The case is about the price discrimination strategy followed by Sweden-based music streaming platform service Spotify Technology S.A. (Spotify). The online platform offered digital audio content and allowed users to search for an artist and listen to music, create playlists, and share them with others. Customers could access Spotify’s library of millions of songs by signing up with the platform for free. Spotify adopted a freemium pricing model where it offered basic functionality for free, but charged for product specific benefits. While Spotify was a free streaming service, consumers needed to pay for additional features such as advertisement-free streaming and offline music downloads. This has become a dominant business model to acquire and retain users on the platform.
Spotify’s business model employed differential pricing strategies to acquire and retain as many consumers as possible on its platform. Spotify’s pricing structure fluctuated across different types of consumers and countries around the world. Spotify came out with discounted Family/Student Plans targeting different segments of customers. These grew highly popular across the world. However, despite the increasing number of subscribers, the company was still in the growth stage and it often depended on trial periods and discounts to attract and retain customers. Spotify needed to work out monetization strategies to maintain its growth in the competitive music streaming market. It remained to be seen whether Spotify could sustain its growth with its current strategies or whether it would need to adopt new strategies, going forward.
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The case is structured to achieve the following teaching objectives:
Understand the business model of a music streaming company.
Analyze the pricing strategies of an online music platform to attract and retain customers.
Discuss how price discrimination strategies help in business growth.
Identify possible challenges for a music streaming company.
Discuss how an online music platform can overcome challenges and maintain its growth in the industry.
Music streaming; Subscription service; Freemium business model; Customer acquisition and retention,Subscription price; Pricing plan; Standard premium price; Price discrimination; Revenue stream,Monetization strategy; Sustenance of growth