Legal and Profitable? Spotify: The Challenges of an Online Music Service

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CASE STUDY. Spotify is an on-demand music streaming service founded in Sweden in 2006, in a music industry in crisis.

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Legal and Profitable? Spotify: The Challenges of an Online Music Service: Abstract

Legal and Profitable? Spotify: The Challenges of an Online Music Service is a case study by Joëlle Bissonnette and Eric Brunelle.

Spotify is an on-demand music streaming service founded in Sweden in 2006, in a music industry in crisis. It offers online music consumers legal access to a repertoire of over 30 million pieces of music, which varies by country. Its mission is to let people listen to the music they want, when they want and where they want. To accomplish this, the company offers a legal alternative that is superior to piracy, via a simple, clear and rapid platform, making listening to and sharing music easier than ever. Its service falls within the freemium model: users can access it free in exchange for being exposed to ads a few minutes every hour or pay a small monthly fee to access it without ads, without interruptions and with a certain number of benefits in terms of the quality and accessibility of music.

Spotify has seen meteoric growth since it was founded: it has a presence in 58 countries and has 75 million users, 20 million of whom are paying subscribers. Despite this, the company has not yet turned a profit. Plus the compensation it pays to rights holders for the use of their music has been criticized as being insufficient. However, this problem is not exclusive to Spotify; it affects most businesses that try to monetize music online.

Teaching objectives

  • The strategic analysis of a company online that is experiencing critical issues
  • Search for solutions to problems specific to the profitability of a cultural business (the music industry) and compensation of rights holders
  • Think about the monetization of music and the culture of online music consumers

Main themes covered

  • New methods of consumption and new habits developed online
  • The monetization of music
  • Collective value creation
  • Commercial partnerships based on the identity value of music and that leverage online communication tools

Concepts and theories related to the case

  • Internet business model
  • Intellectual property online
  • Business strategy

Additional information

Also available in French.

Teaching notes are available for professors. Contact the HEC Montréal Case Centre.

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