Digital Disruption in the Music Industry: A Case Study of Spotify

The report discusses the changes in the music industry due to digital disruption and how Spotify changed the distribution method. It also provides an implementation plan to increase the market share of the organization.

Running Head: ETHICS 1
Ethics

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Executive Summary
The present report has discussed the changes that the company has brought in the music industry.
It changed the distribution method in the music industry. The change in the business structure
negatively impacted the profit of the traditional business organizations. With the advent of
internet, the music distribution companies suffered from the piracy of the music albums. Spotify
tries to use internet to distribute music legally. It created a platform wherein the customers can
access music online by paying a subscription charge. In the present report an implementation
plan is suggested to uplift the current position of the organization in the market.

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Table of Contents
Executive Summary.....................................................................................................................................3
Introduction.................................................................................................................................................3
Case Study...................................................................................................................................................3
Framework Analysis.....................................................................................................................................4
Effects of Digital Disruption.........................................................................................................................4
Recommendation........................................................................................................................................5
Implementation Plan...................................................................................................................................5
Conclusion...................................................................................................................................................6

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Introduction
Digital disruption refers to an event, wherein a digital idea or business approach can change the
current dynamics of the music industry. In the recent years, the world has observed several
innovations in which Internet and digital approaches have changed the operations of the entire
industry. Airbnb and Uber are the major examples of the digital disruption events. However, the
music industry has also drastically changed due to internet and the availability of the music on
the online media. In the last decade of 20th century, a large number of music companies suffered
as different albums and music were made available on internet. Spotify made use of the changes
in the music industry and created a business model in which the music was made available on
internet with ethical means (Business Today, 2013). The ethical subscription was the unique
selling point of the organization. The company created a website and a mobile application in
which the users can find the music of their choice anytime. The Spotify account is accessible
through computer, tablet and mobile phones. Spotify was founded in 2008, and since then
became the biggest name in the music industry. The company has a substantial market share in
the music industry. The business organization provided several additional services such as
improved music quality and music downloads. It also provides paid subscriptions to the
customers at nominal fees. There are several other features such as the users can search for music
by using different parameters such as artists, albums or playlists. The users can also share their
music with their friends on social media. The business model of the organization is based on
paying royalties to the music artists based on the number of downloads. In the present report, the
digital disruption in the music industry has been discussed. Spotify is considered as a significant
organization in the music industry, which changed the dynamics and the market of the
organization. The company was based on a novel concept and pioneer in the present music
industry.
Case Study
In the present report, the case of Spotitfy has been taken. The company is pioneer in the current
digital music industry. It created turmoil in the traditional music industry and most of these
companies have adopted the new business structure. The company included innovative
strategies, such as on-demand music and experiencing live music. The organization has
implemented a business model such that it provides importance to the human creativity and
intellectual property. It created digital disruption model and monetized on the changes in the
music industry (Chaffey and Ellis-Chadwick, 2016). It also promoted the use of ethical means,
which can fight piracy among customers. In the past, internet users were attracted towards
pirated music as it was easily accessible and provided abundant music library. However, the
company raised the question of ethics and made it its major USP (Unique Selling Point). All the
music albums are obtained from the production. Therefore, the music was obtained from legal
means. The company also promoted new music composers. When the company was introduced,

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it became immediately popular among the internet users. The huge popularity among the internet
users resulted in intense competition among the users.
Framework Analysis
The digital disruption event in the music industry has been analyzed through work-centered
analysis. The traditional music industry was quite different and used a different business model.
In the past, the recording artists were invited at the music studio. They used to record music,
which was stored in DVDs, CDs and music cassettes. They were distributed through traditional
medium of the retail stores. The retailers collected commission on the sale on music. However,
with the advent of internet, the profits of music industry started declining (Scott, 2015). The
users started using internet for accessing the audio and video music on internet. It was pirated
music and unethical means of access. However, the consumers were attracted as it was easy to
access and provided abundant music.
Spotify realized the change in the music distribution. When the traditional music companies were
fighting in different ways to stop piracy and increase consumer awareness, Spotify made
negotiations with the music developers and they were given loyalty when their music sold. The
company also provided opportunity to new singers and music developers (Kotler, 2015). They
have to pay small fees so that they can promote themselves on the online platform. The users can
also share their playlists on social media, which is an altogether new way to connect to the users.
The company promoted itself as an ethical approach to access music online. The commission
collected by the retailers was given to the company.
Effects of Digital Disruption
The digital disruption event challenged the industry in several aspects. The traditional music
industry was suffering from huge loss and significant loss in market share as the users have
started using internet to download the files from the internet. However, when Spotify emerged,
most of the consumers were attracted to download the musing from these websites. Several other
companies such as Apple music and other companies also emerged as a competitor. The digital
disruption event influenced the operations of the organizations in the music industry in a
significant manner (Nicolaou, 2017).
With the technological development and the advent of internet, the companies have started using
internet to support their regular operations. However, several times, technology radically changes
the business operations. In this case, the companied have to change their business model as their
current business operations and the product becomes irrelevant. The digital disruption triggers
such events.
In such cases, the pioneer companies inducing the change become the market leader. In the
music distribution industry, Spotify became the first company to monetize on this change. It took

