Walden University ScholarWorks Walden Dissertations and Doctoral Studies Walden Dissertations and Doctoral Studies Collection 2018 Strategies for Achieving Profitability in the Music Streaming Service Business Model James Bennett Walden University Follow this and additional works at: https://scholarworks.edu/dissertations Part of the Business Administration, Management, and Operations Commons, Databases and Information Systems Commons, and the Management Sciences and Quantitative Methods Commons This Dissertation is brought to you for free and open access by the Walden Dissertations and Doctoral Studies Collection at ScholarWorks. It has been accepted for inclusion in Walden Dissertations and Doctoral Studies by an authorized administrator of ScholarWorks. For more information, please contact ScholarWorks@waldenu. Walden University College of Management and Technology This is to certify that the doctoral study by James D.
Bennett has been found to be complete and satisfactory in all respects, and that any and all revisions required by the review committee have been made. Review Committee Dr. Diane Dusick, Committee Chairperson, Doctor of Business Administration Faculty Dr. Charles Needham, Committee Member, Doctor of Business Administration Faculty Dr.
Yvonne Doll, University Reviewer, Doctor of Business Administration Faculty Chief Academic Officer Eric Riedel, Ph. Abstract Strategies for Achieving Profitability in the Music Streaming Service Business Model by James D. Bennett MS, Belmont University, 2006 BS, Belmont University, 2001 Doctoral Study Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Business Administration Walden University December 2018 Abstract Although the rapid growth of the music streaming industry has led to record levels of global music consumption, many leaders in the music streaming industry have not developed a financially sustainable business model for music streaming. This descriptive single case study focused on strategies that some global music streaming service leaders used to generate sustainable profits through their business models.
Christensen’s theory of disruptive innovation served as the conceptual framework for this study. Semistructured interviews with the chief executive officer and 4 senior managers of a leading music streaming service in southeastern Asia were analyzed to identify themes. Secondary data collected for this research included practitioner reports, government reports, company documentation, and peer-reviewed journal articles. During data analysis, I used method triangulation to generate insights regarding the key themes identified in the literature review.
Analysis of the data revealed strategies that global music streaming leaders used to generate profits: (a) optimization of the firm’s dynamic capabilities, (b) optimization of the subscription and freemium business models, and (c) a deliberate focus on the niche of local music. The findings of this study could be useful to music streaming service leaders who need to generate sustainable revenues and lack the strategies to do so on their own as well as to music streaming leaders who want their service to implement a disruptive innovation strategy. Additionally, the findings of this study might promote social change by generating awareness of proven strategies leading to sustainable profits for music streaming services and job security for artists who contribute to sustaining or increasing local economies cash flows and taxable incomes. Profitability of the Music Streaming Service Business Model by James D.
Bennett MS, Belmont University, 2006 BS, Belmont University, 2001 Doctoral Study Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Business Administration Walden University December 2018 Dedication I dedicate this doctoral study to my wife, Kristen, and children, Taylor and Noah. Acknowledgments I would like to thank God for giving me the patience and persistence to finish this doctoral study. The doctoral study process often challenged my resolve, but God always gave me strength and encouragement to press on to the finish line. Further, I would like to thank my family and friends for all their patience, encouragement, and support.
Additionally, I would like to thank my doctoral study committee, Dr. Diane Dusick, Dr. Charles Needham, and Dr. Yvonne Doll, for their guidance, insight, and encouragement throughout the whole process.
I want to especially want to thank and highlight how grateful I am to have had Dr. Diane Dusick as my doctoral study committee chairman. I could not have finished this study without her tireless help, encouragement, and wisdom. Finally, I want to thank Walden University for the wonderful experience I have had during my doctoral studies.
Table of Contents List of Tables. iv List of Figures .v Section 1: Foundation of the Study.1 Background of the Problem .3 Nature of the Study .7 Assumptions, Limitations, and Delimitations. 10 Significance of the Study .10 Contribution to Business Practice. 11 Implications for Social Change.
12 A Review of the Professional and Academic Literature. 33 Business Model Innovation. 35 The Music Streaming Business Model .41 Section 2: The Project .43 Role of the Researcher .47 Research Method and Design. 51 Population and Sampling .57 Data Collection Instruments .61 Data Collection Technique .65 Data Organization Technique .72 Reliability and Validity.
79 Transition and Summary .82 ii Section 3: Application to Professional Practice and Implications for Change .83 Presentation of the Findings.84 Theme 1: Optimization of Dynamic Capabilities. 87 Theme 2: Optimize Subscription Business Model. 98 Theme 3: Focus on the Niche of Local Music. 109 Theme 4: Optimize the Freemium Business Model.
119 Applications to Professional Practice .128 Implications for Social Change .130 Recommendations for Action .131 Recommendations for Further Research .137 Appendix A: Audio Interview Protocol .167 Appendix B: Email Contact Protocol .168 Appendix C: Interview Questions .170 iii List of Tables Table 1. References Used by Frequency and Percentage in Proposal. References Used by Frequency and Percentage in Literature Review. Optimization of Dynamic Capabilities.
Optimize Subscription Business Model. Focus on Niche of Local Music. Optimize the Freemium Business Model. 126 iv List of Figures Figure 1.
