Spotify: A Pioneer in the Digital Music Industry
Question:
Discuss about the Case Study of Spotitfy Music Industry.
Digital disruption refers to an event, wherein a digital idea or business approach can change the current dynamics of the music industry. In the recent years, the world has observed several innovations in which Internet and digital approaches have changed the operations of the entire industry. Airbnb and Uber are the major examples of the digital disruption events. However, the music industry has also drastically changed due to internet and the availability of the music on the online media. In the last decade of 20th century, a large number of music companies suffered as different albums and music were made available on internet. Spotify made use of the changes in the music industry and created a business model in which the music was made available on internet with ethical means (Business Today, 2013). The ethical subscription was the unique selling point of the organization. The company created a website and a mobile application in which the users can find the music of their choice anytime. The Spotify account is accessible through computer, tablet and mobile phones. Spotify was founded in 2008, and since then became the biggest name in the music industry. The company has a substantial market share in the music industry. The business organization provided several additional services such as improved music quality and music downloads. It also provides paid subscriptions to the customers at nominal fees. There are several other features such as the users can search for music by using different parameters such as artists, albums or playlists. The users can also share their music with their friends on social media. The business model of the organization is based on paying royalties to the music artists based on the number of downloads. In the present report, the digital disruption in the music industry has been discussed. Spotify is considered as a significant organization in the music industry, which changed the dynamics and the market of the organization. The company was based on a novel concept and pioneer in the present music industry.
In the present report, the case of Spotitfy has been taken. The company is pioneer in the current digital music industry. It created turmoil in the traditional music industry and most of these companies have adopted the new business structure. The company included innovative strategies, such as on-demand music and experiencing live music. The organization has implemented a business model such that it provides importance to the human creativity and intellectual property. It created digital disruption model and monetized on the changes in the music industry (Chaffey and Ellis-Chadwick, 2016). It also promoted the use of ethical means, which can fight piracy among customers. In the past, internet users were attracted towards pirated music as it was easily accessible and provided abundant music library. However, the company raised the question of ethics and made it its major USP (Unique Selling Point). All the music albums are obtained from the production. Therefore, the music was obtained from legal means. The company also promoted new music composers. When the company was introduced, it became immediately popular among the internet users. The huge popularity among the internet users resulted in intense competition among the users.
Impact of Digital Disruption on the Traditional Music Industry
The digital disruption event in the music industry has been analyzed through work-centered analysis. The traditional music industry was quite different and used a different business model. In the past, the recording artists were invited at the music studio. They used to record music, which was stored in DVDs, CDs and music cassettes. They were distributed through traditional medium of the retail stores. The retailers collected commission on the sale on music. However, with the advent of internet, the profits of music industry started declining (Scott, 2015). The users started using internet for accessing the audio and video music on internet. It was pirated music and unethical means of access. However, the consumers were attracted as it was easy to access and provided abundant music.
Spotify realized the change in the music distribution. When the traditional music companies were fighting in different ways to stop piracy and increase consumer awareness, Spotify made negotiations with the music developers and they were given loyalty when their music sold. The company also provided opportunity to new singers and music developers (Kotler, 2015). They have to pay small fees so that they can promote themselves on the online platform. The users can also share their playlists on social media, which is an altogether new way to connect to the users. The company promoted itself as an ethical approach to access music online. The commission collected by the retailers was given to the company.
The digital disruption event challenged the industry in several aspects. The traditional music industry was suffering from huge loss and significant loss in market share as the users have started using internet to download the files from the internet. However, when Spotify emerged, most of the consumers were attracted to download the musing from these websites. Several other companies such as Apple music and other companies also emerged as a competitor. The digital disruption event influenced the operations of the organizations in the music industry in a significant manner (Nicolaou, 2017).
With the technological development and the advent of internet, the companies have started using internet to support their regular operations. However, several times, technology radically changes the business operations. In this case, the companied have to change their business model as their current business operations and the product becomes irrelevant. The digital disruption triggers such events.
