Spotify Strategy Essay

4818 Words Sep 11th, 2014 20 Pages
Project Summary

Introduction
Spotify is an online commercial music streaming platform that, despite earning a massive sum of Euros in 2012, has never recorded any profit ever since its launch in 2008. Royalty costs and increases in licensing costs cover most of Spotify’s expenses, and these fees continue to be a problem as it prevents Spotify from making a profit.

Purpose
This paper aims to improve Spotify’s strategies in order to make its business more profitable.

Method
This paper will use secondary data to analyze both Spotify’s external and internal environments. The main tools used here are: PEST, SWOT and the Five Forces analysis. The paper will give insight into Spotify’s pricing and advertising methods, suggesting
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This could be due to the fact that about 70% of the revenues cover royalty costs. Although Spotify is still receiving financial support by investors, this remains a vital problem.

3. External Analysis

3.1 PEST Analysis
Political
Spotify has acquired licensing from the major record labels and is paying the required fees. So Spotify should be safe from copyright violation issues.

Economical
The recent digitalization of the world increases online business traffic. Although the total sale of music worldwide has decreased, there has been an increase in sales in the digital music industry. According to IBIS World, digital music accounted for 39% of music sales worldwide in 2012. Furthermore, IBIS predicts that by 2017 digital sales will surpass that of its physical counterpart.

Social
Social media marketing is a recent trend that almost any business have picked up. Social media allows firms to have an interactive engagement and direct communication with their consumers. Firms can easily fall behind in effective branding if this tool is not properly utilized.
Spotify’s Facebook integration that allows users to share their songs and playlists via the webpage is an example of a great utilization of this information channel.

Technology
The emergence and usage of smartphone has become beneficial for social media marketing and the digital music industry in general. Today, many smartphones have social networking

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