs on the basis of Competence (Audiobooks, Videos etc) and Consumer Experience delivered.

9) Aligning its offerings with the key drivers of the technology (Cos Technology is one of the factors to create competence), and leveraging its potential of accessibility across all cross platforms to drive the music ubiquity, continuity and convergence across all the platforms (hardware + software + virtual).

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