The Economic Model Of Spotify - 2522 Words

The Economic Model of Spotify. Abstract. This research looks deeper into the mechanics of how a digital music streaming, namely Spotify, works in the music industry. Spotify is a combination of both non-interactive and interactive service, and it is therefore important to understand how this combination model uses different licensing schemes for each in order to avoid any intellectual property right abuse or copyright infringement. The focus for this paper is more based on the economic model of Spotify, which includes how Spotify can be classified as network good, the licensing schemes that Spotify uses, how royalty payment is determined and the effect Spotify has in combating piracy. The growth of Spotify is also discussed in this paper,†¦show more content†¦21st century marked the era of digital activity, and hence, the declining in physical sale of albums is replaced by active downloading activity of musical works. The downloading activity can vary greatly from downloading songs from legal market, such as iTunes , to downloading more songs in illegal market, which promotes piracy. While the downloading activity may have replaced some of the values that are lost from the declining sale, majority of the revenue in music industry has evaporated. Unfortunately, this type of music consumption today generates very little to no value for the artist. Daniel Elk, a visionary guy from Sweden, realized this problem and hence, began to develop a model that could help in relieving the music industry. This is when Spotify was introduced to the market, a paid service that is legal and capable in helping artist by giving them the royalty they deserved. Spotify’s Economic Model. Spotify, which was a technology based on Sweden, entered the U.S. market around mid 2011. Spotify’s services are all provided in a single computer program or even applications in mobile devices, such as in phones or in tablets. Spotify in general consists of three different services. Firstly, Spotify provides Radio service. This is a non-interactive service in which the user searches a song, play it, and then Spotify will generate a random playlist, which will be