Musicand its way to listen to it own the same history since the conception of themusic industry which started at the early beginning of the twentieth century. Theuse of the expression “music industry” began with the introduction of thegramophone and the phonograph on the market, which has spread musicalconsumption. It is this propagation of private consumption of music thatcharacterizes the use of the term “music industry” which thus leadsto the mass production of material for the record and listening of sound.Thosetwo items, which were the phonograph and the gramophone, needed the use of two differenttypes of discs: the phonograph was using a metal cylinder and the gramophonewas using a shellac disc.
The discs were only compatible with the readingmachine that was intended for them. This incompatibility spawned a real battlein which the shellac disc came out victorious especially because the shellac discswere easier to store and produce. This victory engendered a mass production ofthose kind of discs: for example, more than 27 million records were soldannually in the United States during the 1910s.
But the production of theshellac discs is gradually fading, the arrival of the electric turntables madethe use of the shellac (component of the shellac disk that allows the reading)less essential, the industry of the record looks, therefore, on vinyl records.The Second World War disrupted the importation of shellac and consequentlystrengthened the vinyl record as a reference medium. The production of theshellac disc stopped in 1948, the vinyl record becoming the mean that all therecord companies will use from now on.Theaudio cassette is another mini revolution for the music industry. Beyond itsinnovative character, it will also create a new way to consume music tochallenge the supremacy of vinyl.Theaudio cassette came on the market in the 1970s.
It uses magnetic stripetechnology to record and listen to music sounds. It allowed to establish afreedom to the listener without precedence, this one could record, program,exchange, and discover without limit the music which he wished. Thus, the youngartists could record their music on a tape and then share it with whomever theywant. But the recording that allowed the tape has inevitably generated copiesof vinyl records of the time as well as their exchanges and their sharing.A newformat appears on the market: the Compact Disc (CD) which brings a notableimprovement in sound quality. The sound is clearer and more respectful ofreality than these predecessors. It is mainly developed by the music industrybecause of its unalterable nature.
It cannot be copied or shared. The audiocassette and especially its copy capacity were a thorn in the foot of the musicindustry that the CD just removed.The inventionof the Personal Computer (PC) in the 1960’s marks a turning point in the musicindustry. Indeed, this represents the start of the sound dematerialization; withoutits support, the sound is not tangible anymore and is then no longer amaterial. This dematerialization is a real break in the sense that the musicindustry and in particular the record industry is offloading the material thatcharacterizes its industrial nature. The PC has simply been the central toolfor digitizing sound and its volatility.
What is meant by volatility is thecapacity of the sound to be shared, listened to and transported without itsmaterial support. Therefore, the computer thanks to the Internet and especiallyto the Web, has networked listeners-consumers from all over the world whoexchanged dematerialized music: it is the arrival of the Peer 2 Peer (P2P).Music is now compressed in mp3 format and can easily be shared betweenlisteners-consumers in a completely free and illegal way.But the evolution of the dematerialized musicindustry does not stop there. The arrival of portable digital players (mp3) andthen the IPods continue this development of illegal downloading.
One of the resultsis also the disappearance of CD players and Walkman. Indeed, they cannot compete with the IPod which allowsto walk with more than 1000 music when the players need a tape or a CD limitedto a few dozen music. As a result, the vanishing of CD players and Walkman was inevitable.New actors enter the gameto circumvent illegal downloads. They understood the wants of the Internetusers to have access to free services; some companies, then, decided to makeavailable catalogs of music searchable online for free. The idea of ??thesecompanies is to pay the artists through the advertising generated the trafficon their site. The listener is the target of the advertisement but beneficiateof a very extensive catalog of music. Companies such as Spotify; which is the worldleader in streaming listening platforms or Deezer have been the main beneficiariesof this system that combines free listening for listeners and remuneration forartists.
They also link their offer with monthly or annual subscriptions thatallow the subscriber’s music lists to be synchronized with his smartphone, sothat he can listen to his favorite music offline without having to load it inhis smartphone via his computer. Strengths: The amount ofsongs and playlist available on Spotify’s makes it one of its most popularbenefit. Any research made or song the user had listen to can be found on thedifferent device he is connected on: phone, PC, tablets. The user can alsoshare his playlists on social media such as Facebook or Twitter.
To beneficiatefrom this service, Spotify offers different kind of subscription; instead of payingfor each song like some of his competitors offers, Spotify preferred to proposea subscription cost for unlimited options. Therefore, subscribers have anunlimited access the songs and playlists available.But they alsooffer another kind of subscription which is free. Indeed, the users can access thelarge selection of music provided by Spotify without paying but there are somedifferences with the Premium offer: presence of advertisement, no possibilityof downloading music, … By offering twotypes of subscription, Spotify attracts a lot of different kind of people andin both cases, they manage to remunerate the artists. Weaknesses: Converting free users to Premium subscribersis a problem Spotify is facing: on the 140 million (June 2017) active users,only 70 million (January 2018) of them have a Premium accountIndeed, Spotifydoesn’t promote his Premium service to free users well.
