The giving the possibility to share, send via email

The digital music market in United States and EuropeThe US marketThe streaming of music began in 1983 with compact discs. The MP3 files were introduced giving the possibility to share, send via email and download; MP3 granted music to be portable. In 1999 Napster was introduced, a platform which allowed users to access whichever music they wanted. Eventually, the service has been shut down for copyright infraction but its startup still affects the US sales ‘music sales in the US have dropped 47 %, from $1406 billion to $7.7 billion’.Later on, Apple launched its first generation of music players, the iPod, which allowed users to take their track in a convenient way, Apple sold more than 500 million tracks because of the iTunes music store. By 2012 iTunes music store assumed for 60% of worldwide digital music sales for the market. Consequently, a lot of on demand music subscription emerged, such as Spotify, Deezer, and Rdio. This service allows users to play high quality music at a very low cost. At the start, musicians could make a living by just selling records and touring, but when the internet became mainstream and services like Napster were introduced, income streams for musicians have changed drastically. With the figure below we can see the difference in years that Spotify has been through and in only matter of years Spotify became a worldwide musical streaming application.Figure 8: “Apple Music vs. Spotify Subscribers” The European MarketEven though Spotify had an extreme success in the US, Spotify’s recognition is also spread among the European countries. At the very beginning, Spotify was first launched in Sweden and only in 2011 Spotify was introduced in the US. In several years, Spotify has gone from being a start-up venture to the most talked about and fastest growing application.Spotify localisation strategy has been very successful; Spotify’s growth in Europe was a slow planned success, Scandinavian countries first and then the rest of Europe.  During the expansion in Europe, Spotify introduced many abilities that now we can choose from, like the “Top 10” and “Summer Hits”. And in 2014 to expand, even more, it introduced the discount program for students. According to this,  students pay $4.99 instead of $9.99 a monthly subscription. This option was firstly available only in the biggest markets like US, United Kingdom, and Germany, and then it was introduced into 33 other countries across Europe, Asia North and South America and Oceania. Thanks to this strategy and a better recognition, Spotify was able to overtake iTunes royalties earnings by 10%. The decline of iTunes meant a shift away from downloads in favour of streaming, giving Spotify a greater chance to increase a number of users in Europe, and it is one more clarification of why Apple decided to buy Beats Music.Figure 9: “Spotify and Apple publishing income comparison”based on the figure above, the first quarter is a huge milestone for Spotify; in the third quarter, iTunes earnings were 32% higher than Spotify then in the fourth quarter only 8% higher. The diagram shows that the European total publishing revenues are much higher.In 2015 Europe is considered a diverse region with adopting streaming services at varying stages and rates. But in Scandinavian countries, the streaming revenue is 69% of the market. While Germany, the fourth largest music market, increased streaming revenue up to 73%. The digital marketing is still evolving and there is plenty of room for growth in Europe.Spotify’s growth strategy Localization as main strategyOne of the reasons why Spotify is so successful is because of its unique localization strategy, meaning it localises their marketing to fit a country music taste. This strategy is different from competitors such as Deezer that expanded rapidly focusing on getting into as many countries as possible. On the other hand, Spotify growth was much slower gambling success in the United States and later on, in other countries. The music industry is global and Spotify objective is to have a global vision for a streaming application and to work efficiently it requires a large base of both artists and listeners. For instance, in 2013 Spotify added Singapore, Malaysia, and Hong Kong artists to the feature of the 20,000 new tracks in the service. Spotify is using co-marketing and partnership to increase its brand image, growing audience in young adults with social media like Facebook. With these current strategies Spotify has reached an excellent result, the potential strategy can be used to increase customers base and revenue.  Considering the Ansoff matrix below, Spotify’s strategy can be considered as Diversification, Spotify will eventually grow and enter new markets. In new markets such in Asia, the service provided by Spotify is new. Other streaming services might have similar features but Spotify would be a completely new service. For instance, in China, the main music service is QQ Music and the features are different than those in Spotify’s.Whereas competitors, such as Deezer they can be considered in Market Development they can enter new markets but the services would be the same and similar to many other services such as Napster and Apple Music.Figure 10: Ansoff matrixSpotify’s revenueNew revenue streams are introduced due to the continuous growth of new digital streaming services. It appears that people are paying more than ever for music, specifically within the range of 17 to 25 years, this could be a positive factor for digital streaming services but not so much to the artists. But with these many new streams services, artists still earn revenue like fifteen years ago. This is because digital payments will continue to happen over the life of an artist. Instead of receiving one-time profit from a purchase of a track, artists will earn revenue per stream, and this would basically take more time for an artist to receive revenue than having it right away.  In an interview with Berklee College of Music, Mike King stated that an average download of a listener spends $60 per year, while the subscriber $120 per year, meaning that streaming is more expensive than a download. Form the figure below we can see the growth that Spotify has made. Revenue has grown gradually in just a couple of years from 2012 to 2016 Spotify has generated 2.64 billion euros, which is $1.19 billion; as of March 2017, Spotify has 50 million paying subscribers.