SWOT Analysis of Spotify | Spotify Strengths, weaknesses, Opportunities and Threats

1. What is Spotify?

Spotify is a music streaming service. Spotify mobile app allows users to quickly find and play any song they want.

It is the world largest music’s service provider with over 381 million active users monthly.

Spotify was founded in April 2006 by Daniel Ek and Martin Lorentzon and it launched on October 2008 and its headquarters is in Stockholm in Sweden.

2. How is the Business model of Spotify?

Spotify is a subscription-based service. It charges $9.99 USD per month for its premium membership while free users can listen ad-supported music like an internet radio station.

It is a content sharing website that is widely used by music lovers.

Although the business was growing rapidly, Spotify is estimated to have lost over $200 million last year.

The reason for this loss is because Spotify sells its users’ personal data to advertising companies which directly affects its own income.

It has Free and Premium user base: It has a strong free and premium user’s base which makes it a good business model.

The user acquisition cost is extremely low as Spotify is an available online service.

3. How Does Spotify Makes Money?

a) Revenue Model: Spotify makes money by having a lot of users, thus making them pay every month.

b) Subscription Revenue: It is the major revenue model of Spotify.  The company offers both free and paid memberships.

c) Content Acquisition: The content acquisition of Spotify is free, since it can get music from any artists that want to share their songs.

d) Ecommerce: In order for users to listen to their favorite music, they have to pay a monthly fee.

4. Spotify Revenue and Financials

Spotify went public in April 2018, with a market valuation of $26.5 billion following the first day of trading, surviving the switch to mobile technologies.

They made $9.06billion in sales in 2020, up 16 percent from the previous year. Spotify has never reported a profit on its operations.

It made a $670.69 million loss in 2020. With 381 million users listen to Spotify at least once a month, with 172 million of them being members.

The Company generated a total revenue of US$9 billion, asset of US$7.7 billion and Net Income Decrease US$−658 million in 2021.

5. Spotify Premium Plans

Spotify has many different plans to attract new people to its service these include;

a) Premium Family: It is free for Spotify Premium family member who have children under the given age.

b) Spotify Flexi: This is a plan where users can subscribe to the service with payment plans where they could stop at any time without obligation once the chosen term ends.

c) Premium Duo: It is free for everyone who has family plan.

d) Spotify Premium: The plan that covers the full range of ad-free and offline listening features which means that it excludes the ads. This plan costs $9.99 per month..

e) Partner Premium plans: Spotify partners plan includes a discount of 50% on the Premium Single Plan and the Device Plans.

f) Premium Individual: This plan can be used by users who are not in a family account.

g) Spotify Student Plan: It is only available in the United State which is free for you to use if you are a student, with this offer it will give you the same plan that you had when your upgrade from the free version of Spotify.

g) Premium trials: This means that users can listen to Spotify for free for 14 days before they decide to either start being a premium user or cancel the service.

6. Spotify Competitors

Spotify have many competitors in the music industry these include;

a) Apple Music: Apple Music is another music streaming service that Apple created in 2015 and it is based in California, with headquarters located in Cupertino. It has over 30 million paying subscribers. It has over 70 million users as of July 2019.

b) Deezer: Deezer is a European-based music streaming service that was founded in 2007. It has expanded to more than 180 countries and 73 million active users as of July 2019.

c) Amazon Music: It is a music streaming service on the web and on the phone and it has 7 million paying users as of July 2007, with over 55 million users on all platforms in 2020.

d) Sound Cloud: It is a music streaming service on the web and on the phone which has over 30 million active users as of July 2021.

e) Google Play Music: Google Play Music is a free music streaming service on the web and on the phone, which has more than 20 million users as of July 2021.

f) YouTube Music: It is another music streaming service that was started in 2015. It has over 50 million active users as of July 2021.

g) NAPSTER: It is a music streaming service on the web and on the phone. It has a new policy which just allows paying subscribers to download music for offline listening, which was not possible before. It also have over 5.7 million users as of July 2020.

7. SWOT Analysis of Spotify

·        Strengths of Spotify

a) The product is good and reliable for users because it fulfills their needs and can be used in any device. It has an easy interface that makes it the best choice for the user.

b) It is a free and reliable streaming music service, which helps the user to have a better time listening to music.

c) Users can access Spotify from any part of the world without the need for internet to use Spotify.

d) Service is designed for all music lovers, thus making it a good business model.

e) Company has many employees so there is a high chance of this company being able to have continuous growth.

f) Company has a good platform for marketing and advertising, thus making it a great business model.

g) Spotify has a good service it does not need any improvement.

h) Spotify has good working process of the company which makes it great for business.

i) Their focus on making users happy helps to increase their popularity.

·        Weaknesses of Spotify

a) Spotify only has commercial plans which makes user not able to access it on free basis.

b) Users can listen to song on some other better platforms which results in losing some money.

c) It needs time to settle for users, it needs time before it can be used by the people.

d) Customers need more than 12 months to use the service so there is no guarantee of making profits.

e) The company doesn’t have more products so the company might lose its customers if there is an upcoming change or new product.

f) The company has subscription based business model, which means that it depends on users’ subscription plans.

g) It is not an offline music streaming service so it can’t be used anywhere outside.

h) Company should have more innovative plans to attract customers for Spotify for an increase in profits.

i) The company provides additional features to other music streaming services which benefits the competitors making higher prices.

j) Spotify does not have any contact number or address that can be put into Wikipedia or other websites.

k) Spotify does not have any social media accounts which are essential for an effective marketing strategy.

l) Spotify is only available in one area, which results in lack of growth

m) There are many other better services that are easily accessible which results in loss of user.

n) It is not hard to block or delete Spotify account, thus making it very easy for users to block or delete account

o) The company has no assistance for the people who are having trouble with their account on Spotify.