In such cases, the pioneer companies inducing the change become the market leader. In the music distribution industry, Spotify became the first company to monetize on this change. It took advantage of the new trend in the music industry and developed a new market for itself (Jocobson, 2017). The sales figure in the music industry has drastically changed and the revenue obtained from the physical devices has reduced whereas the revenue obtained from the digital mediums has increased substantially.
In the current times, the company has created a niche position in the music industry. However, with time, several companies such as Apple music and Google music have emerged. Therefore, the company has to adopt several the strategies to establish their position in the market. Following recommendations are suggested to increase the market share of the organization:
Spotify’s Business Model and Ethical Subscription
Firstly, the company should invest in the market analysis and link the preference of the customers with the music. They should analyze the previous preference of the customers and suggest music videos accordingly. Other than that, the organization can also use the location of the customers to suggest music videos to them (Sheth and Sisodia, 2015).
The company should invest in increasing the market share of the organization by investing in the marketing campaigns. The company is based on digital mediums; therefore, it should invest in digital and social media strategy to increase the market share. Currently, it is the cheapest form of marketing approach. Along with it, the company should invest in the referrals and loyalty discounts to the loyal customers. It can link the account with the Facebook, Twitter and other social media platforms. It will increase the outreach of the organization (Divekar, 2016).
Currently, the company is operational in a few market and limited countries. In order to expand the profitability, the company should expand to other countries and market.
The company should also create dynamic pricing model in which the organization charges the customers according to their use.
The implementation plan refers to different strategies, which can be used to uplift the position of the organization in the market. As per the strategy, the company should seek license in foreign countries. It should also expand its music library so that it suits the taste of users of different geographical and cultural backgrounds.
It should also implement social media plans and marketing strategies to connect with the users. The users of the organization use online media extensively, so the marketing strategy should be based on online mediums (Clarke, 2015).
Conclusion
Conclusively, it can be stated that the digital disruption is an event, which can destroy the current business model of the organization. The present report has discussed the changes in the dynamics of in the music industry. The distribution method of the music industry changed after arrival of Spotify. With the popularity of internet, the profit of music distribution companies reduced drastically. It created a platform through which music is supplied through legal means. In the present report an implementation plan to increase the market share. Spotify changed the distribution method in the music industry. Moreover, it also supported new music composers.
References
Business Today. 2013. Playing the social tune. [Online]. Available at: https://www.businesstoday.in/magazine/lbs-mcase-study/london-case-study-how-spotify-evolved-its-use-of-marketing-tools/story/200269.html [Accessed on: 17 April 2018].
Chaffey, D. and Ellis-Chadwick, F., 2016. Digital marketing. Prentice Hall.
Clarke, C. 2015. Disrupting the disruptor: How can Spotify, Tinder and others handle the constant threat of tech disruption? The Drum. . [Online]. Available at: https://www.thedrum.com/news/2015/08/12/disrupting-disruptor-how-can-spotify-tinder-and-others-handle-constant-threat-tech [Accessed on: 17 April 2018].
Divekar, A. 2016. DIGITAL DISRUPTION: THE MUSIC INDUSTRY. Eco-Bridge . [Online]. Available at: https://www.eco-bridge.com/2016/08/08/digital-disruption-the-music-industry/ [Accessed on: 17 April 2018].
Jocobson, E.M. 2017. How Spotify Has Waged War With The Music Industry. Forbes. . [Online]. Available at: https://www.forbes.com/sites/legalentertainment/2017/09/22/how-spotify-has-waged-war-with-the-music-industry/#1ace2b9456d5 [Accessed on: 17 April 2018].
Kotler, P., 2015. Framework for marketing management. Pearson Education India.
Nicolaou, A. 2017. How streaming saved the music industry. Financial Times. . [Online]. Available at: https://www.ft.com/content/cd99b95e-d8ba-11e6-944b-e7eb37a6aa8e [Accessed on: 17 April 2018].
Scott, D.M., 2015. The new rules of marketing and PR: How to use social media, online video, mobile applications, blogs, news releases, and viral marketing to reach buyers directly. John Wiley & Sons.
Sheth, J.N. and Sisodia, R.S., 2015. Does marketing need reform?: Fresh perspectives on the future. Routledge.
Strauss, J., 2016. E-marketing. Routledge.
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