Premium account is thesecond source of income for Spotify, they need to develop it as much aspossible as the competition is increasing significantly. Opportunities: Spotify now proposesuniversity student discounts on their Premium service, making the total monthlyprice £4.99. However, there is no such discount for students who are slightlyyounger, such as high school students. But they can continue to increase their usersby expanding their library in the “long-tail”, or less popular genres. Spotify is also incollaboration with concert tickets seller website such as ticketmaster.
com;this partnership allows the user to find tickets really easily and helps togrow a durable relationship with the user. Threats: Downloading music illegallyis always a risk for services like Spotify as users, specially the one usingthe free subscription, can get tired of the advertisement and not being able tolisten to their music offline. The competition onthe market of the music provider service is getting tougher as all thecompanies offer the same kind of package for the same price. Spotify is alsofacing another problem: if they lost a lot of subscribers at the same time, itwould probably be the end of the company; thus, having those many competitorsis dangerous for them.
Another main danger is the change which can occurconcerning the new technology. Indeed, the new technology market on whichSpotify is operating is a fast-moving market, which means Spotify may have someproblem to keep following the trends. Competitive rivalry:Themusic streaming market hosts a lot of competitors with the same kind of offersthan Spotify has. Those competitors are some of the most prominent newtechnology companies, which are already well-known and therefore have a lot ofmoney to invest on marketing strategies. However, Spotify is most likely tokeep is leadership as its subscribers have no interests in changing the servicethey are using for another one. That’s why competitors are not axing theirmarketing onto the users who already have a subscription but more on those whowant to get one. Thus, Spotify will probably remain the market-leader.Threat of New EntryThere is already a lot of competitors on the music streaming market,therefore the barrier to entry is really high.
But profitability is still anon-going problem not every firm can afford to try to fight. Therefore, if acompany wants to entry the market, they should be specialized in newtechnologies, for it to be interesting for them and also be able to provide thelargest library they can. So, having a lot of money to invest in a must-have,which limits the possibility of entry on the market. Threat of SubstitutionMusicstreaming services appear to have substituted the main alternative methods oflistening to music, taking into account the decline of paid downloading,physical sales, stagnation of internet radio and increase in streaming. The onlycompany Spotify could be afraid of is YouTube as it’s offering kind of the sameservices as Spotify but for free. The only difference is the user cannot listento music offline but the range of music is larger.Anotherthreat would be illegal downloading; indeed, the amount of piracy is still highand can be an alternative for the premium subscribers who will find the sameservice as the one Spotify is offering.
Power of Suppliers At the beginning of those music streaming companies, labels and artistswere suspicious about the service they were providing, but now that the companiesall grew in recognition, they seem to have a positive attitude towards them. Spotify and the labels are functioningon common positive contracts, suggesting that it is not likely for the providersto use their influence to negatively affect Spotify. This will doubtless concernother streaming services as well, since the industry has indicated it looks favorablyupon music streaming and regards it as the future of the recording industry. Power of Buyers In order to keep their subscribers, the music streaming service need tooffer extra service. Spotify is offering some tools that competitors don’t butmost of Spotify’s competitors do offer an extra value as well but the Spotify’susers don’t seem to be receptive to this as Spotify is not losing customers onthe contrary gaining in subscription. This is showing that brand-recognition issufficient for the users to not change their music platform.
Over theyears, Spotify has implemented many tools for Internet users that do not existamong competitors. These tools generally allow a better follow-up of theartists of the Spotify community. For example, in 2016, Spotify has unveiled anew version of its platform which is enriched by a “Follow” button inthe manner of Twitter and Facebook, so that fans are kept informed of all thenew features of the artist. The music streaming service goes further with apowerful recommendation system that adapts to the tracks to allow you to”discover more and more music”.In July 2015,Spotify publishes a map on its website that reports the country’s musicalguests, city by city, according to the listening of its users. “Tell mewhat you listen to, I’ll tell you where you come from.
” The Swedishservice undertook to rebrand on an interactive map the most cost-effectiveartists in a thousand cities around the world, from more than 60 countries,mainly located in Europe. When we travel, we try to experience what makes thedifference: food, places … Spotify aims to make this experience throughmusic, by sampling musical trends in many cities around the world.Spotify’s strategy is focusing on users fromthe Millennials so born between 1980 and 1995 as this generation is generally marked by an increased use andfamiliarity with communications, media, and digital technologies.However, Spotifyhas the possibility to operate on two other markets: teenage high schoolstudents and young to middle-aged adult business professionals by using amulti-segment strategy.
Spotify can then adapt their marketing mixes accordingto those distinct markets as the two segments have different needs and wants. Bothof the groups have active music listening habits and they spend a lot of timeonline every day. Creating special offers could be very beneficial for Spotifyand would increase the number of Premium subscription significantly.