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 ( ).