Soundtrack of Tomorrow

No other technological innovation has disrupted the global media and entertainment industry
and altered music consumption habits as extensively as streaming. Today, nearly 616.2 million
people listen to their favorite artists or discover new ones via online streaming platforms. Music
streaming makes up 84% of music industry revenue, amounting to 17.5 billion USD and valued
at 35 billion USD as of 2023. Growing at a CAGR of 15% from 2023 to 2032, the market is
expected to reach USD 141.5 billion by 2032. By 2027, the number of users in the Music
Streaming market is expected to amount to 1.1bn users. Talking close to home, in India, The
Music Streaming market is projected to reach a revenue of USD 531.90m in 2024. It is expected
to show an annual growth rate (CAGR 2024-2027) of 7.55% and reach a market volume of
US$661.70m by 2027{1} (EXHIBIT: 1)

One of the prominent players in this space is the Spotify app. It lets you discover, organize,
and share over 100 million songs, 5 million podcast titles, and 350,000+ audiobooks {2}
Data shows that Spotify remains the most popular music streaming provider worldwide with
574 million users and 226 million premium subscribers across 184 regions, accounting for over
30 percent of all streaming subscribers Spotify generated USD 11.72 billion in revenue in 2023,
a 21% increase year-on-year. India is among the top five markets for Spotify in terms of users.
The app fetches the highest monthly streams (13.5 billion) compared to other freemium apps
here. But the country falls in your ‘rest of world’ zone which contributes the lowest share (12%)
of paying subscribers {3}.

{1}
Music Streaming Market
https://www.thebrainyinsights.com/report/music-streaming-market-
13646#:~:text=The%20global%20music%20streaming%20market,and%20individuals'%20in
creasing%20disposable%20income.https://www.statista.com/topics/6408/music-streaming/
{2}
Music Streaming – India (Market Insights)
https://www.statista.com/outlook/dmo/digital-media/digital-music/music-streaming/india
{3}
India Is Driving Spotify’s Global Growth – Will Revenue Follow
https://www.billboard.com/pro/india-spotify-global-growth-revenue/

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 Rhythmic Rivals: Spotify’s Major Adversaries

Though Spotify is still the top dog in music streaming in India, the rivals are stepping up. The
primary competitors of Spotify in the Indian arena include Amazon Music, Apple Music,
Wynk, Gaana, and YouTube Music. (EXHIBIT: 2)

While Amazon Music throws in free tunes with Amazon Prime and Seamlessly integrates with
the Amazon ecosystem, offering an add-free interface and curated playlists with a feature to
download songs offline, YouTube Music boasts a better recommendation algorithm and a larger
repository of songs compared to Spotify, with every single song available on youtube and
comes free with yt premium, making the add free youtube + yt music a great package. Wync
Music initially launched as a free service for Airtel users, is ranked as # 1 Top
Free in the Music and Audio category on the Google Play Store and Currently offers the
cheapest premium service in the market.{4}

Though Spotify is still on top, Today, it's a big music battle, and there's more to come,
especially with the recent restrictions imposed by Spotify in its free subscription plan in India,
marking a shift in its strategy in a country where the digital piracy rate is 73%, in hopes to get
more users to subscribe to its subscription plan.{5}

Sonic Strategies: The Ingenious Business Model of Spotify

Spotify works on a two-sided marketplace with music lovers on one side and the artists who
create the music on the other side. It provides music lovers an easy way to discover and enjoy
music and artists an extra avenue to showcase their creative work.{6}

{4}
2021 in Review: Which One Was India’s Hottest Music Streaming App?
https://inc42.com/features/2021-in-review-wynk-gaana-or-spotify-which-one-was-indias-
hottest-music-streaming-app/
{5}
Spotify has ‘bad news’ for its free users in India
https://timesofindia.indiatimes.com/gadgets-news/spotify-has-bad-news-for-its-free-users-
heres-why/articleshow/104321347.cms
{6}
Spotify and the Premium Subscription
https://indianexpress.com/article/technology/tech-news-technology/spotify-limits-features-
for-free-users-india-8975967/#:

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 Recently company launched the “RADAR Podcasts” program in 15 global markets, including
India. Additionally, Spotify also announced the initial slate of podcasters that will be
spotlighted with the RADAR program. The first three podcasts chosen from India to be a part
of this slate, include 'Anurag Minus Verma,' 'Chumma Conversations with Satshyaa' and
'Getting Lost with Archit and Shirin: All About Food'.

Revenue Remix: The Beat of Spotify’s Financial Innovation

▪ Premium Revenue:
Spotify charges monthly subscription fees for premium services. With premium service,
users get uninterrupted ad-free music {7}. (EXHIBIT: 3)
▪ Ad-based Revenue:
Spotify also provides free services for its users. With free services, users will have ads
between music streaming. These ads are sponsored by companies who want to promote
their brand and pay Spotify to market their products and services. (EXHIBIT: 4)

Recent Change in the Subscription Model

Spotify, has recently implemented changes in its subscription model in India, strategically
locking certain features behind a paywall to drive an increase in Premium subscribers.
Free users in India will now find restrictions such as:
• The inability to play songs in a specific order,
• repeat songs,
• or navigate back to previous tracks.
These premium features are exclusively available to subscribers of Spotify's Premium service.
Despite these limitations, free accounts can still enjoy listening to their favorite artists, albums,
and playlists, and receive song recommendations.

{7}
Spotify: Restrictions & Key Features
https://www.livemint.com/technology/apps/spotify-introduces-restrictions-for-free-users-in-
india-here-are-some-key-features-that-have-been-removed-11696904063166.html

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 Play, Pause, Profit: The Economic Symphony of Spotify’s Model

Spotify's strategic adjustments to its freemium model in the Indian market bear a significant
impact on customer behavior. The decision to restrict the free plan to shuffle mode with limited
skips in 2023 serves as a deliberate move to entice users toward premium subscriptions. By
emphasizing the advantages of the premium experience, characterized by an ad-free
environment and unlimited access, Spotify aims to create a compelling value proposition. This
shift reflects the company's endeavor to monetize its freemium user base more effectively,
encouraging conversions and bolstering revenue from premium services. However, Spotify
needs to strike a delicate balance, ensuring that these changes enhance user engagement
without alienating the ad-supported segment, which remains a vital component of its revenue
strategy.

Deliverables:

1. Develop a localization roadmap concerning the Indian market for Spotify, prioritizing
local/Bollywood music, vernacular content, new features, marketing campaigns, and app
experience.

2. Create a perceptual map for Spotify, defining its positioning concerning its competitors.

3. Develop a strategic plan for Spotify India to regain user trust and mitigate the negative
impact of free tier restrictions, to drive sustainable user growth and engagement, particularly
among free users.

4. Chart a 5-year plan for Spotify to maintain its profitability and market competitiveness in
the Indian context.

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 EXHIBITS

EXHIBIT: 1
Value of Music Industry (In Billion INR)
Source: Statista

EXHIBIT: 2
Subscription Prices of Various Competitors (per month)
Source: Statista

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 EXHIBIT: 3
Average Revenue Per User over the years ($)
Source: BusinessofApps

EXHIBIT: 4
Distribution of Revenue
Source: United States Securities and Exchange Commission Report
(October,2023)

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