Tag Archives: spotify

A SWOT Analysis of the Music Industry

(My first post can be found here.)

While some parts of the Music Industry are caught in a downward spiral, streaming services along with the new Direct to Fan platform have done well in adapting to the disruptive technologies in our society today.  So where does the Music Industry stand as a whole? In order to answer this question we must do what all businesses do when they need to see where they stand, and that is we conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats,) Analysis for the Music Industry.



Streaming music sales in the US beat CDs for the first time

Adele Is Said to Reject Streaming for ‘25’

Apple to end Beats Music on November 30

That’s Business, Man: Why Jay Z’s Tidal Is a Complete Disaster

Recording Studios Face Uncertain Future

“Free and Easy” Disruption Dismantles Music

When you look at the sudden free fall of the music industry due to disruptive technologies, you can’t help but empathize with an industry that was completely blindsided and not equipped by any means to handle such a sudden alteratiaccon in the way music is made, bought, and distributed.  The question we find ourselves asking is, “What drove this change in the industry?” Music torrent sites like Napster, streaming services such as Spotify, and music production applications like GarageBand are all examples of these disruptive technologies, but I would describe them as the effect of disruption and not necessarily the cause of it.  I think the main ingredient of the music industries spiraling downfall is the consumer. Like all disruptive technologies, the music industries disruption is based on the fundamental question “How can we make the consumer’s life easier?”

“Free” and “easy” are the words driving the changes in the music industry.  Why pay for music when I can get it for free? Why drive to a store and purchase my favorite artist’s album when I can do that with just a few clicks of the mouse? It was these concepts that anyone could get music for free through file sharing that drove Napster to such prominence that wounded record sales to such an extent that they never fully recovered. Napster of course would not have been able to thrive without the internet and file sharing capabilities that were becoming a big presence in the late 90’s and early 2000’s. Not only did Napster give society the chance to obtain artists’ albums for free, but also it popularized the idea of downloading music on your computer without the hassle of going to the store and purchasing music.  It’s no coincidence that Apple’s iTunes really took off after Napster disbanded in 2002.  Society became enamored with the ease through which you could purchase a song and add it to your MP3 player with just a few simple clicks of a mouse.  With Napster no longer an option to illegally obtain music for free, other peer-to-peer file sharing services such as Limewire and BitTorrent began to emerge, along with Youtube to MP3 websites after 2005, to satisfy the consumer’s need to not have to pay for music.

As technology increased its capabilities, so did the ease through which music could be created, distributed, and bought.  Why pay $1.29 per song on iTunes when you can pay a monthly fee on Spotify or to stream music on Pandora radio?  Nowadays the area of the music industry that is feeling the powerful influence of disruptive technologies are recording studios.  Popular Recording studios such as this one in Soho in Manhattan may soon go by the wayside with the lack of use by artists. But this begs the question, “why pay incredibly high rates to use a recording studio when GarageBand and other recording services are available right on your own computer?”  It is very likely that we could soon see more recording studios and even record labels become a thing of the past. http://www.fastcompany.com/3032642/why-the-music-industrys-next-big-disruption-is-in-the-recording-studio

So what is to come for the music industry? What new products are going to make life easier for consumers to have access to their favorite artists? A new platform of music streaming called Direct-to-Fan has made it possible for independent artists to bypass record labels and sell their music or merchandise directly to their fans through websites such as Musicglue.com  or Nimbit.com.  The logic here is, if you’re an artist, why give record labels and music/merchandise distributors a significant cut of your revenues, when it would be much cheaper to use one of the aforementioned websites?  Another new product consumers are beginning to use is Periscope.  Periscope is a live streaming app that allows the user to view live videos that other users are uploading and the user can upload their own live stream.  Periscope has come under fire as some users are using the service to stream live concerts or sporting events, which violates broadcasting copyright law.  Once again the consumer is finding new ways to avoid paying expensive ticket prices for events that they can watch for free from the comfort of their own home.

The question the music industry is asking itself, was there a way its collapse could have been prevented? Is there anything that can be done to stop this downward spiral?  According to this article there is still something that can be done to prevent further collapse but this Forbes article does a great job explaining why the music industry is “beyond all recognition” thanks to disruption. Finally this video also gives a brief description about the causes of disruption in the music industry.




Pandora and Music Labels Finally Agree?

Since its conception in January, 2000, music labels and Spotify have been at odds. Even last week, Pandora announced it would pay $90 million to settle a lawsuit over royalties for artists who recorded music before 1972. Because of a legal loophole, Pandora was able to play songs on the internet radio services without paying royalties to artists. While Pandora has been at odds with labels, they agree with labels about one thing.

They hate Spotify.

Spotify and other streaming services of its kind have been growing, effecting the music industry in different ways every year. According to Nielsen’s 2014 Report, only 257 million albums, CD or digital, were sold. This was an 11 percent drop from 289 million the previous year. Streaming, however, has 78.6 billion audio streams with 85.3 billion video views. This is an exponential increase from the previous year. The numbers clearly show that consumers are leaning more towards streaming their music, instead of buying digital tracks or albums.

While labels and artists hated Pandora for royalties, they all agree that Spotify’s music service gives consumers too many options. While Pandora allows its listeners to listen to virtually any song, these songs are picked by the service. In addition to this, Pandora breaks up these songs with advertisements. On the other hand, Spotify let listeners listen to ANYTHING they want for AS LONG as they want. Pandora CEO Brian McAndrews said during Thursday’s earnings call, “I think one of the challenges for the industry, I think, and for Spotify is how many of those teens are actually paying for it? And an on-demand model is meant to be paid for and subscribed to.”

McAndrews brings up a point. According to Spotify, there are sixty million overall active users of the service, with fifteen million paying users. Spotify offers a “freemium” option that has advertisements, but users are still allowed to listen to anything they want anytime. This freedom is hurting Pandora, and bringing up not only licensing issues, but questions about streaming in the future. In addition to this, Spotify still isn’t even a profitable. In 2011, Spotify brought in revenue of $236 million, with a net loss of $57 million.

Spotify isn’t the only company facing net loss. Pandora is too, with a net loss of $20 million in 2012. How do these companies effectively pay artists, but still make a profit? Many say that we should get rid of streaming services all together. Others say we should all just “suck it up” and agree to pay $10 a month, helping the industry go and supporting artists, with no “freemium” option.

Peter Kafka of Re/code translated Pandora’s earning’s call, and their issue with Spotify, in a great way. “Look, it would be bad if our free, not-on-demand service had to compete with free on-demand services forever. But those things are as bad for the music industry as they are for us, so we bet (we hope!) they’re going to go away.”

While it’s obvious these services aren’t going away, it’s going to be interesting to see what happens.