Playing a new tune in a disrupted market MS&E 270 Fall 2016 - - PowerPoint PPT Presentation

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Playing a new tune in a disrupted market MS&E 270 Fall 2016 - - PowerPoint PPT Presentation

Jul 11, 2023 296 likes •694 views

Playing a new tune in a disrupted market MS&E 270 Fall 2016 Hyder, Yash, Akash, Dhruv Todays playlist Evolution of the music industry Spotify 101 Challenges Strategic considerations Recommendations $10.00 $15.00

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SLIDE 1

Playing a new tune in a disrupted market

MS&E 270 Fall 2016

Hyder, Yash, Akash, Dhruv

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SLIDE 2

Today’s playlist

  • Evolution of the music industry
  • Spotify 101
  • Challenges
  • Strategic considerations
  • Recommendations
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SLIDE 3

Yesterday (all my troubles seemed so far away)

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1973 1975 1976 1977 1978 1979 1980 1981 1982 1984 1985 1986 1987 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2001 2003 2004 2006 2008 2009 2010 2011 2012 2013 2015

Music Industry Revenue (in billions)

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SLIDE 4

Yo Ho (A Pirate’s Life for Me)

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1973 1975 1976 1977 1978 1979 1980 1981 1982 1984 1985 1986 1987 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2001 2003 2004 2006 2008 2009 2010 2011 2012 2013 2015

Music Industry Revenue (in billions)

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SLIDE 5

Enter iTunes (Don’t forget my son, to include everyone)

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1973 1975 1976 1977 1978 1979 1980 1981 1982 1984 1985 1986 1987 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2001 2003 2004 2006 2008 2009 2010 2011 2012 2013 2015

Music Industry Revenue (in billions)

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SLIDE 6

Good Times Bad Times (try to do … the best I can)

$- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1973 1975 1976 1977 1978 1979 1980 1981 1982 1984 1985 1986 1987 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2001 2003 2004 2006 2008 2009 2010 2011 2012 2013 2015

Music Industry Revenue (in billions)

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SLIDE 7

Coming Back to Life

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SLIDE 8

Coming Back to Life

46%

DIGITAL

46%

PHYSICAL

8% PERFORMANCE RIGHTS

SOURCE: IFPI. 2014 figures

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SLIDE 9

Coming Back to Life

46%

DIGITAL

46%

PHYSICAL

8% PERFORMANCE RIGHTS

SOURCE: IFPI. 2014 figures

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SLIDE 10
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SLIDE 11
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SLIDE 12

What is Spotify? Baby don’t hurt me..

  • Launched in 2008 in Sweden
  • Founded by Daniel Ek (former CEO of

uTorrent)

  • Present in 60 countries
  • On-demand music streaming service with

personalized recommendations and playlists

History of Spotify

  • Spotify has 40m subscribers for their

premium service and 60m “freemium” users

  • As of 2015, its revenue is close to $2 bn.
  • 90% from subscriptions
  • 10% from advertisements

Spotify now

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SLIDE 13

Challenges

“Livin’ on a Prayer”

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SLIDE 14

It’s the eye of the tiger…

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SLIDE 15

.. rising up to the challenge of our rivals

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SLIDE 16

Artists in Flux

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Sustainable Growth?

  • 28.5
  • 45.4
  • 86.7
  • 57.8
  • 162.3
  • 173.1

73.9 188 430 747 1082 1945 2010 2011 2012 2013 2014 2015

Net Loss Revenue

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SLIDE 18

The New Streaming Industry

“I will Survive”

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SLIDE 19

Highly competitive industry

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Navigating the landscape

Industry Structure Resource- Based View Game Theory Complexity Theory Institutional Structure Driver Competitive Advantage Performance Market Organization Position VRIN Resource Right Moves Edge of Chaos Viable Niche Profitability Long-Term Dominance Short-Term win Growth Survival Stable Changing Oligopoly Growing Uncertainty Nascent Activity System Resource Portfolio N/A Complex Adaptive System Fluid Long-Term Long-Term Short-Term Unpredictable Unknown

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SLIDE 21

Navigating the landscape

Industry Structure Resource- Based View Game Theory Complexity Theory Institutional Structure Driver Competitive Advantage Performance Market Organization Position VRIN Resource Right Moves Edge of Chaos Viable Niche Profitability Long-Term Dominance Short-Term win Growth Survival Stable Changing Oligopoly Growing Uncertainty Nascent Activity System Resource Portfolio N/A Complex Adaptive System Fluid Long-Term Long-Term Short-Term Unpredictable Unknown

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SLIDE 22

Navigating the landscape

Industry Structure Resource- Based View Game Theory Complexity Theory Institutional Structure Driver Competitive Advantage Performance Market Organization Position VRIN Resource Right Moves Edge of Chaos Viable Niche Profitability Long-Term Dominance Short-Term win Growth Survival Stable Changing Oligopoly Growing Uncertainty Nascent Activity System Resource Portfolio N/A Complex Adaptive System Fluid Long-Term Long-Term Short-Term Unpredictable Unknown

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Navigating the landscape

Industry Structure Resource- Based View Game Theory Complexity Theory Institutional Structure Driver Competitive Advantage Performance Market Organization Position VRIN Resource Right Moves Edge of Chaos Viable Niche Profitability Long-Term Dominance Short-Term win Growth Survival Stable Changing Oligopoly Growing Uncertainty Nascent Activity System Resource Portfolio N/A Complex Adaptive System Fluid Long-Term Long-Term Short-Term Unpredictable Unknown

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What resources do they have now?