References used by frequency and percentage in proposal. References used by frequency and percentage in literature review. The relationships between the major themes and minor themes. 86 v 1 Section 1: Foundation of the Study In 2016, the global music market grew by of 5.9%, which was the fastest growth rate in 19 years, and generated total revenues of $15.
However, leaders in the music streaming industry have not achieved a sustainable music streaming business model (Aguiar & Waldfogel, 2017; Butz, Stifel, Schultz, & O’Neill, 2017; IFPI, 2017). In this study, I applied Christensen’s (1997) disruptive innovation theory to examine what elements of the on- demand music streaming service business model can influence revenues leading to profitability. This study is of value to music streaming service leaders because their industry is the most rapidly growing sector of the global music industry (IFPI, 2017). As such, the financial condition of music streaming services requires a profitable and sustainable music streaming service business model (IFPI, 2017).
Findings from this study might help music streaming leaders to develop a strategic framework to enhance profits. Background of the Problem Traditionally, the music business model has been ownership based, which required sales of physical music products through retail distribution networks. Under the ownership based music business model, when music consumers wanted to listen to their favorite songs they had to own or purchase those songs from brick and mortar stores on physical music products, such as compact discs (CDs), cassettes, and vinyl albums (Aguiar & Martens, 2016; IFPI, 2017; Wlömert & Papies, 2015). However, the 2 popularization of the Mp3 audio file throughout the late 1990s made the digital copies of music cheap and easy to obtain through peer-to-peer (P2P) file-sharing networks and download stores such as Apple’s iTunes (Lyubareva, Benghozi, & Fidele, 2014).
Consequently, the ownership based music business model remained in intact until the advent of cloud computing technology made on-demand music streaming possible (Lyubareva et al. On-demand music streaming has resulted in the creation of a new music business model based on access to, not ownership of, music (Butz et al., 2017; Lyubareva et al. The access based music business model has experienced rapid worldwide growth because of advances in wireless telecommunications, smartphone technology, and mobile payment technology (Aguiar & Martens, 2016; Hiller, 2016; Trefzger, Rose, Baccarella, & Voigt, 2015). With the exception of record labels, the rise in popularity of music streaming, however, has not generated sustainable revenues for either the music industry or for the music streaming industry (Butz et al.
Without sustainable revenues, the music streaming industry creates more problems than solutions for the global music industry (Wlömert & Papies, 2015). As a result, music streaming leaders need new strategies to generate sustainable revenues. Problem Statement Although the rapid growth of the music streaming industry has led to record levels of global music consumption, leaders in the music streaming industry have not developed a financially sustainable business model for music streaming (Aguiar & 3 Waldfogel, 2017; Butz et al. Revenues from music streaming services grew 578% from $0.5 billion in 2010 to $2.89 billion in 2015; by contrast, global music industry revenues fell from more than $22 billion in 2005 to approximately $15 billion in 2015 (Aguiar & Waldfogel, 2017).
The general business problem is that the developmental and growth-related costs inherent in the Spotify music streaming business model have resulted in a loss of profitability for leaders of music streaming services. The specific business problem is that some global music streaming service leaders lack strategies to generate sustainable profits through their business models. Purpose Statement The purpose of the qualitative descriptive single case study was to explore strategies that some global music streaming service leaders use to generate sustainable profits through their business models. The specific population for the case study included the chief executive officer (CEO) and four senior managers of a leading music streaming service in Southeastern Asia who addressed the sustainability challenges inherent in the Spotify music streaming service business model.
The data from this study could contribute to positive social change through its use by music streaming service leaders to identify strategies they can apply to prevent bankruptcy and enhance profits within the music streaming business. Using study data, academic and practitioner researchers may be able to develop a strategic framework for achieving music streaming service profitability. Furthermore, the profitability strategies discussed in this study could aid music leaders in developing new streaming service analytics that could allow artists to 4 analyze their music better and music consumers to listen to and support their favorite artists more easily. Nature of the Study A qualitative methodology was appropriate for this study as the purpose was to explore strategies rather than gather and analyze numerical data.
A quantitative methodology seemed inappropriate for this research. As McCusker and Gunaydin (2014) noted, researchers use a quantitative method to test hypotheses about differences or relationships among variables. Researchers use qualitative methods when their objective is to interpret the meaning of phenomena to gain insights (McCusker & Gunaydin, 2014). To answer the research question, more in-depth insight into the phenomenon of interest resulted from a qualitative method than was possible using a quantitative method.
I considered but opted against using a mixed method approach. As noted by Bentahar and Cameron (2015), researchers analyze both closed-ended data, such as numerical data, and open-ended data, such as interviews, when using a mixed method approach. The analysis of numerical data was not necessary to answer my research question. Consequently, I opted against using a mixed method approach.
The research design selected for this project was a case study. Other researchers studying the music streaming industry have used this design. Butz et al. (2017) used a qualitative case study approach to explore the technological and consumer changes in the music industry.
Yin (2014) observed that a single descriptive case study research design is appropriate when a researcher’s goal is to use a descriptive theory to describe a 5 phenomenon. A case study research design was suitable for this study because of the objective of exploring the phenomenon of music streaming service leaders’ strategies to enhance profitability of the music streaming business market.