Advanced Business Strategy - Spotify PDF

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FIVE FORCES MODEL OF COMPETITION: SPOTIFY

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The Five Forces Model of Competition - New Entrance: Spotify Doan Nhat Quang - 1901043 Ha Van Tuan - 1901076 Advanced Business Strategy - IBS309 Lecturer: Tran Ngoc Hung

Table of contents

Introduction

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Spotify before entering Vietnam

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Spotify after entering Vietnam Spotify's strategy when entering the Vietnamese market Core factors - Competitive advantages Marketing strategy - Spotify is not a music provider, Spotify is a close friend of the user. Spotify, what to do in Vietnam Strongly on copyright issues Convince users to change

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Spotify in Vietnam - A Story of Time

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References

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Introduction Music is an indispensable entertainment for anyone. With the advancement of technology, today there are many applications and platforms for music streaming. This makes the market more intense than ever. However, after all, only a few names have become popular and known by many people. Among them, it is impossible not to mention Spotify - the world's No. 1 online music player. This report will focus on analyzing the development history and factors that make Spotify's success in the first part and analyzing Spotify's strategies when entering the Vietnamese market. Spotify before entering Vietnam At the time early 2018, the music streaming market of VietNam appeared a new potential entry is Spotify. Spotify is a digital music streaming service that gives you access to millions of songs, podcasts and videos from artists all over the world, like Apple Music. Spotify was founded in 2006 in Stockholm, Sweden, by Daniel Ek, former CTO of Stardoll, and Martin Lorentzon, co-founder of Tradedoubler (Thomas, Lauren, 2017). This is a Swedish audio streaming and media services provider, launched in October 2008. Spotify's global headquarters are in Stockholm, Sweden ("About us", n.d.). Spotify offers digital copyright restricted recorded music and podcasts, including more than 60 million songs, from record labels and media companies ("Company Info", 2020). As a freemium service, basic features are free with advertisements and limited control, while additional features, such as offline listening and commercial-free listening, are offered via paid subscriptions. Users can search for music based on artist, album, or genre, and can create, edit, and share

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playlists. Spotify is available in most of Europe and the Americas, Oceania, and parts of Africa and AsiaSpotify is available in most of Europe and the Americas, Oceania, and parts of Africa and Asia. And this platform is also working on most modern devices including Windows, macOS, and Linux computers, and iOS, and Android smartphones and tablets and AI enabled smart speakers such as Amazon Alexa. And now, Spotify is available in 92 countries. At the time Spotify attacked the streaming market of VietNam, there are two biggest platforms of the market are Nhaccuatui and Zingmp3. In the year 2017, Viet Nam had 25 million people usually using music streaming, in which 90% market share of online music in the country was held by about 4-5 Vietnam companies. In many years, music sites have maintained two forms: free music and subscription music. The monthly fee that companies offer is very low, it’s just about 1 USD/month, but the number of paying customers is still very limited. In the world, on average, about 45% of people accept to pay to listen to music online on the total number of customers, but in Vietnam this figure is less than 10%. So, this will be a difficult problem with Spotify if they want to take over the Vietnam streaming music market. Because, with Spotify users must pay 2.5 USD to use Premium service. Before going to Viet Nam, Spotify was the biggest streaming music platform in the world. In March 2011, Spotify announced a customer base of one million paid subscribers across Europe, and by September 2011 the number of paid subscribers doubled to two million people (Van, G., Jennifer, 2011). In August 2012, Time reported 15 million active users, four million paying Spotify subscribers (Sanburn, Josh, 2012). Users continue to grow, reaching a total of 20 million active users, including five million paying customers globally and one million paying customers in the United States, as of December 2012 (Weber, Harrison, 2012). By March 2013,

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the service had 24 million active users, six million paid subscribers (Sloan, Paul, 2014), and had grown to 40 million users (including ten million payers) by May of this year 2014 (Brustein, Joshua, 2014), 60 million users (including 15 million paid users) in December 2014, 75 million users (20 million paid users) in June 2015, 30 million paid subscribers in March in 2016, 40 million paid subscribers as of September 2016 (Kahn, Jordan, 2016), and a total of 100 million users by June 2016 (Murgia, Madhumita, 2016). In 2017, Spotify was valued at up to $ 19 billion, each share reached $ 4,000. Talking about its target in the Vietnamese market, Spotify confirmed that they will focus on providing the best music experience for users here and reducing license violations. When Spotify aims to Viet Nam, they provide Viet Nam users one copy right music streaming platform. With copyright music, users can listen to the higher quality of the song. Spotify wants people to listen to copyrighted music that requires royalty payment. This is a fine objective, but I think it is too ambitious in Viet Nam’s context. Because, Free music streaming websites have been here for more than a decade, and people have not got so used to them that it’s hard to change. It was not until some two years ago that the two major Vietnamese music streaming applications, Zing Mp3 and Nhaccuatui, started to offer premium accounts, and they have been struggling to convert free users to paying users ever since. Moreover, at that time the word copyright music with VietNam people still is something very new. Because Viet Nam users are accustomed to using free music streaming and non copyright music, they even don’t know the differences between copyright and non copyright music. So, with Viet Nam users just copyright music is not enough for them to spend more than 2.5 USD/month for using this platform. And the solution of Spotify is they develop and use data analytics, user profile mining, and personalization of customer