·        Opportunities of Spotify

a) The users of this company are increasing, because it has many updates and new things to offer the users.

b) The company provides an easy way to listen to music, which easily catches user’s attention.

c) Spotify is free of cost, so anyone can use the product without spending any money.

d) It can easily target many markets because it has many features for everyone’s needs.

e) The company is not facing any type of restriction or regulation that can stop its growth.

f) Spotify has good amount of traffic on the web which makes it easily reachable by the users.

g) The company has good marketing strategies for its products.

h) The company is expanding its business, thus providing more jobs to people.

i) Spotify is the best choice for making money in music streaming services market.

j) Spotify has many features that are essential for today’s generation.

k) Spotify has a good business plan, which helps in the growth of the company.

l) The users of Spotify are very young and it is more of an entertainment for them.

m) The company has different features to achieve higher profits.

·        Threat of Spotify

a) Spotify allows users to pay for the service in advance, which results in lower profits.

b) There are many companies which are against Spotify because it is not limited for its free usage.

c) The business model of Spotify is too limited for an international company to succeed there.

d) There are many other music streaming services available in the market, thus losing customer might be a problem.

e) There are many other better streaming services available in the market.

f) Spotify is giving users more options, which results in loss of its customers.

g) There are many restrictions in terms of number of songs, videos etc. that can be downloaded at one time.

h) People have to pay again and again in order to get the additional features.

i) Spotify has no marketing plan for targeting markets outside United State, which results in loss of money.

j)  Competitors have many plans, which attracts more people to use it instead of using Spotify.

k) Spotify has a limited time that can be used by the users.

l) It is not a good music streaming service, thus losing the customers might be a threat for this company.

Spotify FAQs

How does getting paid on Spotify work?

They get paid when they transfer money to Spotify directly from their bank to their account.

However, if they use Auto-pay for their Spotify bill, the money will be transferred automatically to the company’s bank account on the day of their payment.

They can also avoid paying upfront by using Spotify free trial feature.

How much do I make per song?

The song pays per stream. If they are streaming via mobile data or Wi-Fi, then that one million streams works out at $0.

How much are the royalties?

Spotify is keeping it a closely guarded secret. The corporation has set a reward range of $0.003 to $0.0084 per stream, with an average payout of $0.004 per stream.

However, it is dependent on a number of things. For instance, not all countries pay the same amount.

Is there a minimum payout?

Yes, it is 150 streams per payout. However, if a song is streamed 1 million times, then this would result in 100 payments to the artist.

How much does a song cost to play on Spotify?

The company charges a variable rate which ranges from $0.007 to $0.0084 per stream.

Is there a royalty cap?

It is not known if there is any royalty cap after which an artiste can stop receiving their royalties from Spotify or not.

What can I do with the money I make on Spotify?

They can donate the money to charity. They can also use the money as a down payment for a purchase.

How is pay per listen worked out?

They earn per play or listen, which is based on typical streaming usage of 10 times per day.

What is the catch with Spotify?

Spotify does not tell their artists how much they actually earn.

How does Spotify make a profit?

The company is charging the artists a fee of $0.0014 per stream, after which there are other costs that are included, including transaction fees.

Why do I have to pay upfront?

They state that they want to have total transparency in how much they will earn from their plays.

Is Spotify safe?

They are not planning on any expansion until it would be completely safe to do so.

They prefer not to expand at anything but their current market size until they are sure their product is ready for global expansion.

What sets Spotify apart from competitors?

They offer a huge catalog of songs and can play songs on any device.

Do I have to pay if I listen to Spotify offline?

They state that they do not charge anything for those who listen offline, as it is free on all devices.

How do I create an account?

The company states that they will show them how to set up an account when they are signed up to see the terms of service.

How does Spotify make money?

The company states that they make money through per play fees and subscription revenues.

What is the business model of Spotify?

Currently, they charge $9.99 per month which can be canceled at any time. However, they do not levy any charges when a user is signed up for their free trial.

How do I listen to Spotify?

They can listen to music via the web, their mobile app or any other device that has access to the Internet.

How do artists get paid with Spotify?

There are many methods through which an artist can get paid with Spotify. These include, but are not limited to, pay per stream, pay per play, pay per download and pay per subscription.

They can also choose to have Spotify list their songs on their own where it will be possible for them to sell their songs directly through the site.

How do I get subscribers?

There are several ways through which people can use to increase the number of subscribers that they have on Spotify.

These include but are not limited to asking subscribers for an additional list or adding these people as friends or family members.

How do I get my songs listed on Spotify?

There are several options that they have in order to get their songs added on Spotify.

They can also add these songs to their own website and sell them there.

How is Spotify different from others?

They are not limiting the number of tracks that they can stream.

They are also encouraging artists to take control of their careers by letting them have access to information about their own sales, so that they can keep an eye on the popularity of their music.

How do I transfer money from my bank account to Spotify?

They need to sign up for an account with the company first, which would then allow them to pay using any of their existing payment methods.

How do I get paid using Spotify?

The company offers payments through PayPal. They also offer the option of collecting the payments through their bank account.

Do I receive royalty checks if I am an artist?

They would not only get royalties every time they stream, but they could also sell their music directly to Spotify which might result in them making more money than when they stream on the site.