Wednesday, April 10, 2013

Who Doesn't Love Music?

When you hear a new song on the radio, where's the first place you go to look it up? Youtube. Youtube's sensation has begun to expand beyond its online platform.  In fact, the new streaming music service Spotify has realized Youtube's worth and has invested in a $400,000 18-minute ad as a part of the service's marketing campaign.  Using Youtube as a platform in which Spotify can expand and expose itself against its music competitors such as Pandora or iHeartRadio, Spotify has likely made this new strategic move as a result of fear and opportunity of losing its place within the popular streaming music online sensation. Yet while its current competitors are a reason to expand Spotify's market, larger technology industries such as Apple, Google, and Amazon are also thinking along the streaming music lines.

What's unique about Spotify's streaming music service is that it provides its users with 3 different tiers of service.  Users can either stream to their desktops for free, have an unlimited service for $4.99 or become an ultimate member for $9.99. The largest advantage that Spotify has over its other leading competitors is its unique characteristics of having users choose artists and compile playlists specific to their musical tastes.  This ultimately prevents users from having to switch to a competitor if all of the services being provided are the same.  What Spotify can hope for however, is that while Apple, Google, and Amazon are all big name brands, they will not necessarily prevail in the streaming music sector.  In fact, senior vice president, Russ Crupnick of industry analysis at NPD Group stated that, "Obviously whenever you've got large brands with a tremendous amount of reach and equity in this space, they have the potential to be formidable competitors," said Crupnick. "It doesn't necessarily mean that they can pull it off."

In terms of strategy development, our reading this week focuses on capitalizing on your industry's capabilities.  For Spotify, it's main capability to provide users with a unlimited access to their favorite artists' music, while having the ability to customize playlists of their favorite songs has been the streaming music service's strategic plan for gaining and retaining users.  By capitalizing on their talent as a unique-based, user-friendly streaming service, Spotify has been able to become a leader by assessing their productivity measures to motivate its users to stay, as noted within the article "Capitalizing on Capabilities" by authors Dave Ulrich and Norman Smallwood.  In fact, Ulrich and Smallwood note that it is better to get focused and concentrate on a few targeted capabilities than to expand your network across too many boundaries.  This is quite evident with the potential strategic moves that Apple, Google, and Amazon are willing to make.  As such, Spotify has been able to focus its efforts on what it knows best, and as a result has been able to capitalize on the small market that it has created for itself through its refined direction.

My question to the class is, while Spotify has been able to focus on one area of concern within the
streaming music service, companies such as Apple, Google, and Amazon all began with a refined focus as well.  At what point do you expand your boundaries without stretching yourself too far?

Spotify Aggressively Courting New Subscribers Before Google, Apple Enter Streaming Market

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