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advantage of the new trend in the music industry and developed a new market for itself
(Jocobson, 2017). The sales figure in the music industry has drastically changed and the revenue
obtained from the physical devices has reduced whereas the revenue obtained from the digital
mediums has increased substantially.
Recommendation
In the current times, the company has created a niche position in the music industry. However,
with time, several companies such as Apple music and Google music have emerged. Therefore,
the company has to adopt several the strategies to establish their position in the market.
Following recommendations are suggested to increase the market share of the organization:
Firstly, the company should invest in the market analysis and link the preference of the
customers with the music. They should analyze the previous preference of the customers and
suggest music videos accordingly. Other than that, the organization can also use the location of
the customers to suggest music videos to them (Sheth and Sisodia, 2015).
The company should invest in increasing the market share of the organization by investing in the
marketing campaigns. The company is based on digital mediums; therefore, it should invest in
digital and social media strategy to increase the market share. Currently, it is the cheapest form
of marketing approach. Along with it, the company should invest in the referrals and loyalty
discounts to the loyal customers. It can link the account with the Facebook, Twitter and other
social media platforms. It will increase the outreach of the organization (Divekar, 2016).
Currently, the company is operational in a few market and limited countries. In order to expand
the profitability, the company should expand to other countries and market.
The company should also create dynamic pricing model in which the organization charges the
customers according to their use.
Implementation Plan
The implementation plan refers to different strategies, which can be used to uplift the position of
the organization in the market. As per the strategy, the company should seek license in foreign
countries. It should also expand its music library so that it suits the taste of users of different
geographical and cultural backgrounds.
It should also implement social media plans and marketing strategies to connect with the users.
The users of the organization use online media extensively, so the marketing strategy should be
based on online mediums (Clarke, 2015).

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Conclusion
Conclusively, it can be stated that the digital disruption is an event, which can destroy the current
business model of the organization. The present report has discussed the changes in the dynamics
of in the music industry. The distribution method of the music industry changed after arrival of
Spotify. With the popularity of internet, the profit of music distribution companies reduced
drastically. It created a platform through which music is supplied through legal means. In the
present report an implementation plan to increase the market share. Spotify changed the
distribution method in the music industry. Moreover, it also supported new music composers.

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References
Business Today. 2013. Playing the social tune. [Online]. Available at:
http://www.businesstoday.in/magazine/lbs-mcase-study/london-case-study-how-spotify-evolved-
its-use-of-marketing-tools/story/200269.html [Accessed on: 17 April 2018].
Chaffey, D. and Ellis-Chadwick, F., 2016. Digital marketing. Prentice Hall.
Clarke, C. 2015. Disrupting the disruptor: How can Spotify, Tinder and others handle the
constant threat of tech disruption? The Drum. . [Online]. Available at:
http://www.thedrum.com/news/2015/08/12/disrupting-disruptor-how-can-spotify-tinder-and-
others-handle-constant-threat-tech [Accessed on: 17 April 2018].
Divekar, A. 2016. DIGITAL DISRUPTION: THE MUSIC INDUSTRY. Eco-Bridge . [Online].
Available at: http://www.eco-bridge.com/2016/08/08/digital-disruption-the-music-industry/
[Accessed on: 17 April 2018].
Jocobson, E.M. 2017. How Spotify Has Waged War With The Music Industry. Forbes. .
[Online]. Available at: https://www.forbes.com/sites/legalentertainment/2017/09/22/how-
spotify-has-waged-war-with-the-music-industry/#1ace2b9456d5 [Accessed on: 17 April 2018].
Kotler, P., 2015. Framework for marketing management. Pearson Education India.
Nicolaou, A. 2017. How streaming saved the music industry. Financial Times. . [Online].
Available at: https://www.ft.com/content/cd99b95e-d8ba-11e6-944b-e7eb37a6aa8e [Accessed
on: 17 April 2018].
Scott, D.M., 2015. The new rules of marketing and PR: How to use social media, online video,
mobile applications, blogs, news releases, and viral marketing to reach buyers directly. John
Wiley & Sons.
Sheth, J.N. and Sisodia, R.S., 2015. Does marketing need reform?: Fresh perspectives on the
future. Routledge.
Strauss, J., 2016. E-marketing. Routledge.

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Appendix 1
Before the Digital disruption
Customers Products & Services
Consumers with different demographic features DVD drives, records and cassettes
Major Activities in business model
There are different phases in the music production in traditional music industry. In the first phase,
recording process occurs, wherein performance of the recording artists is recorded. In this process, the
recording artists create a track, rhythm and select melodies according to the lyrics. The second phase is
the editing process in which the sound track is edited for better sound. In the third phase, mixing
process occurs. The tracks are blended to enhance the quality (Strauss, 2016). The last phase is the
distribution phase in which the labels are sold in retail stores.
Participants Information Technologies
There are several participants
in music distribution
companies. The stakeholders
include recording artists,
musing producers and the
singers.
In this phase, the information
produced by the music or
employee database. The
information includes the work
schedule of the singers.
It includes the recording
schedules of artists, and
production and distribution
method.
Recording process of music need
several technologies. In
traditional model, digital sound
recording technique is used in
which music is stored in digital
CDs. Several digital audio file
formats are used in digital music
recording.

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Appendix 2
Customers Products & Services
Users of internet Music, podcasts and video streaming
Major Activities or Processes
Development of mobile and web application
Providing music at reasonable cost
Participants Information Technologies
The employees of
organization.
The customers of the
company.
Music producers and source
singers, record artists,
marketing managers and
distributors.
Customer database. The IT
managers manages the
database of the organization.
Mobile applications
Use of social media and
mobile application