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experience to deliver new features for the premium version. They changed music store and optimize user experience when listening to playlists, to suggest users and play music automatically, Spotify's algorithm is created based on machine learning: This feature analyzes songs in a certain playlist and tries to predict music will come next - as if its creator kept adding tracks. Spotify also created algorithms to optimize cue music that pops up from your main menu to manage playlists like Discover Weekly. And one thing very creative is localization strategy, Spotify has playlists created to match your region. The music experience of each region on this platform is very different and diverse. And the results for these strategies is Spotify was getting over Zingmp3 and becoming one of the largest music streaming in Viet Nam. Spotify after entering Vietnam Spotify's strategy when entering the Vietnamese market Core factors - Competitive advantages Technology and experience optimization Spotify's user understanding is the biggest strength of this application in the Vietnamese market as well as in the world. By using artificial intelligence technology and personalizing the user experience, Spotify always knows how to serve listeners whenever they need it, whether they're sad, happy, learning or cooking. This makes the listeners' playlist not boring, giving them a feeling of being cared for and shared because music helps people express their emotions (T.K., 2018; Nguyen, 2018).

However, to create a great brand can not only come from optimized technology because no matter how advanced you have technology, it cannot serve the needs of customers or users who do not know, you also cannot sell the product. Therefore, the Marketing department of Spotify in my opinion has contributed a big part to the

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success of this entertainment technology service company. Marketing strategy - Spotify is not a music provider, Spotify is a close friend of the user. Although it is not clear to the audience that it is targeting, but it feels like Spotify is still targeting the young and middle-aged segment. This can be seen through their extremely impressive media campaigns. They capture the trends and interest of the users to broadcast interesting media translations. For example, a poster with the words “Me:“ It's okay, the breakup was mutual ”and next to it is a picture of Spotify playing sad music (picture) (AimAcademy).

We can see this as a competitive advantage of Spotify comparing its media campaigns with Zing Mp3's communication method. It can be seen that Zing Mp3 carries out advertising campaigns for the main purpose of providing information. In other words, Spotify knows how to attract attention, increase interaction with users. They're building their own community, Spotify followers. This can also be the

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reason for the rapid increase in the number of users using this technology since its release as mentioned in the previous section. Spotify, what to do in Vietnam As mentioned in the previous section, the number of users in Vietnam that accept to pay is very low. The culture of listening to copyright music in Vietnam is not really strong. So Spotify needs to have the right direction to suit the specifics of users in Vietnam. Strongly on copyright issues Spotify entered the Vietnamese market in July 2018. By January 2019, Zing Mp3 had to remove a series of songs on its system for fear of being sued for copyright issues. While before that Spotify has been continuously broadcasting media services that emphasize the delivery of high-quality music, the best user experience, and the most important thing is copyright. The special feature here is that most of the songs taken down by Zing Mp3 are songs by artists outside of the Vietnamese music market like Selena Gomez or the female singer with a strong fan base in Vietnam - Taylor Swift (Nam, 2019). This in turn is Spotify's competitive advantage when they have collaborated with these singers before. What Spotify does not have at this time is the signature of the music publishers in Vietnam. However, this media campaign against the copyright issue brings Spotify another great benefit that is the support of Vietnamese artists. Because in the past, listening to music at no charge on music publishing applications in Vietnam has greatly affected the interests of artists. Spotify's entry into Vietnam opens up new doors to change consumer habits of customers and harmonize the interests of music producers and music listeners (An, 2018). After a controversial media campaign on the issue of copyright, Spotify has

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partly stepped into the Vietnamese market. However, the problem still lies in how to change the consumer habits of Vietnamese people who like to listen to free music. Spotify started by using its advantages in technology and optimizing its experience to create trends - the trend of using Spotify. Along with the curious psychology of Vietnamese people, it is not difficult for Spotify to attract attention and become a trend of young people. Convince users to change Trial package. Spotify allows users to try out an app's Premium plan for a set period of time. Unlike the Premium package, the free plan is limited to many features such as being unable to select songs or create a Playlist. This is where the trial package comes into play. After experiencing the trial package, users have created their own Playlist and music taste, but the failure to add new makes them quickly feel bored. At the same time, using the free package also means that the user accepts to listen to "outdated" music. Because Spotify's policy will only give free plan users access to new music after two weeks of release, this is a long time for a hit track. In addition, users are limited to many other features such as unable to listen to music offline or create new music albums (Nguyen, 2020). This makes many users feel uncomfortable and have to upgrade the premium package because the free music apps that used to be free are not releasing as many songs they want. Spotify in Vietnam - A Story of Time The fact that Spotify has confirmed its foothold in Vietnam is absolutely possible. However, Vietnamese consumers' preference for listening to free music is too big and popular. To change this consumer habits, Spotify needs time and reasonable communication strategies to build communities and form a culture of

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paying music in Vietnam.

