• Tom DuPree III

Spotify's Master Plan

Spotify very clearly has a master plan. Let's talk about it.

I am a Spotify premium subscriber. I'm also an Apple Music subscriber. Call me crazy.

I've been paying a lot of attention lately to the decisions that Spotify, in particular, has been making. I think they have a grand plan that goes deeper than what meets the eye.

Everybody knows Spotify is a music streaming service. They were the first major music streaming service to enter the marketplace and really dominate, and they have, as of the second quarter of 2018, around 80 million paid premium subscribers. The second biggest competitor in that market is Apple Music with only 40 million paid premium subscribers.

Spotify has over double the market share of their next closest competitor. They are by all accounts the 800 pound gorilla in the room.

But that's just streaming. That's just music consumption. I think that what Spotify really is in the business of is understanding the social aspect and consumer behavior of people listening to music.

You can really get a sense of this if you take into account the acquisitions and partnerships they have made within the past five years.

A brief synopsis: In 2014 they purchased a company called The Echo Nest, which is a music discovery tool; in 2015 they purchased a company called Seed Scientific, which is advanced data analytics; 2016 they bought a company called CrowdAlbum, which aggregates music and video from social media posts across the internet, all publicly shared, and matches them against their own music consumption data to provide information to artists so that those artists can better engage with their fans.

In 2017 they bought a company called Sonalytic, which is an audio detection startup for matching similar to better curate playlists; 2017 they also bought a company called SoundTrap, which is an online studio and collaboration startup (it's basically a digital audio workstation that exists online, allowing you to create music with someone from across the globe); in 2018 they announced purchase of a minority share in DistroKid, a music distribution service; and in 2019 they announced their purchases of Gimlet Media and Anchor, both of which are podcasting services.

On the surface level, Spotify is heavily investing into audio, not just music, but audio. Both music and podcasting. And on top of that, they've also incorporated video. But underneath that, what they're really doing is seeking to understand music consumption behavior and the integration of the social element that music inherently possesses.

This is why they win and why they will continue to win.

Are they going to continue to try to put people out of business? Maybe. And even if that's not their goal, I think they are going to continue to seek to dominate all things audio.

I honestly wouldn't be surprised if one of these companies that they have purchased is a means of beating Shazam at music identification and discovery. Or maybe they'll just end up buying Shazam. Who knows?

Just this past year, in 2018, they announced Stations by Spotify, which is ostensibly the exact format that Pandora uses. Looks like a bid to beat Pandora at their own game to me.

And moving forward, I wouldn't be surprised if in the future we don't see them become the strategic partner for a monolithic social network like Facebook or Instagram.

Spotify: the music integration tool of choice.

Spotify is in the business of streaming music and audio, yes. But I really think they are in the business of understanding music consumption behavior.

If you look at all of their decisions through that lens, you can see why they're winning. If you really pay attention, what they are investing in is a deeper level understanding of how people engage with, consume, listen to and share music with one another.

Because the more they can understand that, the more they can deliver an enjoyable experience to each individual listener, which only serves to further cultivate the social foundation of music as a whole.

And for Spotify, a happy listener is a happy customer.

Listen to the podcast: https://anchor.fm/tomdupreeiii

Watch the video: https://youtu.be/Ldcmo380Zps

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