All of you music enthusiasts are probably very excited about this article because Spotify has undoubtedly become one of the world’s topmost streaming services. There have been many other alternatives, in fact, there still are many, so how did this brand manage to overcome all of the clutter? This is exactly what we will try to understand in the Spotify SWOT analysis.
Not many people know this, but Spotify is actually of Swedish origin and was founded by Daniel Ek and Martin Lorentzon in 2006. At the moment, this company is easily one of the largest streaming services for music in the world; as of December 2021, they have over 460 million official users and out of these they have 180 million subscribers who pay regularly.
They have a freemium model of business which means that certain services are absolutely free of cost whereas others require users to pay a premium price to be used. So needless to say applying the SWOT model to this brand will surely be interesting.
Before we commence with the article, you must understand the SWOT template clearly; otherwise, you will not be able to make much sense of the article. It basically is an acronym of four separate factors which have a macro effect on the organization (or any other entity) being analyzed.
These factors are strengths, weaknesses, opportunities, and threats namely. The story doesn’t end here though. Strengths and weaknesses together make up internal factors whereas opportunities and threats make up external factors.
Internal factors are the ones that in nature are able to be influenced and even controlled by the organization being studied. This is why we call them internal factors. E.g. If Spotify has a huge customer base, this is definitely an internally controlled strength for the brand because they have worked hard to achieve this feat.
On the other hand, external factors cannot be controlled or even influenced by the organization. These factors emerge on their own; in a very unprecedented manner. This is why we use the term external for them. Suppose that Spotify has a very strong new competitor who is giving them a tough time; this is undoubtedly a huge threat.
So you see the SWOT table actually makes it possible for one to work on all of these factors simultaneously to better comprehend the brand. Now that we have understood everything in detail, let’s move on and see how the framework applies to this case.
Whenever people work with examples of SWOT analysis the strengths of the company usually garner a lot of their interest because these factors set the brand apart from all others in the industry. Spotify surely has many strengths under its belt however, these are the ones that are most prominent.
Spotify has amazingly carved its way to the absolute top in the online music streaming industry despite having some very strong competitors.
As of the second quarter of 2021, they surpassed everyone with a whopping 31% share in the market! A bigger share means bigger revenues and profits for the company!
Spotify has become a staple name amongst some of the biggest brands in the world. Whenever someone speaks of music streaming the first word to pop in their mind is Spotify.
It is also a platform that features almost all relevant and most popular musicians and singers along with relevant podcasts and audiobooks as well. One platform is basically providing quality audio content that is very easily accessible for users.
First Mover’s Advantage
Spotify was one of the earliest businesses to get into the concept of online streaming when the trend was newly emerging amongst consumers. This enabled the brand to grow all the way from its inception in 2006 to where they are now.
All strong competitors got into music streaming much later compared to Spotify, whereas many simply became irrelevant with time.
Internet Connectivity Options
Because it is an online streaming platform it requires a stable connection to an internet source. Even if the internet you are using is not enabling smooth streaming, Spotify allows you to adjust the streaming quality to make it compatible with the speed and frequency of the internet.
This is why users are always able to use the app so long as they have an internet connection irrespective of its quality.
A tech business in nature, Spotify could not be at this point of success had they not implemented amazing technological solutions to their product.
They have a genius algorithm that makes use of machine learning, artificial intelligence, and data sifting technology to help the users by recommending artists, tracks, etc. according to the tastes and preferences of these users. All of this data is gathered from the listening history of the user.
Not only this, but they also have a “discover weekly” feature which helps the users find up to 30 new artists and songs just so they have exposure to new content as well.
Users also have the option to create their own playlists which can be shared with others to have people enjoying each other’s musical tastes.
As explained above, the freemium model allows many users to be able to enjoy Spotify without having to sign up.
However, users who want a better experience such as by not seeing annoying and unwanted ads, or having access to certain exclusive features, have the option to upgrade their accounts.
This way, a wide range of consumers are catered to.
