A Project by Lyna Abdelkefi, Edoardo Bruna, Marietta Dullau, Côme Legroux and Giulia Olearo

Objectives

• Demonstrate how Spotify has been able to grow its user base in
recent years to the point where it has the largest market share.
• Show how the growth in the cost of subscriptions in recent
years is due to a shift in the supply and demand curve that lead
to a new market equilibrium.

2
 Spotify’s User Growth (2015 - 2022)
Demand 500

Monthly Active Users in millions

450 422433
406
400 381
356365
345
350
• The number of users has 286299
320
300 271
increased consistently but the 250 232
248
207217
growth rate has been 200 180191
149160157
declining over the years. 150
113123132138
100 82 91 96 104
• Spotify retains the largest 68 77
50
market share but competitors 0
are growing faster. 2 015
2 015
2 016
2 016
2 017
2 017
2 018
2 018
2 019
2 019
2 020
2 020
2 021
2 021
2 022
1 3 1 3 1 3 1 3 1 3 1 3 1 3 1
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q

Source:
Statista
3
 Demand

Global; Streaming Music Subscriber Age Demographics

Market Shares in Q1 2021 of Spotify Users

4
 Supply
Major Suppliers of Tracks
Among Streaming Services
• Spotify has more than 80
millions tracks.
• It is only at 10th place for
number of subscribers.
• Music labels have a lot of
bargaining power on
Spotify.
Source:
RouteNot 5
Market equilibrium
• Changes in incomes cause a
rightward shift in demand.
• Shift of supply to the right
caused by the continuous
application of music.
• Simultaneous shifts of supply
and demand: demand increases
greater than supply increases.

Source:
Here 6
Price elasticity Spotify annual subscribers in
Europe (mm)
of demand 70 66

(ped) 60
50
43
54

40
33
30
• PED measures the 20

responsiveness of 10
0
20 18 2 01 9 202 0 20 21
demand to changes
in price. BEFORE AFTER ‘21 INCREASE
• Spotify’s demand ‘21 PRICE PRICE
RISE RISE
is inelastic. EU: DUO € 11.99 € 12.99 +€1
• Spotify's price PLAN (€)
increase therefore EU: € 14.99 € 17.99 +€3
Source:
FAMILY
increased profits. PLAN (€) Here 7
Gen-Z Interview on how they listen
to music
• Have you ever switched • If your platform increases its
platforms because of a price prices, will you switch to another?
increase?

YES
NO
I don't know

Source:
Our 8
Survey
Cross Price elasticity
of demand (xed) Spotify’s Paying Subscribers in
Comparison to Apple Music (Main
Competitor)

• XED measures the change

in quantity demanded of a
good in relation to a
change in price of an other Premium Premium Premium Free

good.
Student Family

• Apple Music is considered

Apple Music 5.99$ 16.99$ 10.99$ Not Available
Spotify 4.99$ 14.99$ 9.99$ Available

a substitute good for (prices per month for the United States market,
source: Spotify and Apple Music websites)
Spotify.
• Pricing strategies of both 9
Income elasticity of demand (yed)

• Being a luxury good

(YED > 2), a price
increase in poorer
countries would lead to
a decrease in revenue.
• We note how the price
of subscriptions changes
depending on the wealth
of the country. (Price Source:
Here 10
Differentiation
Price Spotify’s Subscription Pricies Are Set

discrimination According to Each Country’s Per-Capita GDP

• We find that country-specific

pricing increases revenue by
5.9% relative to uniform world
pricing.
• Country-specific pricing decreases
world consumer surplus by 1.0%.
• Consumers in lower-income
countries gain more from price
discrimination than consumers in
higher-income countries.
Source:
Here 11
Conclusions
• Managers studied their competitors and realized that they
couldn’t increase the price too much.
• They studied the price elasticity of their product → PED is
inelastic so they could increase the price without
diminishing revenue.
• Increased the prices of the different subscriptions with
regards to the price of their competitors but since they used
microeconomics’ principles they did not decrease their
revenue. 12
Thanks For Your Attention

13
 • Mulligan, M. (2021). Global music subscriber market shares Q1 2021. [online] www.midiaresearch.com.
Available at: https://www.midiaresearch.com/blog/global-music-subscriber-market-shares-q1-2021.

• B
‌ acklinko. (2021). Spotify User Stats (Updated Oct 2021). [online] Available at:
https://backlinko.com/spotify-users#tracks-available-on-spotify.‌

referen
• Statista (2021). Spotify users - subscribers in 2021 | Statista. [online] Statista. Available at:
https://www.statista.com/statistics/244995/number-of-paying-spotify-subscribers/.

• Statista (2018). Spotify MAUs worldwide 2018 | Statistic. [online] Statista. Available at:
https://www.statista.com/statistics/367739/spotify-global-mau/.

• King, A. (2022). Study Confirms That Major Labels Control Spotify Playlists. [online] Digital Music News.
Available at: https://www.digitalmusicnews.com/2022/05/04/spotify-playlist-study-major-labels/.

ces
• Waldfogel, J. (2020). The Welfare Effects of Spotify’s Cross-Country Price Discrimination. Review of
Industrial Organization. doi:10.1007/s11151-020-09748-0

• Newman, T. (2022). Top 10 streaming services with the most tracks in 2022. [online] RouteNote Blog.
Available at: https://routenote.com/blog/streaming-services-with-the-most-tracks/.

• Spotify (2022). About Spotify. [online] Spotify. Available at:

https://newsroom.spotify.com/company-info/.

• Ingham, T. (2021). Over 60,000 tracks are now uploaded to Spotify every day. That’s nearly one per
second. [online] Music Business Worldwide. Available at:
https://www.musicbusinessworldwide.com/over-60000-tracks-are-now-uploaded-to-spotify-daily-that
s-nearly-one-per-second/
.

• shohappy (2018). Spotify vs. Other Music Apps: Price Elasticity. [online] Economic Corner. Available at:
https://thinklikeeconomist.wordpress.com/2018/10/28/spotify-vs-other-music-apps-price-elasticity/.

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