Spotify

Image: newsroom.spotify.com

LINK: https://www.menti.com/gngh8ez3rxVoting code: 3725 3045

In 2021:* Paid subscription - 57.2%* On-demand streaming (ads) - 11.7%* SoundExchange distributions - 6.6%* Limited tier paid subscription - 6.1%* Synchronization - 2.0%* Download album - 1.9%* Other ad-supported streaming - 1.4%

* LP/EP - 6.9%

* CD - 3.9%

Source: https://www.riaa.com/u-s-sales-database/

"First, you need to have a really good idea of what it is that you’re trying to solve. And in our case... (what) we were trying to solve was it needs to feel like you have all your music on your hard drive... So, it was very clear to me that if we could deliver something that felt like you had all the world’s music on your hard drive, it would likely be way better than piracy, which was the dominant force of music consumption at the time."

Source: How Spotify Saved the Music Industry (But Not Necessarily Musicians) (Ep. 374) https://freakonomics.com/podcast/spotify/12

* Please state the facts of the case.- Detail what has made Spotify successful so far- Detail what has been the main problem for Spotify

Substitutes

Radio YouTubeDigitally purchased music Vynil, CDs, cassettes

ConcertsPiracy

Rivals

Apple MusicAmazon MusicTidalPandoraGoogle Play Music DeezerNapster

Casual listeners Music enthusiasts AdvertisersBuyers

Big record labelsOther record labels Artists Podcasters Suppliers

...

What can you conclude

from the Five-forces framework

Other streaming services Other legal/illegal companiesNew entrants

for Spotify?

Source: Team activities compilation

Who is the strongest player?

What changes did digitalization bring to the value chain?

distribution

artists / bands

record labels

users

advertising

Spotify Technology S.A. Announces Financial Results for First Quarter 2022

MAUs by region

https://www.businesswire.com/news/home/20220427005371/en/Spotify-Technology-S.A.-Announces-Financial-Results-for-First-Quarter-2022

A business model describes the rationale of how an organization creates, delivers, and

captures value.A. Osterwalder (2005) proposed there were nine "building blocks" that made up a company's business model.With the Business Model Canvas, organizations can conduct structured, tangible, and strategic conversations around existing or new business.The nine building blocks fit into one page so you have a complete look of the business

model in a simple way.

https://youtu.be/dhQh-tryXOg

Source: Osterwalder, A. (2013). A better way to think about your business model. Harvard Business Review, 6.

Group the 9 building blocks into 4 areas:

What?

Value proposition

Who?

Customer segments

ChannelsCustomer relationships

How?

Key resourcesKey activitiesKey partnersHow much?Cost structure Revenue streams

You can get the original PDF template from the link below.

Source: https://canvanizer.com/downloads/business_model_canvas_poster.pdf

Customer segmentsAre the heart of any business model.This building block defines the dierent groups of people or organizations an enterprise aims

to reach and serve.An organization can serve one or several customer segments.

Examples:Mass marketNiche marketSegmentedDiversified

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Value propositionsIs the reason why customers turn to one company over another.It seeks to solve customer problems and satisfy customer needs with value propositions.This building block describes the bundle of products and services that create value for a specific

customer segment.Examples of elements that contribute to value creation:

NewnessPerformanceCustomization

DesignBrandConvenience

Price

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Channels Value propositions are delivered to customers through communication, distribution, and sales channels, which comprise a company's interface with customers.This building block describes how a company communicates with and reaches its customer

segments to deliver a value proposition.Examples of channels:Direct - own stores, website, sales forceIndirect - partner stores, distributors, wholesalers

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Customer relationshipsThis building block describes the types of relationships a company establishes with specific

customer segments.A company should clarify the type of relationship it wants to establish with each customer

segment.Relationships can range from personal to automated.Examples of customer relationships:

Personal assistanceSelf-serviceAutomated serviceCommunities

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Revenue streamsResult from value propositions successfully oered to customer segments.This building block represents the cash a company generates from each customer segment (costs must be subtracted from revenues to create earnings).A company must ask itself "for what value is each customer segment truly willing to pay?"Successfully answering that question allows the company to generate one or more revenue

streams from each customer segment.Examples of revenue streams:

SalesSubscription feesLicensingLending/Renting/Leasing

Advertising

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Key resourcesThis building block describes the most important assets required to make a business model

work.These resources allow a company to create and oer a value proposition, reach markets, maintain relationships with customer segments, and earn revenue streams.Dierent key resources are needed depending on the type of business model.

Key resources can be:PhysicalFinancialIntellectualHuman

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Key activitiesThis building block describes the most important things a company must do to make its

business model work.Like key resources, they are required to create and oer a value proposition, reach markets, maintain relationships with customer segments, and earn revenue streams.Like key resources, dierent key activities are needed depending on the type of business model.

Exaples of key activities:ProductionTrainingService deliverySupply chain management

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Key partnersThis building block describes the network of suppliers and partners that make the business

model work.Some activities are outsourced and some resources are acquired outside the enterprise.

Reasons for creating partnershipsOptimization and economies of scaleReduction of risk and uncertaintyAcquisition of particular resources and/or activities

Examples partnerships:Buyer-supplier relationshipsStrategic alliances between non-competitorsCoopetition (strategic partnerships between competitors)Joint-ventures to create new businesses

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Cost structureDescribes all costs incurred to operate a business model.Creating and delivering a value proposition, maintaining customer relationships, and generating

revenue streams all incur costs.Such costs can be calculated relatively easily aer defining key resources, key activities, and key

partners.Costs should be minimized in every business model, however low cost structures are more important to some business models than to others.Two broad classes of business model cost structures:Cost-driven - models focus on minimizing costs wherever possible.Value-driven - are less concerned with the cost implications of a particular business model design, and instead focus on value creation.

Source: Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

What is Spotify's competitive advantage?

Does Spotify have something important

for users?

Can Spotify do something others can't do?

Source: https://stephenfmccarthy.files.wordpress.com/2014/12/bmc-22.png

LINK: https://forms.oice.com/r/5gwdU97QRq

Interesting video from CNBC "Netflixʼs DVD business is still alive — hereʼs what it looks like"click here to watch

Go to Module 2 in CANVAS.

You need to purchase this case in the Harvard Business Publishing Education site

Due Monday September 26 at 11:59pm:* Individual assignment - video

See you in two weeks.