Spotify – Price Discrimination
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Case Code: ECON085 Case Length: 13 Pages Period: 2018-2019 Pub Date: 2020 Teaching Note: Available |
Price: Rs.300 Organization : Spotify Technology S.A. Industry : Leisure & Entertainment Countries : Sweden Themes: Micro Economics, Pricing, Marketing Strategy |
Abstract Case Intro 1 Excerpts
Excerpts
Background
Spotify was founded in 2006 by Daniel Ek (Ek) and Martin Lorentzon (Lorentzon) in Stockholm, Sweden, as a streaming platform service that offered digital audio content such as music and podcasts. The term 'Spotify' was the outcome of a brainstorming session between Ek and Lorentzon. When the duo was thinking of various potential names for the company, Ek misheard one of the names as Spotify. After a search on Google revealed that the name was not listed, they decided to name their company Spotify, a combination of 'spot' and 'identify'. Spotify's mission was "to unlock the potential of human creativity – by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it." Spotify was officially launched in Sweden in 2008. The early version (2006-2008) was on an invite only basis with both free subscriptions and paid accounts becoming available only later. After the company reported a loss of nearly US$4.4 million during the first year of its operations,...
Pricing Strategy
Spotify offered three kinds of subscription to its consumers – Spotify Free version, Spotify Premium, and Spotify Family. In its free version, Spotify Free, users got free access to a huge library of streaming music. A Free account allowed users unlimited listening hours for the first six months. After the end of that promotional period, listening hours were cut back to 10 hours per month, allowing the users to play their favourite songs a maximum of five times before they were asked either to purchase it as a digital download or upgrade the account...
Looking Ahead
Despite the huge subscriber numbers and the steady increase in worldwide premium subscribers from 18 million in the first quarter of 2015 to 124 million in the fourth quarter of 2019, Spotify still reported an operating loss of €77 million in the fourth quarter of 2019 (See Exhibit I1I and IV). Even as Spotify's subscribers crossed 100 million by 2019, the company was still in the growth stage and depended on trial periods and discounts to retain customers...
Exhibits
Exhibit I: Spotify Investors (2008-2018)
Exhibit II:The World's Most Popular Music Streaming Services
Exhibit III: Number of Spotify Premium Subscribers Worldwide
Exhibit IV: Summary of Spotify Users and Financial Metrics
Exhibit V:Spotify's Official Year-end Monthly ARPU
Exhibit VI: Spotify's Price Sensitive by Age
Exhibit VII: Spotify's Price Sensitivity by Feature
Exhibit VIII: Spotify Standard Premium Price Worldwide
Exhibit IX: Sales and Marketing Costs of Spotify Worldwide (from 2013 to 2019)
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