Spotify

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Term paper
At
Handelshøyskolen BI

- Spotify -

GRA 68344 – Business Development and

Innovation Management

Hand-in date
30.11.2011

BI Oslo

Program
MSc in Innovation and Entrepreneurship
Table of content
Executive summaryii
What is Spotify?1
Timeline For Spotify2
External Environment Analysis3
PESTEL framework3
Porters 5 forces3
Internal Environment Analysis6
Vrin framework6
Stakeholder analysis7
Users8
Right Holders8
Business Partners8
Employees8
Competition9
Swot analysis:9
Strength9
Weakness10
Opportunities11
Treaths11
Spotify’s value system11
Spotify’s innovation Processes14
Spotify and Disruptive innovation15
Status and challenges16
Technological16
Strategy19
Recommendations20
Appendix 1 – findings in interview with Cathrine Solheim22 Appendix 2 – Findings in Interview with Ugress25

Executive summary

The digital music industry has over the last decade developed significantly. From LP’s, CD’s, illegal downloading until now; Digital music streaming underlines this theory. In that case we have analyzed Spotify as one of the fastest growing online music programs in the business. From their start in 2008 Spotify has contributed to renew the music and revolutionize the music industry with continuous launch of new services, markets and networks. Their merge with Facebook in the fall 2011 had significant impact on their services and is also something this paper touches upon. Throughout the paper we gathered valuable information from Ms Catherine Solheim, Country manager at Spotify Norway, and the Norwegian Electronic artist, Ugress, who has Spotify as his most important distribution channel. In order to get an adequate and accurate view of Spotify’s external environment we have emphasized on PESTEL - framework and Porters 5 Forces throughout the paper. We found this to be attractive where Spotify has managed to gather market share in their representative countries. On Spotify’s internal analysis we practiced the Vrin - framework, additionally as we have used a stakeholder analysis. Furthermore, this paper shows that Spotify is a value networking company since it links customers together through sharing of music. This is closer described in our analysis of their innovation process, since Spotify as an innovation itself derives from good understanding of the theories related to distributing music rather than experimentation. As Spotify is build in an EPI system, Spotify gathers significant input from external factors and to that extend, this paper shows that they have been practicing open innovation. Throughout the paper we have showed Spotify’s efficient and cheap marketing strategy by creating positive word of mouth and involvement with Facebook. This involvement, additionally to US launch, facilitated for 250,000 new users the first weeks, and thus increased their brand awareness. We also found that Spotify invests in high technology to a large extent in order to continuo their development on these operations. Lastly, we have made some recommendations with basis from findings and analysis throughout the paper. What is Spotify?

Spotify is a music streaming service offering unlimited streaming of selected music from a range of major and independent record labels, with virtually no buffering delay. Spotify was founded in 2006 by Daniel Ek and Martin Lorentzon. In 2008 Spotify it was launched to the masses, and today they have about 15 million users in 9 countries, 8 in Europe, additionally to the US. Spotify currently offers three main music packages – Spotify free and in the new launch May 2010 called Spotify-open. They also have Spotify unlimited, and Spotify premium. The Spotify free is mainly financed through advertisements of different kinds, audio and pictures, text and short films.

Spotify unlimited was launched...
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