Updated: Nov 14
Understanding some of Spotify's Business Model
Every time I go outside, I put on earphones to listen to music on Spotify. Whenever new songs from my favourite artists are released, I get excited to open Spotify app on my phone to add them to my favourites. Is this relatable to you?
When talking about music and podcast apps, you cannot ignore the contributions of Spotify to the modern music industry. With its foundation by two Swedish entrepreneurs in 2006, Spotify has attracted millions of subscribers and artists from more than 170 countries for its innovative approaches to music streaming. It has become the world's #1 music streaming service. But do you know what exactly places Spotify the best among others in the music streaming industry? I believe not many of you have considered this until now. So today, I would like to provide you with my brief notes on Spotify's business model.
1. What the Company does - Key Activities
- Develop software
- Connect with abs fans
- Data Analysis
2. Attracting a Large Number of Users - Target Customers What makes Spotify most intriguing is that they offer free services – not many music streaming services offer free plans to all users. I started using Spotify with a free plan at first because there were millions of songs I could choose from to listen to.
3. Persuading Free Users to Become Paid Users - Value Propositions
There are always downsides to a free plan. Spotify plays a variety of digital audio adverts in between songs for unpaid users. This made me get annoyed as I simply wanted to listen to my music. But hearing Spotify's own ads on a premium plan made me consider upgrading to the premium plan. The premium plan removes its advertising and allows users to skip songs anytime they want. In 2018, 46% of Spotify’s users are premium users, who generate 90% of its total revenues.
4. Keeping Premium Users Leads to Better Operation - Business Operation
I am now a fully dedicated premium user of Spotify in terms of listening to music. This is how addictive, in a way, Spotify is. Once I got in, you don't find it difficult to get out as you think Spotify is the best。
6. How People Use Spotify - Channels
- Desktop app
- Mobile app
7. Spotify's Profits - Revenue Streams
- Adv fees
- Subscription fees
I hope you got familiar with the basics of the business model and enjoyed reading this :) See you next week!!