Spotify: Face the Music (Update 2024)

The year 2023 was another remarkable one for Spotify. Once more, the company reported record figures in both revenue ($13.1 billion) and users, boasting 236 million premium subscribers and 602 million total monthly active users. However, 2023 was also remarkable in another sense, as the company marked a turning point. After years focused on what Daniel Ek had referred to as "growth, growth, growth," Spotify witnessed three rounds of layoffs over the course of the year, with the largest coming just a few weeks before the company announced its record 2023 results. Furthermore, Spotify had announced that Paul Vogel, the company's CFO, would be stepping down on March 31. Many of the departures were located in the company's podcasting division, the core of an ambitious "audio strategy" that had seen Spotify invest over $1 billion since 2020, acquiring non-music content and technology to fuel growth. Spotify still recorded an operating loss of $446m; however, investors seemed to welcome the new direction, as market capitalization doubled throughout 2023.
The case presents the state of the music industry in the 2020s, examining each of the most important stakeholders (artists, labels, distributors like Spotify, and consumers), before discussing the history of Spotify and its freemium business model as well as its recent expansion into non-music content, such as podcasts and audiobooks, and how it has retooled this particular business model.
The case also discusses Spotify's experimentation with new technologies, including AI or NFTs, and the way in which it has reacted to competition, both from powerful tech actors that operate similar music streaming services (e.g., Apple, Amazon, or Alphabet) and emerging ways of consuming music, such as through TikTok.
The case closes by detailing the organizational and personnel changes carried out by Spotify throughout 2023, with the stated goal of improving efficiency and finally achieving profitability. Will this course change finally turn Spotify into a profitable company, or will it hurt its ability to compete in an increasingly complex marketplace? Is there an alternative path?
Collection: IESE (España)
Ref: SM-1761-E
Format: PDF
Number of pages: 24
Publication Date: Feb 22, 2024
Language: English, Spanish
Review date: May 28, 2024

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Description

The year 2023 was another remarkable one for Spotify. Once more, the company reported record figures in both revenue ($13.1 billion) and users, boasting 236 million premium subscribers and 602 million total monthly active users. However, 2023 was also remarkable in another sense, as the company marked a turning point. After years focused on what Daniel Ek had referred to as "growth, growth, growth," Spotify witnessed three rounds of layoffs over the course of the year, with the largest coming just a few weeks before the company announced its record 2023 results. Furthermore, Spotify had announced that Paul Vogel, the company's CFO, would be stepping down on March 31. Many of the departures were located in the company's podcasting division, the core of an ambitious "audio strategy" that had seen Spotify invest over $1 billion since 2020, acquiring non-music content and technology to fuel growth. Spotify still recorded an operating loss of $446m; however, investors seemed to welcome the new direction, as market capitalization doubled throughout 2023.
The case presents the state of the music industry in the 2020s, examining each of the most important stakeholders (artists, labels, distributors like Spotify, and consumers), before discussing the history of Spotify and its freemium business model as well as its recent expansion into non-music content, such as podcasts and audiobooks, and how it has retooled this particular business model.
The case also discusses Spotify's experimentation with new technologies, including AI or NFTs, and the way in which it has reacted to competition, both from powerful tech actors that operate similar music streaming services (e.g., Apple, Amazon, or Alphabet) and emerging ways of consuming music, such as through TikTok.
The case closes by detailing the organizational and personnel changes carried out by Spotify throughout 2023, with the stated goal of improving efficiency and finally achieving profitability. Will this course change finally turn Spotify into a profitable company, or will it hurt its ability to compete in an increasingly complex marketplace? Is there an alternative path?
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Geographic Setting: United States
Industry Setting: Learning, education and culture

Learning Objective

This case was written for courses in strategic management, in particular, those dealing with competitive strategies and network markets. Spotify's success and challenges within the framework of a music industry that has seen significant disruption in the last two decades are well suited for analyzing the following topics:
- How the introduction of new business models affects the structure of an industry.
- The power of different players in a value chain and the relationships established between them.
- How value is created and captured in a changing ecosystem.
The case can also be used in an entrepreneurship course on startup companies to highlight the competitive challenges faced by startups in the digital age. It discusses elements such as market disruption, the formulation and reformulation of the service offerings, and obtaining funding.

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Spotify: Face the Music (Update 2024)

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"Spotify: Face the Music (Update 2024)"