Spotify is an online music streaming and it has changed the dynamic of how people listen and enjoy music. The audio streaming platform has shifted from physical media to online streaming files and libraries. Adopting the latest technology has helped Spotify to gain a competitive advantage over other audio streaming platforms. Today, we’ll discuss swot analysis of Spotify.
Spotify swot analysis would focus on studying the company’s internal strengths and weaknesses, and external available opportunities and threats that the company has to face.
Spotify has established a strong brand reputation and achieved a market leadership position in the market. It is in terms of high music streaming subscribers, high market share, great content in the music library, and stability. A new competitive platform has to compete with Spotify in many ways.
According to a study by Statista, Spotify is the world’s topmost reputed music streaming brand in 2019.
Early Mover Edge
Spotify has a unique competitive edge of entering the music streaming industry earlier in the market. The platform kept on entering the global market and expanding its music library. The music streaming platform follows a simple business model, has a user-friendly interface, quality content, and extensive library make it highly visible to the users.
Spotify became operational in 2008, and the platform has roundabout 140 million paid subscribers by the end of 2020. On the other hand, Apple became an operation in 2015, and it has got 72 million paid subscribers.
Expensive Music Library
Spotify wasn’t the first music platform in the market, but the company achieved the market share in a short time. If your internet connectivity isn’t good, then it offers you various streaming options to listen to music without interruption. According to a study by Statista, Spotify spends roundabout 795.5 million dollars on research and development.
Artists add nearly 60,000 new songs every day on the platform, and its library has got more than 60 million songs and 1.9 million podcast titles.
Popular Music App
The other reason for the popularity of Spotify in a short time is that users can access the platform in various ways like smartwatches, Bluetooth speakers, gaming consoles, laptops, and smartphones.
Personalized Music Selection
Spotify uses various algorithms like data sifting technology, artificial intelligence, and machine learning in order to understand customers’ preferences, valuable insight, and recommend new artists and songs to the customers. According to an estimate, Spotify drive does 16 billion artist discoveries every month. The users listen to the user-generated list of Spotify.
The discover technology of Spotify sends you 30 new songs every week that you would like. The platform sends you the latest songs every week on Friday. You’ll receive a wrapped-up playlist at the end of the year. It allows you to share your music playlist with your friends and acquaintances.
The pricing model of Spotify is very simple. The first entry comprises the free users just like any other platform. You can buy a paid subscription in order to enjoy the ad-free experience. Third, you can get unlimited access to the music library. According to an estimate, Spotify has more than 130 million paid subscribers across the globe.
Spotify is following the on-demand access model just like other platforms like Netflix and Hulu. Musicians and artists have realized the reach of such platforms, and they launch their latest songs on such platforms. According to an estimate, Spotify generates 80% of its revenue from the US, and 36% comes from the global market.
The music listeners and market influence of Spotify are increasing every day. It offers the company a market leadership position and it can forecast the upcoming trends. According to an estimate, the platform has 144 million subscribers, 320 million active users, and 4 billion playlists in 92 countries worldwide.
High Royalty Cost
The running operational cost of Spotify is very high. The music streaming platform has to pay a lot of money to the copyrights holders, writers, producers, labels, and artists for the featured songs and content. According to an estimate by Statista, Spotify spent roundabout 75% of its revenue on royalty payments.
If you want to listen and enjoy the music, then you should have stable connectivity and access to the internet. However, it allows users to download music on their devices, but you need to have internet and it is one of the biggest weaknesses of the platform. According to an estimate, approximately 54% of the world’s population only has the access to the internet.
No Different than Other Apps
The services, platform’s layout, and other features of Spotify are almost the same, the company doesn’t offer any unique or different. The only different element it has got is the brand reputation and premium features, and it can change at any time.
Less Payment to Music Owners
Spotify offers a few cents to the users for playing the music, and it has to be played thousands of times for the artist to make some money. That’s why famous artists and singers like Taylor Swift are pulling out their music and shifting it to other platforms.
Here is how the music streaming services pay to the artists:
|Music Streaming Service||Average Pay Per Stream|
Focus on Paid Subscribers
Advertisement based business model could cover the platform’s expenses, but the focus of Spotify is increasing the paid subscribers. Some music listeners are highly price-conscious, and the platform has to spend a lot of effort in making them paid users. According to an estimate, an average user spends 25 hours per month listening to music on Spotify, and it becomes 40.3 billion hours per year.
As that Spotify is operating its business worldwide, but there are many markets that the company hasn’t tapped into yet. If the company wants to amplify its profitability, then it has to keep on pushing its boundaries.
Spotify has entered the video streaming market in the form of video podcasts in July 2020. But the video streaming is a very competitive market, and the platform requires a great push to make its name in the video streaming market and attract new users.
The podcasting market of Spotify has significantly increased by approximately 200% since 2019. Spotify is a very famous application for watching and listening to podcasts in the US. There was nearly 120 million podcast listeners in 2020, and it would reach approximately 160 million by the end of 2023.
Many tech companies, cell phone, and internet service providing companies offer partnership programs where the user could get the premium package for some time. The audio streaming platform has established a partnership with Vodafone, Luiza, Magazine, Bouygues Telecom, Xbox, Facebook, and others. The company should keep on building alliances with other companies.
Celebrities and influencers have got a great fan following, when they endorse any brand, then it helps such brand to increase its market. Barak Obama, Britney Spears, and Justin Bieber have already endorsed Spotify and shared their favorite Spotify music playlist with their fans. Since the competition in the music streaming industry is increasing, the company should get more endorsement from the influencers.
The focus of Spotify has been on growth and market expansion over profitability, and it resulted in the form of losses. The company has had significant losses for the past few years.
The music streaming industry has become highly competitive for the past few years. Deezer, SoundCloud, Google Play Music, TIDAL, Pandora, YouTube Music, and Apple Music are some of the top competitors of Spotify. Some of them are top tech giant companies, and their presence in the market has made it difficult for the company to expand its market share.
Labels, artists, and copyright holders keep on shifting their music from one platform to another and signing new contracts. When there is a change in platform, the former one can’t keep the music on its playlist. Therefore, Spotify has been having legal disputes with various parties on contacts, and it is increasing the operational cost.
Artists Pulling out
Famous artists like Radiohead, Beck, Taylor Swift, Neil Young, and Prince have finished the contracts with Spotify and pulled out their content from the platform over the payment issues. They have got a great fan following, and they’ll shift to the other platform.
Some people would like to download the music on their device and play it from there. Although Spotify allows you to download the music from there, you need to have an account in order to access the data. A very few people have got the account, approximately 40% of the millennials.
Vulnerable to Piracy
Spotify is highly vulnerable to piracy attempts, and it’s only after YouTube. When users could download the music and keep on listening to them off the record, it won’t offer any benefits to the artists and the platform. They would shift their music to other platforms that are more safe and secure.
After studying Spotify swot analysis, we’ve realized that the company is the leading music streaming platform. But the company should be aware of the potential threats that are lingering, and focus on its strengths in order to exploit the opportunities.