References About us (n.d.). www.spotify.com. Spotify AB. Retrieved from https://www.spotify.com/us/about-us/contact/ Aim Academy. Chiến lược marketing - truyền thông của Spotify: Vượt mặt Apple Music dẫn đầu làng stream nhạc https://aimacademy.vn/blog/marketers-hoc-duoc-gi-tu-chien-luoc-truyenthong-cua-spotify/ An, L. (2018). Spotify vào Việt Nam: Có đủ sức khơi mào cuộc chiến người dùng và nền tảng quảng cáo nghe nhạc trực tuyến? https://www.brandsvietnam.com/tieudiem/14951-Spotify-vao-Viet-Nam-Co-dusuc-khoi-mao-cuoc-chien-nguoi-dung-va-nen-tang-quang-cao-nghenhac-truc-tuyen Brustein, Joshua (2014). "Spotify Hits 10 Million Paid Users. Now Can It Make Money?". Bloomberg L.P. Retrieved 7 November 2016. Company Info (2020, june 30). Spotify For the Record. Retrieved from https://newsroom.spotify.com/company-info/ Kahn, Jordan (2016). "Spotify hits 40 million paid subscriber milestone, outpacing Apple Music's growth". 9to5Mac. Retrieved 7 November 2016. Mercuri, Monica (n.d.). "Spotify Reports First Quarterly Operating Profit, Reaches 96 Million Paid Subscribers". Forbes. Retrieved from https://www.forbes.com/sites/monicamercuri/2019/02/06/spotify-reports-firstquarterly-operating-profit-reaches-96-million-paid-subscribers/? sh=39ece6035dc9

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Murgia, Madhumita (2016)."Spotify crosses 100m users". The Daily Telegraph. Retrieved 7 November 2016. Nam, A. (2019). Zing Mp3 đồng loạt gỡ các ca khúc đình đám khỏi hệ thống vì lý do bản quyền? https://thethaovanhoa.vn/giai-tri/zing-mp3-dong-loat-go-cac-cakhuc-dinh-dam-khoi-he-thong-vi-ly-do-ban-quyen-n20190103152113972.htm Nguyen, H. (2018). Spotify: Khác biệt nhờ cấu trúc xử lý và phân phối bài hát. https://www.brandsvietnam.com/congdong/topic/9758-Spotify-Khac-biet-nhocau-truc-xu-ly-va-phan-phoi-bai-hat Nguyen, H. (2020). Chiến lược marketing của Spotify – Tại sao lại “hot” đến vậy. https://marketingai.admicro.vn/chien-luoc-marketing-cua-spotify/ Sanburn, Josh (2012). "Spotify is Growing — But Why Isn't It Growing Faster?". Time. Retrieved from https://business.time.com/2012/08/16/spotify-is-growingbut-the-idea-of-music-ownership-is-holding-it-back/ Sloan, Paul (2014). "Spotify: Growing like mad, yet so far to go". CNET. CBS Interactive. Retrieved 7 November 2016. Spotify Music (n.d.). Roku Channel Store. Roku. Retrieved from https://channelstore.roku.com/engb/details/08532417380d48cf2244a1831ff94f26/spotify The story of Spotify: Sweden's controversial king of music streaming (2018, March 2). www.thelocal.se. Retrieved from https://www.thelocal.se/20180302/thestory-of-spotify-swedens-controversial-king-of-music-streaming Thomas, Lauren (2017). "Spotify adding more than 1,000 jobs in New York, moving to World Trade Center". Retrieved from https://www.cnbc.com/2017/02/15/spotify-adding-more-than-1000-jobs-innew-york-moving-to-world-trade-center.html

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T.K. (2018). Spotify là gì mà "hot" đến vậy? https://cafebiz.vn/spotify-la-gi-ma-hot-den-vay-20180313135119977.chn Van, G., Jennifer (2011). "Spotify Surpasses 2 Million Paying Subscribers". Mashable. Retrieved from https://mashable.com/2011/09/21/spotify-2-millionsubscribers/ Weber, Harrison (2012). "Spotify announces 5M+ paid subscribers globally, 1M paid in US, 20M total active users, 1B playlists". The Next Web. Retrieved from https://thenextweb.com/insider/2012/12/06/spotify-announces/...