Written by: Laksmana Anggitapradhana & Indrani Salsabilla
Designed by: M. Albaradai Ansar
The music industry has been through a lot of transformation in the last few decades. From the sales in the form of CDs, the rise of file sharing, to the introduction of streaming services like Spotify. With each transformation, a new business model is created to better serve the needs of the industry.
Streaming directly is the method that most of us prefer to use for listening to music nowadays. Before streaming became the normal thing, CD was the widely-used media. But there was a phase when music was accessed by users mostly through peer-to-peer music file sharing websites such as Napster. These ‘music-ripper’ sites allow users to download music in a digital format without spending a dime. However, these sites’ existence was detrimental to artists. Napster got showered with lawsuits from various labels and artists, and it was finally shut down in 2001.
Napster may have died in 2001, but the audience was still there and migrated to other similar sites. In 2003, Apple’s iTunes came into the scene with a similar format, but paid. Yet many of the same audience from before flocked to iTunes despite having to pay, mainly because of malware issues commonly associated with such sites. This willingness to pay shows that there is a need for immediateness and easy access in the music world, two things that CDs fail to provide.
Pandora explored this concept further in 2005 by developing algorithms to tailor song recommendations to users and thus adding personalization to the mix. Then, in 2008, Spotify saw the patterns from its predecessors and combined the concepts together into the familiar music-streaming app that most people use nowadays. All right, now, what exactly makes Spotify have the upper hand in the music streaming market?
It is a given that this platform allows their users to play songs from various artists. But Spotify is not just about streaming music. With Spotify, users can share their feelings and expressions through the latest song they listen to and in return, see what their mutuals’ go-to songs are. To make them more social, Spotify released Wrapped in 2017. Spotify Wrapped lets the users reminisce all of their musical experiences in the past year; the songs they listened to the most, the number of time spent listening, top genres, and even the audio auras. These unique contents drive users to share their listening “results” on social media, thus, creating fear of missing out on non-Spotify users and making them new users. By analyzing their users’ habits, the company boosted their mobile app downloads and engagement by 21% in the first week of December 2020.
Users can do so many things on Spotify for free. They can add favorites and make playlists. However, they have to listen and watch ads after several songs and for the mobile app, users can only skip over six songs every one hour. Of course, this can be annoying after some time. Spotify takes advantage of this fact and offers Premium Service which includes no-shuffle mode, unlimited skips, free downloads, and ability to listen to music offline. This tactic pushes users to upgrade to premium subscriptions. Based on Spotify’s FY 2020, 91% of the company’s revenue came from its Premium Service with the other 9% coming from Ad-Supported Service.
The music industry has come a long way. Spotify saw and took the opportunity. They always try to give a creative touch to their business strategies and make sure to engage closely with their customers which turn out to be a success, as Spotify now dominates the music streaming market.
References:
(2021, April 23). Musicology: The history of music streaming. Mixdown Magazine. mixdownmag.com.au/features/musicology-the-history-of-music-streaming/
Agrawal, A. (2016, July 21). The Evolution of the Music Industry – Where We Go From Here. HuffPost Entertainment. www.huffpost.com/entry/the-evolution-of-the-musi_b_11109130
Granell, C. (2018, May 16). A history of music streaming. www.dynaudio.com/dynaudio-academy/2018/may/a-history-of-music-streaming
Jain, Pulkit. (2021). How Spotify Wrapped 2020 Marketing Campaign Boosted Mobile App Downloads And Engagement. https://www.moengage.com/blog/spotify-wrapped-2020-app-downloads-engagement/
Johnston, Matthew. (2021). How Spotify Makes Money. https://www.investopedia.com/articles/investing/120314/spotify-makes-internet-music-make-money.asp