No matter how successful a brand is, it will always be faced with internal weaknesses. Spotify does have a few issues which fall into this category too, we are only going to talk about the most important ones to keep the discussion precise. Here they are.
Heavy Licensing Fees
In order to be able to feature various artists on their platform, Spotify actually has to purchase a license for streaming the content.
As a result, they end up paying not only the artists but also their labels and other stakeholders. A considerable portion of the revenue they earn is spent to acquire more and more licenses.
Needs Internet Connection
Despite there being options for people with slow internet connections to be able to listen to music on Spotify, they still need the internet.
This obviously makes it vital to have either a wireless internet device or Wi-Fi on hand to be able to stream music. Mobile data though another alternative costs a lot. So this is a weakness the company should consider working their way around.
Subscribers can download music from libraries to be able to listen to it without internet connectivity but they still need internet access to download the content in the first place.
No Specific USP
Although Spotify is a streaming giant as evident from their status as the market leader, they really don’t have anything too different about their business to be qualified as a unique selling point.
In order to maintain the market share and to project it even further, they should work on developing a core competency or some other factor that sets them completely apart from the competition.
Not Everyone Upgrades
Because of the free option for users, many choose never to upgrade. Spotify gets its major revenue from users who subscribe to the premium version.
All users who don’t pay contribute very little in terms of the streams they have. The company should convert these users to subscribers but this is not easy to achieve.
They will lose many users if they suddenly revoke the free version from the market; this won’t be a smart method to fix this issue.
As long as a company identifies and capitalizes on opportunities, they always have a chance to do better than before. Here are some of the hottest opportunities Spotify should take advantage of.
Spotify has a golden opportunity to be a platform that offers both music and videos for streaming purposes.
This will open up a lot of avenues for Spotify to become a competitor with huge content streamers such as Netflix and Amazon Prime. In fact, Spotify will offer more because they already have audiobooks, podcasts, and music.
Every great business in the world ventures their portfolio into a variety of businesses that they acquire or even merge with. These businesses are often not even related or of the same industry.
This makes it very easy for the parent company to keep on generating profits in case one of their businesses falters or even fails.
Spotify should also cater to other segments of music listeners. The older generation of people are also music lovers, the platform should incorporate more songs and music from the past eras like the ’70s, ’80s, and even the ’90s (golden eras if you ask me) so that more users are interested.
To think about it, older people are also not very hesitant to pay as they are much more stable financially compared to the youth. They can even contribute to the subscriber base.
Spotify should spend a lot of effort on eradicating these threats so they don’t become a hindrance to their immense success. Here are the threats which are a cause of serious concern for the brand.
Apple Music, Amazon, YouTube Music, Pandora, TIDAL, Google Play Music, SoundCloud and Deezer are some of the biggest competitors that this company has.
Spotify may be the market leader, but there are some very serious competitors they must remain ahead of. They aren’t too far behind either.
Because they have to acquire so many licenses from so many artists, legal disputes are not very uncommon because principles of streaming rights and copyrights evolve all the time.
It becomes very difficult for the brand to maintain these licenses without serious conflicts of interest between all the parties involved.
People Who Refuse to Convert
There are still many people around the world who choose to download their music (even via torrents illegally) and steer clear of any streaming platforms.
These people are almost impossible to convert into users because the product that they desire (music) is easily available to them.
YouTube also has every song along with the subsequent music videos for people to stream and watch simultaneously to enjoy when they do want to use the internet.
So have you made it to the end of the article? If you have, congratulations are in order because now you know how to conduct a SWOT analysis!
Not only that, but you also know what Spotify is and more importantly why it is so successful. Based on the information compiled in this article, we now know that Spotify is definitely going to stay in the market for a long time.
The strengths that they have at the moment are enough to outweigh all the weaknesses and even the threats. They also have amazing opportunities for further success.
This however does not mean that the brand should ignore the threats or weaknesses in any shape or form. They should be working actively in order to mitigate the negative factors so that they can eventually be even bigger than their current state. Overall it is to be concluded that Spotify is a very inspirational platform with much more to show all of us.