As technological advances continue to
revolutionize the music industry, there has been a noticeable trend towards
users streaming music rather than purchasing albums and songs. According to the
Global Music Report of 2017, there has been a 60.4% growth in streaming revenue
versus a 7.6% decrease in physical revenue and a 20.5% decrease in download
revenue.1
Congruent with this recent trend, there has been an evident increase in the number
of companies offering music streaming platforms, such as Spotify, Pandora,
Apple Music, and Amazon Music, to name a few. Founded in 2000, Pandora was one
of the first streaming companies to experience success. After going public in
2011 with a $100 million dollar IPO,2
Pandora became the leading music streaming company, and its stock eventually
peaked at $37.42 cents per share in February 2014 (Figure 1). During Pandora’s
rise, a small Swedish company, named Spotify, was founded in 20063
and became available in the US in 2011.4
By offering a more resourceful music streaming platform, Spotify eventually
surpassed Pandora’s total monthly active worldwide users by 2015 despite having
to overcome the significant hurdle of joining the music streaming industry much
later. Spotify has continued to separate themselves even further from the
competition by offering a product that exhibits a stimulating visual appeal, superior
algorithms on a platform that provides its users with an autonomous experience,
a versatile pricing structure, and ultimately exploits the value of network
effects to maximize their success.

1 “Global Music
Report 2017.” Ifpi, 2017.
http://www.ifpi.org/downloads/GMR2017.pdf.

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2 Evelyn M. Rusli,
“Pandora Files to Go Public,” The New York Times, February 11, 2011,
https://dealbook.nytimes.com/2011/02/11/pandora-files-to-go-public/.

3 Jordan Crook and
Fitz Tepper, “A Brief History Of Spotify,” TechCrunch, July 29,
2015, https://techcrunch.com/gallery/a-brief-history-of-spotify/.

4 Daniel Ek,
“Hello America. Spotify here.,” News, July 14, 2011, https://news.spotify.com/us/2011/07/14/hello-america-spotify-here/.

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