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Trenton Fengel
September 22, 2020
CST 300 Industry Analysis
Music Streaming Industry Analysis

Music streaming is an exciting modern technology that has changed the way the average

person listens to music. For many decades in the 20th century, music was distributed as a

tangible product. The masses would visit music stores to buy their favorite albums on recording

mediums such as vinyl records, cassette tapes, and compact disks. Around the turn of the

century, digital music became a mainstay in the music industry. However, digital distribution of

music has evolved over the years. Prior to the popularity of music streaming, digital music

companies would sell downloads of songs or albums. Recently it has become a more common

business model to offer a subscription service for music streaming. Some of the major companies

in the music streaming industry include Spotify, Apple, Amazon, Tidal, Pandora, and YouTube.

There are many music streaming companies and corporations that offer music streaming as one

of multiple services (such as Amazon who primarily sells physical products online), but perhaps

one of the most successful companies is Spotify.

Spotify is a streaming service that brings music and podcasts to computers and mobile

devices. Spotify is a great platform for discovering new music; Spotify has developed algorithms

that assemble playlists and suggest new music to users based on artists that they already enjoy.

Spotify was founded in 2006 in Stockholm, Sweden by Daniel Ek (former Chief Technology

Officer for online fashion community Stardoll) and Martin Lorentzon (co-founder of digital

marketing company Tradedoubler). In 2008, Spotify officially launched, and since the launch

they have quickly expanded. They currently operate in many offices worldwide with the main

headquarters located in New York City (About Us). Within the past years, Spotify has gained

more popularity which has consequently increased the need for more employees. In the years
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2017, 2018, and 2019, the average number of full-time employees amounted to 2,960, 3,651, and

4,405 respectively (Annual and Transition Report, pg. 69).

The success of any major company can partly be attributed to competent management.

Perhaps one of the biggest contributors to the success of Spotify is the Founder and Chief

Executive Officer, Daniel Ek (Governance). His main responsibilities are to guide the strategy of

the company and to lead the management team. Another important leader at Spotify is the co-

founder Martin Lorentzon. Lorentzon is currently part of the board of directors and served as the

Chairman of the Board of Directors from 2008 to 2016. The person responsible for overseeing

financial affairs is Chief Financial Officer Paul Vogel. From 2016 to January 2020, Vogel served

as the head of Financial Planning & Analysis, Treasury and Investor Relations.

Another important leader at Spotify is Katarina Berg who serves as the company’s Chief

Human Resources Officer. Berg oversees the human resources department and develops a people

strategy. The leader responsible for overseeing the company’s consumer growth strategy is Alex

Norström who is the Chief Freemium Business Officer. The individual that oversees the product,

design, data, and engineering teams at Spotify is Gustav Söderström who holds the title Chief

Research & Development Officer. Söderström holds a Master of Science in Electrical

Engineering from KTH Royal Institute of Technology. Another major leader at Spotify is Dawn

Ostroff who is the Chief Content & Advertising Business Officer. Ostroff’s responsibilities are to

oversee the global content and distribution operations and manage the advertising sales business.

Another prominent leader at Spotify is Horacio Gutierrez, who holds the position Head of Global

Affairs & Chief Legal Officer. Gutierrez oversees industry relations and partnerships, public

policy and trust and safety.

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Another possible reason Spotify has become more successful over the years are the

reasonable and straight-forward payment plans they offer. Spotify is free to download but there

are some limitations with non-paid accounts. Users that use Spotify for free can only listen to the

music on shuffle and they get served advertisements every few songs. Alternatively, the user can

choose one of four different Premium plans. For $9.99 the user can upgrade to a Premium

account. The user can also spend $12.99 for a Duo account (which allows for two users), or they

can pay $14.99 for a Family account (which allows for up to six users). Spotify also offers a

student discount of $4.99 for a Premium account. If a customer pays for Spotify Premium, the

advertisements get removed and the user can listen to any song of their choice with unlimited

skipping.

It is becoming apparent that the combination of technological advancements, the

evolution of music distribution, and many other factors are resulting in the growth of the music

streaming industry. Spotify reported in the first fiscal quarter of 2018 that they had

approximately 170 million active monthly users (Shareholders Letter Q1 2018, pg. 1). Spotify

users have drastically increased as the first fiscal quarter of 2020 reports that there were about

286 million active monthly subscriptions with approximately 130 million of those users being

Premium subscribers (Shareholders Letter Q1 2020, pg.1). This data demonstrates tremendous

growth over the past two years.

The huge success of Spotify suggests that the application exhibits what many music

listeners look for in a music distribution platform. Spotify is an early adopter of the subscription-

based music streaming business model that has now become popular. Also, aside from the

innovative business model, the product is well-designed. Many of Spotify’s features are

innovative and convenient. This has forced other music distribution companies to change in
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order to stay competitive. Competitors such as Apple Music have evolved their business model

to be able to compete with Spotify. Previously, Apple exclusively sold digital copies of music

singles and albums, but after the success of Spotify they adopted music streaming into their

offered services.

According to the article Co-evolution between streaming and live music leads a way of

sustainable growth of music – Lessons from the US experiences, the rise of the internet led to a

decrease in music revenue due to the ease of finding free music downloads. However, with the

rising popularity of music streaming and live music, the music industry has been able to survive

and remain profitable (Kashif, Chahiro, Pekka, pg. 2).

Another reason Spotify is a successful company is their ability to evolve and provide the

users with the features that they want. As podcasts have become a more relevant form of

entertainment, Spotify has made plans to grow the podcast streaming aspect of their business.

