Business Enterprise - Spotify - Essay Example

ABOUT SPOTIFY.COM Spotify is a Swedish digital music service that was launched in 2008. It has access over 20 million songs. The company’s main aim is to make the entire “world’s music available instantly to everyone” (What is Spotify? 2007). The company was founded by Daniel EK and Martin Lorentzon in the month of April, 2006. The company’s headquarter is in UK with offices in Stockholm, Paris, Oslo, Madrid, Amsterdam and New York. Spotify has a two sided market to deal with. On one side there is the customer and on the other, it’s the music providers. “The name SPOTIFY is a combination of the words SPOT and IDENTIFY” (Spotify Background Information, n.d). BUSINESS MODEL CANVAS Business model definition: “A business model describes the rational of how an organization creates, delivers and captures value” (Osterwalder & Pignuer, 2009). A business model canvas is a visual chart. The elements in the chart will describe the firm’s value proposition, infrastructure, customers and finances. It describes its elements through the building blocks. Alex Osterwalder- Business Canvas Model- Spotify KEY PARTNERS Key partners as well as key suppliers have to be included in this part of the model. For the success of the site Spotify needs a good deal with the related parties like the recording company. Another key partner is Facebook. All the account holders of Facebook have an opportunity to deal with Spotify. KEY ACTIVITIES The continuous flow of service without any interruptions is the key activity of Spotify. And also the site has to be updated with new songs every now and then. KEY RESOURCES Key resources are required to offer the value proposition to the customers; or deliver what the customers want. Key resources can be “physical, intellectual, human and financial resources” (Osterwalder & Pignuer, 2010). The key resource for this company is music. Since, it has to make available all music to the entire world, so the music license has to be obtained. A server is also required to reach the customer. VALUE PROPOSITION Value proposition is something which the company is giving to its customers. In other words, the factors which are forcing the customer to buy the products of the company are termed as the value proposition of the company. Here, the value proposition is between the listeners and the advertisers. The value proposition for the listeners is that, it offers a large amount of music for least cost. And the site is legally registered. The songs can be listened through a smartphone and can be listened offline too. Another offer is that we can share songs. For the advertisers, the site is making a platform to advertise their products and services. CUSTOMER RELATIONSHIP In the current context, customer is considered as a king. Companies are required to give what the customers want. In service industries also, the company have to keep in touch with the customers. Spotify is a web site; it is providing an automated service. And there is a customer supporting forum for solving customer’s problems and queries. CHANNELS The way through which a manufacturer or supplier would reach the customer is termed as channels. CHANNEL PHASES “Awareness”- Spotify has created an awareness through the medium of media and advertising a friend to friend promotion. Social networking sites such as Facebook and Twitter also has become a strong channel to create awareness. The advertisement also has created an impact. “Evaluation”- Evaluation was done through friend to friend communication. The website has a space where the customers can post their comments. In that space, the company team and other customers posted the different features of the site and their benefits. “Purchase”- the customers have to register in the web site using their mail id. Then they can access Spotify and can download through the site. “Delivery”- As mentioned in the value proposition, the delivery is done through smart phones and computers. “After sales” (Campos, n.d). For after sales services, the customers can contact with the customer support department through an e-mail. CUSTOMER SEGMENTS Segmentation means dividing the customers into different groups on the basis of different criteria such as age, gender, life style etc. Spotify.com is aiming a mass market. There are mainly three types of customer segments; “Premium listeners, unlimited listeners and open listeners” (Business Modeling, n.d). Premium listeners are those who are in a position to use Spotify offline through their smartphones. Unlimited listeners are making a small amount of payment for a long time to use the site. And open listeners are those who will be having limited access. COST STRUCTURE All cost incurred to operate a particular business model is the cost structure of a company. Cost structure shows what all are the expenses of the company. Cost can be of fixed nature which will not be varying according to the volume of production. Next is the variable cost. These costs will vary according to the volume of goods and services produced. Every company will have to incur expenses on the raw material, salary and wages, and other infrastructure. Spotify will have to pay to the recording company and has to buy the music license. Employee’s salary is another main expense. REVENUE STREAMS How the model is generating income is included in revenue streams. Revenue can be generated through “asset sale, usage fee, subscription fees, lending/renting/leasing, licensing, advertisements and brokerage fee” (Osterwalder & Pignuer, 2010). In the case of Spotify, the company can earn revenue mainly from the advertisements and usage fee. Before fixing the price for the products, the company has to analyze the purchasing power of the customers. The differently segmented customer will be offered different prices. The main source for the revenue of Spotify is the premium account members. About 75% of the revenue is earned from the premium account members. Next the source of revenue is from the advertisements. To increase the revenue, the company can launch the sites in number of markets. DISCUSSION ON BUSINESS MODEL PATTERN The business model pattern which Spotify.com is following is the multi-sided platform. When an organization has two or more independent customer segment, it is termed as multi-sided platform. “a market is two sided if the platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other by an equal amount; in other words, the price structure matters and platforms must design so as to bring both sides on board” (Bollan et al. 2013). An organization which is having a number of customer segments, needs to satisfy the different wants of different customer and to find the solution for all their problems. Here the Spotify has to take care of its customers and as well as the advertisers. Usually multi- sided platform leads to the reduction in the costs of various transactions. Here, the broadcasters are functioning as platforms that are “intermediating” (Bollan et al. 2013).between advertisers and customers. Every organization needs funds. In the case of Spotify, the company’s income source is not only the customer, but also the advertising companies who all are advertising their product or services or business. While opening the site, we can notice a number of advertisements in the first page itself. The site will be charging a particular amount on such advertisements. So the Spotify.com is being offered both to the customers and advertisers and it is following the multi-sided platform business model. Reference List Business Modeling. n.d. Spotify. Available at [Accessed on 19 February 201 3]. Bollan. et al. 2013.The Double “Layered” Platform Structure of the Audiovisual Media Industry: A Case Study of Flanders. ECONSTOR. Available at [Accessed on 19 February 201 3]. Campos, P. T. n.d. new Business Models in the Recording Industry: A Artist’s Perspectives. Available at< http://musicbusinessresearch.files.wordpress.com/2012/06/1-tupinamba-pablo-new-business-models-in-the-recording-industry-an-artist-perspective.pdf> [Accessed on 19 February 201 3]. Osterwalder, A. & Pignuer, Y. 2009. Business Model Generation. Alexander Osterwalder & Yves Pigneur. Available at [Accessed on 19 February 201 3]. Osterwalder, A & Pignuer, Y 2010. Business Model Generation. WILEY. Print. Spotify Background Information. n.d. Available at< https://www.spotify.com/wp-content/uploads/spotify-background-information.pdf> [Accessed on 19 February 201 3]. What is Spotify? 2007. Spotify Ltd. Available at< https://www.spotify.com/int/about-us/press/information/> [Accessed on 19 February 201 3]. Read More