The music streaming industry is a prominent oligopoly with major players Spotify, Apple music, Amazon music, among others. Spotify is the largest music streaming service accounting for 47.8% market share based on streams with major competitors Apple having 10.6% market shares respectively (Wagner 2018). The music streaming service industry is very competitive and by using the Porters five forces analysis below, we discuss major ways in which the competition has affected the growth of Spotify highlighting major threats, opportunities and points at which the competition is most intense.
Magezi, K. Prudence (2018) "Spotify Porters Five Forces Analysis 2018" 123 Writing [Online] at https://www.123writing.com/sample/spotify-porters-five-forces-analysis-2018
Spotify Strategy Case Study
Key Learning Outcomes
- Use Porters five forces model to analyse an industry on the basis of the five competitive forces.
- Analyse the global music streaming industry and how the five forces have affected Spotify and rival firms and the impact on industry structure, attractiveness, and profitability.
- Understand how Spotify has managed to defend against intense competition from Pandora, Apple and Amazon music and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage.
Analyse the micro environment of Spotify and the global music streaming industry using Pestle, Swot and Porters five forces.
***Updated version***See latest here Spotify Porters Five Forces Analysis 2021
The music streaming industry is very profitable but also very competitive with many players majorly apple music, Spotify, Amazon and Pandora. Spotify is the world’s leading digital music streaming service that gives people access to millions of songs, videos and podcasts from artists all over the world (Willings 2018). Spotify has an average of 71million global monthly subscribers with close competitor Apple music having 40million subscribers (Richter 2018). Spotify also has a global market share of 47.8% with major competitors pandora and Apple Music having 21.6% and 10.5% market shares respectively based on their streams (Wagner 2018).
1.1 Bargaining Power of the buyer
According to Grant (2016), the ability of buyers to drive down the prices they pay is dependent on two factors: their price sensitivity and their bargaining power relative to the firms within the industry. Price sensitivity is normally determined by factors like product differentiation, competition, and significance of the product to the consumer. However, consumer bargaining power is determined by factors like cost and ease of switching to purchase products from Spotify competitors like Amazon music, Google pay or Tidal, as well as buyer information regarding prices music streaming services in the market. Considering the above factors, we can conclude that a Spotify subscriber has high bargaining power because of the availability of many streaming services like Apple Music, Tidal, Pandora, which offer similar high-quality material (music, videos, podcasts) in the same price range making switching costs between different streaming services very minimal. For example, Apple Music and Spotify both have monthly subscription fees of $9.99 or $14.99 for family membership (Harper 2018) meaning there’s zero switching costs hence giving the customer a wide variety of streaming services to choose from with no additional costs.
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