Podcasts are essentially independently produced talk shows that allow a celebrity or a prominent

figure to discuss a wide range of subjects. Recently they signed exclusive deals with established

podcast hosts such as Michelle Obama and Joe Rogan.

Considering this research, it is evident that Spotify would be a great company to work

for. However, the chances of landing a job at Spotify are better with a solid plan. Perhaps my

primary goal is to finish my education. I currently attend California State University Monterey

Bay (CSUMB), and my plans are to receive a bachelor’s degree in Computer Science in the year

2022. CSUMB offers several courses that are relevant to software developers that work in the

music streaming industry. One of the most important classes offered at CSUMB for a

prospective software developer is CST 338, which is a class named Software Design. This class

provides students with a solid knowledge of programming concepts (such as object-oriented

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programming and GUI development) and introduces students to the Java programming language.

These are crucial skills to have as a software developer. Another course that is relevant to

software developers is CST 370 which is a course named Design and Analysis of Algorithms.

The Spotify codebase includes many algorithms that analyze the music an individual user enjoys

and based on that data makes predictions about what other artists or albums that particular user

might enjoy. These algorithms are the works of the software developers at Spotify, so CST 370

at CSUMB could possibly be an especially important course to take. Lastly, a course that would

be relevant to a software developer at Spotify is CST 438, which is a course named Software

Engineering. This is a course that teaches advanced software development concepts and gives the

students opportunities to work on larger software projects.

In addition to finishing my education, I also plan to acquire relevant work experience

while in school, whether that be a job or an internship. Although internships do not always result

in getting a job, they can be a great way to attain relevant experience. This is invaluable in the

hiring process because one of the things that employers look for is experience. A more preferred

route to take than an internship would be to get a full-time job in the software development

industry; this goal might be more difficult to achieve considering many employers require a

bachelor’s degree. However, it is not impossible to secure an entry-level job in the industry if

you can demonstrate the necessary skills to employers.

In addition to attaining work experience, another part of my plan is to practice the skills

that are required of software developers at Spotify. A job listing on the Spotify website for a

Software Engineer (Software Engineer – Content Operations) mentions that they are looking for

someone who has knowledge of the Python, Java, and JavaScript programming languages. Any

programming languages or frameworks that I am not familiar with could be learned using online
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courses from learning services such as Coursera or Udemy. Another way I can prove my

knowledge of a particular skill would be certifications.

In the case that I was able to get an interview with Spotify, I would assume that a

demonstration of knowledge of the inner workings of music streaming software would increase

my chances of being hired. A project that might be impressive to the hiring managers at Spotify

would be an application that makes use of the company’s web API. An idea of a project that

utilizes the Spotify API would be a software that creates a Spotify playlist with songs that have

been previously added to a YouTube playlist. This would also make use of the YouTube API as

the software would have to extract data from a user’s YouTube account (in this case the data is

songs in a YouTube playlist), then verify that each song in the YouTube playlist is included in

Spotify’s library of music. The songs that have been verified to be part of Spotify’s music library

would then be added to a Spotify playlist. Another idea would be to create my own algorithm

that suggests new music based on a user’s current favorite artists. There are many possibilities to

consider.

Another thing to consider that would improve my chances of getting a job at Spotify is to

move near one of the offices. There are offices located in many cities around the world, however

in the United States the location that demands the most employees are the headquarters located

in New York City. I currently live in California which is located on the opposite side of the

country. The hiring managers at Spotify might think twice about hiring someone who lives far

from one of the offices due to the time and money it may cost an employee to relocate. My

career is a huge priority of mine and if relocating is the right step to take in order to land my

ideal job, I am willing to make the necessary sacrifices.

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Through the research of the music streaming industry, and more specifically Spotify, it

has become more apparent to me that Spotify is a spectacular company with lots of potential. It

would be an honor to be part of the company that repeatedly pushes the boundaries of what is

possible with music streaming. With a strong plan of finishing my education, acquiring

experience, and learning the relevant skills, I believe that working at Spotify can change from a

dream of mine to a reality.

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References

Kashif Naveed, Chihiro Watanabe, Pekka Neittaanmäki. (2017, August). Co-evolution between

streaming and live music leads a way to the sustainable growth of music industry –

Lessons from the US experiences. ScienceDirect. Retrieved from

https://www.sciencedirect.com/science/article/pii/S0160791X17300118

Spotify. (2019, February 2). Annual and Transition Report. Cloudfront. Retrieved from

http://d18rn0p25nwr6d.cloudfront.net/CIK-0001639920/e5567a36-185b-4d68-933a-

54ba436d5823.pdf

Spotify. (2018, May 2) Shareholders Letter Q1 2018. Q4cdn. Retrieved from

https://s22.q4cdn.com/540910603/files/doc_financials/quarterly/2018/Q1/Shareholder-

Letter-Q1-2018.pdf

Spotify. (2020, April 29) Shareholders Letter Q1 2020. Q4cdn. Retrieved from

https://s22.q4cdn.com/540910603/files/doc_financials/2020/q1/Shareholder-Letter-Q1-

2020-[Final]-(1).pdf

Spotify. (n.d.). About Us. Retrieved from https://www.spotify.com/us/about-us/contact/

Spotify. (n.d.). Governance. Retrieved from

https://investors.spotify.com/governance/default.aspx

Spotify. (n.d.). Software Engineer – Content Operations. Retrieved from

https://www.spotifyjobs.com/job/software-engineer-content-operations/