“Got the moves like jagger”

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VRIN Analysis

Curation system Relation with labels Music Catalogue User data Valuable Rare Inimitable Non- substitutable Apple, Amazon, Google now all have ~40 million tracks

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VRIN Analysis

Curation system Relation with labels Music Catalogue User data Valuable Rare Inimitable Non- substitutable 55% revenue split with labels, Apple Music 58%, Rdio 60% now dead, Pandora struggling

https://www.cnet.com/news/spotify-negotiating-to-pay-less-to-record-labels-report-says/

Apple, Amazon, Google now all have ~40 million tracks

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VRIN Analysis

Music Catalogue User data Valuable Rare Inimitable Non- substitutable Expert-curated Beat Radio – Apple Music Relation with labels Curation system

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SLIDE 28

VRIN Analysis

User data Valuable Rare Inimitable Non- substitutable Music Catalogue Relation with labels Curation system

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VRIN Analysis

https://news.spotify.com/us/2016/05/25/discover-weekly-reaches-nearly-5-billion-tracks-streamed-since-launch/

  • ~2 hour personalised playlists
  • Updated every Monday morning
  • Nearly 5 billion tracks streamed

since July 2015

  • Over 8,000 artists for whom 50%
  • f listeners from Discover Weekly
  • 42% of listeners use Discover

Weekly first thing in the morning Discover Weekly

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Explore all interdependencies between players in the game Identifying elements of the game which can be changed Step 1 Step 2 Value Net Map

Customers Suppliers Complementors Substitutors Company

Elements of the game

  • Players
  • Added Value
  • Rules
  • Tactics
  • Scope

Quit Playing Game Theory with my heart

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SLIDE 31

Customers Suppliers Complementors Substitutors Company Music Streaming Music Download Free Music Physical Music Labels/Artists Server Infra.

  • Ad. platforms

Audio Hardware Music Ticketing OS Providers End Consumer

Using Game Theory to win

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Customers Suppliers Complementors Substitutors Company Music Streaming Music Download Free Music Physical Music Labels/Artists Server Infra.

  • Ad. platforms

Audio Hardware Music Ticketing OS Providers End Consumer

Using Game Theory to win

  • Complementors and

Substitutors are the same!

  • Supplier relationships can

get disrupted

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Game Theory meets Simple Rules…

Rule #1 Be the Complete Music Experience

Moves Spotify has played Consequence Partner with Audio Hardware Players One-Stop Shop for Music Fans Be the Music Partner for any Business

  • Harman and Spotify Team Up to Streaming Audio
  • Sony incorporates Spotify into PS 3 and PS 4
  • Change complementor

relationships in the game

  • BandPage partnership to Help Musicians sell directly to

fans

  • Ticketmaster partnership for concert recommendations
  • Starbucks and Spotify Redefine Retail Experience
  • Tinder Teams Up with Spotify
  • Change the scope and added

value in the game

  • Change customers in the game
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Game Theory meets Simple Rules…

Rule #2

  • Experiment. Move Faster than the Rest

Moves Spotify has played Consequence Expand! Expand! Expand!

  • Spotify eyes Asia expansion with Indonesia launch
  • Spotify Expands Into Taiwan, Argentina
  • Be the first mover and “lock-in”

customers

Break Pricing Rules

  • Students in US need to pay only half for Spotify

premium

  • Get 3 months of Spotify Premium for just $0.99
  • Change the pricing rules of the

game

New Experimental Products

  • Partnership with Genius for song lyrics
  • Spotify for podcasts, TV shows, Original Content
  • Change the scope of the game
  • Become a verb

Redefine Marketing Rules

  • 'Thanks 2016, it's been weird,‘ : Spotify’s ad campaign
  • Spotify launches with a famous social marketing

initiative

  • Change the marketing rules of

the game

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Game Theory meets Simple Rules…

Rule #3 Leverage Data

Moves Spotify has played Consequence Better Advertising Launch of Spotify Insights Become a Verb

  • 'Thanks 2016, it's been weird,‘ : Spotify’s ad campaign
  • Share user data for targeted ads
  • Becoming more profitable
  • Opens the door for exclusive complementors

(developers etc.) with the Insights API

  • Intelligent Recommendations
  • Bringing new content to the platform for use
  • Creating complementors
  • Increasing switching costs for

customers

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SLIDE 36

Our Recommendations – Come Together

  • Change rights ownership game
  • Become the music ecosystem
  • Probe mature markets
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SLIDE 37

Thank You for listening! Questions?