The document summarizes Spotify's business model experimentation in the music industry. It shows how Spotify moved from a purely free streaming model supported by advertising to a hybrid model that includes premium subscriptions and occasional pay-per-use fees. This allows Spotify to generate revenue from subscriptions, advertising, and one-time song purchases while still offering a free basic service. The document argues that business models need constant rethinking and redesign to adapt to changing customer needs and technologies.

1. Experimenting with
Business Models in the
Music Industry (part II)
Alexander Osterwalder
AlexOsterwalder.com
Twitter: business_design

2. the following slides are a very brief
excerpt of a 60 minute keynote I gave at
Eurosonic Noorderslag, Europeʼs most
important live music industry conference

3. todayʼs music industry is ...

4. a business model playground ..

5. a business model playground ..

6. limitations of the old record company ...

7. The Old Record Label Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
marketing &
promotion
detecting &
distribution nnabe mass
building tale hits & wa
nt market
channels hits
KEY CHANNELS
RESOURCES
manufacturers
portfolio of Retailers TV
star artists
copyrighted “new” digital
content Radio
channels
COST STRUCTURE REVENUE STREAMS
royalt
y huge sales
ing & payme tours &
market subsidizing nts from few
merch
andisin
ion g
promot unsuccessful concerts artists’ albums
artists

8. The Old Record Label Model
KEY KEY OFFER CUSTOMER CUSTOMER
social
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
networks are what
talent will be customer drive music sales
marketing &
discovered by needs are not
promo on
other mechanismsti being satisfied
detecting &
distribution nnabe mass
building tale hits & wa
nt market
channels
shift of the hits
balance of power
towards artists KEY CHANNELS distribution is a
RESOURCES itʼs all about commodity, attention is
manufacturers hits AND the Long the new scarcity
portfolio of Retailers
Tail of music TV
star artists
copyrighted “new” digital
bloated cost content Radio
channels
structure (talent piracy unbundling of
discovery/marketing) price of songs REVENUE STREAMS into single
albums
COST STRUCTURE songs (iTunes)
royalt tending towards
y huge sales
ing & payme ZERO
tours &
market subsidizing nts from few
merch
andisin
ion g
promot unsuccessful concerts artists’ albums
artists

9. two new
models

21. example

23. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
ming
free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
software
application
COST STRUCTURE REVENUE STREAMS
free

24. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
ming
free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
software
application
COST STRUCTURE REVENUE STREAMS
free

25. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
record
ming
labels free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
licensing
agreements
software
application
COST STRUCTURE REVENUE STREAMS
licensing fees free
(for each song
played)
$$$$$$

26. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
platform
development &
maintenance
record
ming
labels free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
licensing plus even
agreements more work
software
m,
platfor softwar application
re & e &
softwa network
brand engineer
s
COST STRUCTURE REVENUE STREAMS
licensing fees free
(for each song
played)

27. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
platform
development &
maintenance
record
ming
labels free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
licensing plus even
agreements more
platfor
m,
softwar costs software
application
re & e &
softwa network
brand engineer
s
COST STRUCTURE REVENUE STREAMS
licensing fees bandwidth free
(for each song salaries
costs
played) engineers

28. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
mood-based automated
platform advertising online
development & advertisers
relationship
maintenance
record
ming
labels free strea
music young
connected
KEY CHANNELS music fans
RESOURCES
Spotify.com
licensing revenues
agreements for free
m,
services software
platfor softwar application
re & e &
softwa network
brand engineer
s
COST STRUCTURE REVENUE STREAMS
licensing fees bandwidth free
(for each song salaries
costs ad fees
played) engineers

29. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
automated
platform
online
development &
maintenance revenues from relationship
record premium
labels subscriptions
young
connected
KEY premium CHANNELS music fans
RESOURCES
subscription
Spotify.com
licensing
agreements
software
m,
platfor softwar mobile application
re & e &
softwa network application
brand engineer
s
COST STRUCTURE REVENUE STREAMS
subscription
licensing fees bandwidth fee
(for each song salaries
costs
played) engineers

30. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
automated
platform
online
development &
maintenance revenues from relationship
record occasional
labels uses
young
connected
KEY premium CHANNELS music fans
RESOURCES
subscription
Spotify.com
licensing
agreements
day pass
software
m,
platfor softwar mobile application
re & e &
softwa network application
brand engineer
s
COST STRUCTURE REVENUE STREAMS
subscription
licensing fees bandwidth fee
(for each song salaries pay-per-use
costs
played) engineers fee

31. Business Model
KEY KEY OFFER CUSTOMER CUSTOMER
PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
mood-based automated
platform advertising online
development & advertisers
relationship
maintenance
record
ming
labels free strea
music young
connected
KEY premium CHANNELS music fans
RESOURCES
subscription
Spotify.com
licensing
agreements
day pass
software
m,
platfor softwar mobile application
re & e &
softwa network application
brand engineer
s
COST STRUCTURE REVENUE STREAMS
subscription
licensing fees bandwidth free fee
(for each song salaries pay-per-use
costs ad fees
played) engineers fee

32. we need to constantly rethink our
models - systematically ...

34. BusinessModelGeneration.com

35. THANK YOU!
www.businessmodelgeneration.com
www.alexosterwalder.com
www.businessmodelalchemist.com
Twitter: business_design